WILMINGTON, Del. — Shareholders of Washington Mutual Inc. Wednesday got the green light to push ahead with their effort to replace the board of directors that agreed to a bankruptcy court deal that leaves shareholders with nothing.
Judge Mary F. Walrath granted the shareholders permission to ask a court in Washington State to force Washington Mutual to convene an annual meeting, where shareholders will have an opportunity to vote out directors they blame for the bank holding company's loss of its prized thrift to a regulatory seizure.
Walrath said nothing in bankruptcy law deprived shareholders of the right to exercise their corporate governance power over the holding company, which has been collecting billions of dollars in cash, tax refunds and other assets left in the wake of Wamu's collapse.
If the Washington State court agrees, shareholders of Washington Mutual are free to meet, vote out the board of directors, and continue lobbying in bankruptcy court for a better deal.
The thrift was swept under in the financial troubles of September 2008, sending parent Washington Mutual into bankruptcy and its Wamu operating unit into the arms of JPMorgan Chase & Co. and touching off a round of lawsuits and ultimately Senate hearings about what went wrong at Wamu.
Shareholders will lose all if Washington Mutual, the bereft bank holding company, goes through with an announced settlement that would quiet the questions about Wamu's collapse, seizure and sale.
"This is not time to shoo away the owners of this company," said shareholder attorney Stephen Susman, who's with Susman Godfrey. "It is exactly the time that they should have an opportunity to be heard through an annual meeting."
Brian Rosen of Weil Gotshal & Manges, an attorney for Washington Mutual, said the shareholders want to block the settlement and wreck the Chapter 11 plan that is based on the deal.
Susman denied shareholders were simply looking to upset the settlement. The clamor for an annual meeting began well before the settlement was announced, he said.
Washington Mutual's proposed agreement to drop $20 billion worth of legal claims for about $6 billion is of "serious concern" to investors, said the shareholder attorney.
Wednesday's ruling in the U.S. Bankruptcy Court in Wilmington, Del., is another blow to Washington Mutual, which has proposed a Chapter 11 plan that is based on a settlement that still does not have a signature from the Federal Deposit Insurance Corp., which brokered the sale of Wamu to JPMorgan.
Rosen said Wednesday the FDIC does endorse the settlement and final documents are being prepared.
Washington Mutual insists there's not enough value left to offer anything to shareholders.