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IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
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In re
WASHINGTON MUTUAL, INC, et al.,1
Debtors.
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Chapter 11
Case No. 08-12229 (MFW)
Jointly Administered
Requested Hearing Date: TBD
Requested Obj. Deadline: TBD
Related Docket Nos. 9527, 9528,
9529
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OPPOSITION OF THE TPS CONSORTIUM AND THE TPS GROUP
TO THE DEBTORS’ MOTION TO COMPEL THE PRODUCTION OF
DOCUMENTS AND RESPONSES TO INTERROGATORIES
The TPS Consortium and the TPS Group2 hereby object to the Debtors’ Motion to
Compel the Production of Documents and Responses to Interrogatories” [D.I. 9527] [Motion to
Compel”]. In support of their opposition, the TPS Holders respectfully represent as follows:
INTRODUCTION
1. Relevance in the context of discovery is framed by the issues at hand. The
discovery requests served by the Debtors, which are the subject of their Motion to Compel, go
beyond the scope of the issues to be presented at the confirmation hearing (i.e. whether the
Debtors proposed plan satisfies the requirements of the Bankruptcy Code). Debtors attempt to
justify their broad Document Requests and Interrogatories on the premise that they are entitled to
unfettered discovery because, generally speaking, discovery may be broad, and that there is some
general right to police the voting process regardless of whether there is any evidence or
1 The Debtors in these Chapter 11 cases, along with the last four digits of each Debtor’s federal tax identification
number, are: Washington Mutual, Inc. (3725) and WMI Investment Corp. (5396). The Debtors’ principal offices
are located at 1301 Second Avenue, Seattle, Washington 98101.
2 The “TPS Consortium,” which has historically been represented by Brown Rudnick LLP, and the “TPS Group,”
represented by Arkin Kaplan Rice LLP, all of whom are proposed to be treated under Class 19 of the Debtors’
Proposed Plan, will be referred to collectively as the “TPS Holders”.
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indication of impropriety by the respondent. However, Debtors do not cite a single case that
stands for that proposition. Debtors also have failed to establish how their attempt to probe the
multi-year trading history and all communications, including telephone records, of one group of
creditors is relevant to whether the Debtors can satisfy their burden of proof under the Code.
2. Additionally, Debtors’ discovery requests are premature because they are
premised on the assumption that Class 19 may vote against the Plan. That has not happened, and
may never happen. Thus, discovery at this point is unwarranted. If Debtors are truly concerned
about the outcome of the vote, then the proper thing to do would be to wait for the votes to be
calculated. If there is a dissenting Class, and if there is evidence of impropriety such that
Debtors may seek to designate certain votes, then Debtors can move to postpone the
confirmation hearing, conduct appropriate discovery, and file and argue any appropriate motions.
Such issues, and such discovery, are not even ripe until the vote is in.
3. Lastly, while Debtors have attempted to couch their requests as part of the Court’s
ability “to investigate the integrity of the voting process on a proposed plan of reorganization,”
Debtors’ Motion, ¶ 23, their broad discovery requests far exceed even their attempted
justification. Rather than target their requests to any established or evident impropriety in
connection with the current voting process on the Seventh Amended Plan, Debtors have
requested all information (by document request and interrogatory) related to any purchase and
sale of any claims or any security, from October 2010 to the present, including all information
related to price at which they were bought or sold, the date they were sold, and even the funds in
which any such claims or securities were placed (see Document Requests 1-3, Interrogatories 1
and 4). Debtors have even gone so far as to request all documents concerning or relating to
communications with anyone regarding the confirmation, including telephone records from as far
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back as September 2008 (Requests 5-7).3 Because those requests do not comport with the
Debtors’ attempted justification, they should not be allowed.
4. Because Debtors have not presented any basis for allowing the broad discovery
requested, their discovery requests are premature, and their requests and interrogatories are much
broader than even their intended justification, the TPS Holders request that this Court deny the
Debtors’ Motion to Compel.
RELEVANT FACTUAL BACKGROUND
5. On January 13, 2012, Debtors served the TPS Consortium with Document
Requests and Interrogatories essentially seeking three categories of information:
i. All documents, and interrogatory answers reciting the information contained
in any such documents, related to:
1. Any claims or securities purchased,
2. The date of purchase,
3. The name and volume of any purchase;
4. The date any securities were sold,
5. The sale price; and
6. The fund(s) in which any security or claim was placed; (Requests 1-4,
Interrogatories 1 and 4)
ii. All documents related to any communication “in connection with
confirmation,” including any telephone records that might indicate or reflect
communications with anyone regarding confirmation (Requests 5-7, 12;
Interrogatory 1, 2 and 5)
iii. Evidence intended to be introduced at the confirmation hearing (Requests 8-
11, Interrogatory 3)4.
3 Although Debtors subsequently narrowed the requests for telephone records to the period from December 12,
2011 to the present, it is still inconceivable what, if any, useful information could be obtained from telephone
records.
4 This last category is not part of the Debtors’ Motion to Compel, and consistent with their obligations, members
of the TPS Consortium will provide Debtors with the information responsive to these Requests, if there is any.
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6. On January 27, 2012, the TPS Consortium served their responses, objecting to the
first two categories of discovery because the information being sought is not relevant to any
matter at issue in the impending confirmation hearing.5 Because of the lack of relevance and the
broad scope of those Document Requests and Interrogatories, the only conclusion is that they
were propounded to harass and to create unnecessary expense for the respondents.6
7. Notwithstanding the fact that Counsel had agreed to meet and confer by telephone
at 10 a.m. on January 31, 20127, at two minutes before midnight on January 30, 2012, the
Debtors filed their Motion to Compel [D.I. 9527]. The Motion to Compel was the Debtors’ first
attempt to explain the relevance of the discovery requested.
8. Notably, while Debtors previously demanded that the TPS Holders produce
documents and answers to interrogatories by February 3, and now seek an expedited order from
this Court requiring documents to be produced by February 6, Debtors have repeatedly refused to
agree to produce any documents, including those that they intend to rely on at the confirmation
hearing, until 5 days before the hearing.
ARGUMENT
9. Ignoring the fact that the proper scope of discovery is to be framed by the issues
at hand, Debtors attempt to justify their discovery requests by simply reciting general principles,
5 Additionally, on January 13, Debtors separately served identical Document Requests and Interrogatories to the
TPS Group. Despite the fact that each member of the TPS Group had responded to the requests and interrogatories
on January 27, Debtors sought separate responses from the TPS Group. On January 30, 2012, counsel for the TPS
Group wrote to Debtors repeating and incorporating the objections and responses served on January 27. See Letter
to Rachel Swartz, attached as Exhibit A.
6 Debtors’ counsel subsequently offered to narrow the time period for the requests and interrogatories to include:
(1) with respect to purchase, sale, price, and fund information, from October 2010 to the present; and (2) with
respect to all communications, including telephone records, from December 12, 2011 to the present. Additionally,
Debtors insisted that any such document be produced by February 3, and wanted a response by noon the following
day, Monday. Debtors, however, made no attempt to explain how the discovery requests to which the TPS
Consortium objected were relevant to the confirmation proceedings. See Email from Diana Eng, attached as Exhibit
B.
7 See Email chain attached as Exhibit C.
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without justifying why those principles lead to any permissible discovery of the TPS Holders.
Without any such justification, discovery should not be allowed.
10. First, Debtors state that the standard for relevance in discovery is broader than
admissibility. However, that general principle does not justify discovery, just for the sake of
discovery. In fact, there must be a factual predicate for conducting discovery. See In re Elonex
Phase II Power Mgmt. Litig., 2003 U.S. Dist. LEXIS 10717, at * 11 (D. Del. June 23, 2003)
(denying motion to compel because the movant did not demonstrate any factual basis for
engaging in a fishing expedition); see also Zuk v. E. Pennsylvania Psychiatric Inst., 103 F.3d
294, 299 (3d Cir. 1996) (noting that the party seeking discovery must have some basis in fact for
the action); The Responsible Person of Musicland Holding Corp. v. Best Buy Co. (In re
Musicland Holding Corp.), 424 B.R. 95, 103 (Bankr. S.D.N.Y. 2010) (denying motion to compel
discovery because of movant's failure to show relevance of information sought).
11. Second, Debtors assert that the Court has a general right to police the voting
process. Motion to Compel, ¶ 23. However, Debtors do not cite a single case that supports their
demand for exploratory discovery based on this general principle. Just because a party may vote
for or against a Plan does not warrant discovery into a creditor’s full trading history and/or
communications about the Plan. Indeed, if the mere act of voting formed the basis for
conducting such broad discovery, then the Debtors could, and should, conduct this exact
discovery of every creditor and claimant that will, or may, vote in favor of or against any
proposed plan of reorganization. The fact is, that is not the rule - discovery must be premised on
an actual purpose, and as this Court is aware, absent a showing of bad faith or illegality, the
reasons for voting for or against a Plan are irrelevant. See John Hancock Mut. Life Ins. Co. v.
Route 37 Business Park Associates, 987 F.2d 154, 161 (3d Cir. 1993) (“Absent bad faith or
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illegality … the Code is not concerned with a claim holder's reason for voting one way or the
other, and undoubtedly most claim holders vote in accordance with their overall economic
interests as they see them.” ) (internal citation omitted); In re Fairfield Executive Associates, 161
B.R. 595, 603 (D.N.J. 1993) (it is presumed that a creditor will vote in its own economic self-
interest and doing so does not constitute bad faith).
12. Even the cases that the Debtors cite for the proposition that discovery has been
allowed to go forward regarding whether the voting process proceeded in good faith, involved
situations where there was already a factual predicate justifying such discovery. The Debtors
even quote the appropriate section from In re Dune Deck Owners Corp., 175 B.R. 839, 845
(Bankr. S.D.N.Y. 1995) – “[W]here the record contains evidence that the creditor has voted
without regard to the treatment of its claim … the Court must inquire into those motives in order
to preserve the integrity of the Chapter 11 process.” Motion to Compel, ¶ 24 (emphasis added).
Debtors have put forth no evidence of wrongdoing, nor have they even made allegations of any
wrongdoing. Thus, as suggested by the Debtors’ own selected quote, because there is no record
evidence of bad faith, there is no basis for inquiring further into the motives behind any votes
that are cast for or against the Plan. Similarly, Debtors attempt to rely on In re Adelphia
Commc’ns Corp., 359 B.R. 54 (Bankr. S.D.N.Y. 2006), but that court noted that it allowed
limited discovery based “upon a showing of possibly (but not plainly) improper activities” and
would only expand such discovery if one side sought to press claims based on further findings.
Id. at 56 n.4.8 Debtors have made no such showing. Debtors’ reliance on In re Wiston XXIV,
8 Notably, the Adelphia court also noted how drastic designation is as a remedy:
A right to vote on a plan is a fundamental right of creditors under chapter 11.
Designation of a creditor’s vote is a drastic remedy, and as a result, designation of votes
is the exception not the rule.
…
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Ltd. P’ship, 153 B.R. 322 (Bankr. D. Kan. 1993) suffers from the same problem. In that case,
the court adjourned and continued a confirmation hearing to allow discovery and presentation of
evidence in connection with a pending motion to designate a creditor’s votes based on perceived
improprieties. Id. at 323. Unlike in those cases, Debtors have not even lodged any allegations,
let alone presented any showing of improper activities to justify discovery.9
13. Third, Debtors attempt to rely on the general requirement that if an impaired class
does not vote to accept the plan, then the Debtors must prove that the plan satisfies the
requirements of § 1129(b), including that it does not unfairly discriminate against the dissenting
classes and that the treatment is fair and equitable. Motion to Compel, ¶ 26. However, Debtors
again fail to cite to any case supporting its theory that this general principle warrants broad
discovery of the TPS Holders. Debtors also fail to link the information sought in their requests
to the principle itself. They cannot explain how the purchase and sale of any securities by the
TPS Holders over a multi-year period, or in which fund any securities or claims were placed, or
how months worth of telephone records will lead to any admissible evidence that the Debtors can
use to satisfy their burden under § 1129(b). The Plan rises or falls on its own – the TPS Holders’
documents or communications in no way affect that.
14. Moreover, Debtors’ own arguments confirm that their discovery requests are
premature. The voting process is currently underway, and while the Debtors are concerned that
Notably, a movant must demonstrate more than a mere selfish motive on behalf of a
voting party in order for a court to designate that party’s vote.
Adelphia, 359 B.R. at 61. Thus, to the extent the Debtors are trolling for evidence, where there has not been any
indication of impropriety, they will have to meet a heavy burden in order for there to be any change in outcome.
And regardless, any such outcome is speculative at this time given that voting on the Seventh Amended Plan is
currently underway, and there may not be any dissenting classes.
9 Other cases Debtors cite for their position do not even involve discovery issues. Century Glove, Inc. v. First
Am. Bank of NY, 860 F.2d 94, 97 (3d Cir. 1988) relates to sanctions imposed for actual improprieties that were
found by the court. In re Allegheny Int’l, Inc., 118 B.R. 282 (Bankr. W.D. Pa. 1990) is not a discovery decision, nor
is In re Combustion Eng’g, Inc., 391 F.3d 190 (3d Cir. 2004).
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Class 19, or some other Class, may vote against the Plan, that has not happened. Nor is there any
evidence or indication that if there is a negative vote, that it will be the result of any impropriety,
illegality or bad faith. Without an actual vote, and without any evidence of impropriety or bad
faith, the discovery requested by the Debtors is not ripe and is entirely irrelevant. If there
happens to be a dissenting class, and if evidence of impropriety arises, then the Debtors can
postpone the confirmation hearing, conduct discovery into any such believed impropriety and
file any appropriate motions. But until then, Debtors’ discovery requests are premature.
15. Lastly, the overly broad nature of Debtors’ requested discovery is indicated by the
Document Requests and the Interrogatories themselves. Debtors have attempted to justify their
requests by claiming, not that they are relevant to the confirmability of the Plan, but that they are
related to the solicitation and voting process that is currently underway (and as to that, there is no
pending motion to designate or any other motion to which such discovery would be relevant).
However, Debtors’ requests are framed in such broad strokes that they will only create
unnecessary burden and expense, while not achieving even the purported desired result.
Specifically, the Debtors seek, both, all documents related to and interrogatory answers setting
forth, among other things: the entire trading history of all claims and securities since October
2010; the sale price of every claim or security bought or sold; and the funds in which such
securities were placed. The current Plan was not made public until December 2012 and the
voting process is underway at this precise moment. How anything prior to December 2012,
especially any securities that were sold or in which funds they were kept is relevant to the current
vote or how such information would shed any light on the current Plan or voting process is
inconceivable.
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16. With respect to the purported discovery that Debtors claim is related to
solicitation, Debtors have asked for, among other things, all telephone records that may reflect
any communication regarding the Plan or confirmation in general. Telephone records would not
provide the Debtors with any information other than a laundry list of telephone numbers, which
may or may not be related in any way to the Plan. How such information would lead to any
admissible evidence is also inconceivable.
17. In short, the Debtors’ reliance on general principles without more does not
warrant discovery. The Debtors have shown no factual basis for their allegations of bad faith in
the voting process, nor have they established that the trading history or communications of the
TPS Holders would lead to any evidence that would be admissible for the purpose of
determining whether the Plan satisfies the requirements of the Bankruptcy Code. Without any
factual predicate or relevant basis for conducting discovery, the Court should not permit the
debtors to engage in a “fishing expedition.”
CONCLUSION
18. For the reasons stated herein, the TPS Holders request that the Court deny
Debtors’ Motion to Compel.
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Dated: Wilmington, Delaware
February 1, 2012
Respectfully submitted,
CAMPBELL & LEVINE LLC
/s/ Mark T. Hurford
Marla Rosoff Eskin, Esq. (DE 2989)
Bernard G. Conaway, Esq. (DE 2856)
Mark T. Hurford, Esq. (DE 3299)
Kathleen Campbell Davis, Esq. (DE 4229)
800 North King Street, Suite 300
Wilmington, DE 19809
Telephone: (302) 426-1900
Facsimile: (302) 426-9947
- and –
BROWN RUDNICK LLP
Robert J. Stark, Esq.
Sigmund Wissner-Gross, Esq.
Seven Times Square
New York, NY 10036
(212) 209-4800
(212) 209-4801 (fax)
– and –
Jeremy B. Coffey, Esq.
James W. Stoll, Esq.
Daniel J. Brown, Esq.
One Financial Center
Boston, MA 02111
(617) 856-8200
(617) 856-8201 (fax)
Counsel to the TPS Consortium
- and -
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ARKIN KAPLAN RICE LLP
Howard J. Kaplan, Esq.
Joseph Matteo, Esq.
Deana Davidian, Esq.
590 Madison Avenue
New York, NY 10022
Telephone: (212) 333-0200
Facsimile: (212) 333-2350
Counsel for the TPS Group
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IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
_______________________________________________ x
: Chapter 11
In re :
: Case No. 08-12229 (MFW)
WASHINGTON MUTUAL, INC., et al., :
:
Debtors : Jointly Administered
_______________________________________________ x
CERTIFICATE OF SERVICE
I, Mark T. Hurford, of Campbell & Levine, LLC, hereby certify that on February 1, 2012,
I caused a copy of the foregoing Opposition of The TPS Consortium and The TPS Group to
the Debtors’ Motion to Compel the Production of Documents and Responses to
Interrogatories to be served upon the parties list below via First Class Mail and electronic mail:
Mark D. Collins, Esquire
Michael J. Merchant, Esquire
Travis A. McRoberts, Esquire
Richards, Layton & Finger, P.A.
One Rodney Square
920 North King Street
Wilmington, Delaware 19801
Brian S. Rosen, Esquire
Diana M. Eng, Esquire
Rachel Barish Swartz, Esquire
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, NY 10153
Dated: February 1, 2012 /s/ Mark T. Hurford
Mark T. Hurford, Esquire (No. 3229)
800 North King Street, Suite 300
Wilmington, DE 19809
Telephone: (302) 426-1900
Facsimile: (302) 426-9947
