Black Horse Capital LP v. JPMorgan Chase Bank, N.A. (In Re Washington Mutual, Inc.)
442 B.R. 297
Bankr. D. Del.2011Background
- WaMu held WMB and created WMPF in 2006; TPS issued in five series totaling about $4B; TPS could be exchanged for WMI Depositary Shares upon an OTS-directed Exchange Event; MOU (Sept 7, 2008) limited WMB dividends; OTS directed a Conditional Exchange Sept 25, 2008; FDIC seized WMB and JPMChase acquired assets Sept 26, 2008; plaintiffs (institutional TPS investors) sued for declaration that TPS remained theirs; cross motions for summary judgment on Counts I-VI; court to decide contract interpretation and related law.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Conditional Exchange had undisclosed conditions precedent | Plaintiffs assert conditions (issuance/delivery steps) were prerequisites | Defendants say steps were ministerial, not conditions | No conditions precedent remained; automatic Conditional Exchange occurred |
| Whether Delaware law required physical delivery to transfer TPS | Delivery of new certificates was necessary to transfer ownership | Transfer occurred by contract language upon OTS direction, not by delivery | Transfer effective without physical delivery; contracts control |
| Whether misrepresentation/fraud claims survive standing and damages limits | WMI misrepresented transfer arrangements to TPS investors | No damages shown; standing issues; 510(b) subordinations apply | Summary judgment for Defendants on misrepresentation/fraud claims (Counts III/IV) |
| Whether equitable defenses bar relief | Unclean hands/preclusive equitable barriers avoid enforcement of Exchange | Conditional Exchange already occurred; equity not applied to bar legal remedies | Equitable defenses are inapplicable; judgment for Defendants on Counts V–VI |
Key Cases Cited
- Amadeus Global Travel Distrib., S.A. v. Orbitz, LLC, 302 F. Supp. 2d 329 (D. Del. 2004) (contract interpretation as a matter of law when unambiguous)
- Castle v. Cohen, 840 F.2d 173 (3d Cir. 1988) (contracts; conditions precedent need express language)
- United Liberty Life Ins. Co. v. Ryan, 985 F.2d 1320 (6th Cir. 1993) (standing to challenge regulatory actions; agency decisions)
- United States v. Seattle-First Nat. Bank, 321 U.S. 583 (1944) (transfer of securities by operation of law; focus on immediate mechanism)