Case MFW Doc Filed 04/28/16 Page 1 of 17 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE

Transcription

1 Case MFW Doc Filed 04/28/16 Page 1 of 17 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE In re: ) Chapter 11 ) WASHINGTON MUTUAL, INC., et al., 1 ) Case No.: (MFW) ) (Jointly Administered) ) Debtors. ) ) ) Re: Docket No RESPONSE AND OPPOSITION OF MELBA ANN BARTELS, KENNETH E. KIDO, STEVEN F. STEIN, AND MITCHELL STEVENS TO WMI LIQUIDATING TRUST S SUPPLEMENTAL OBJECTION TO FIRST AMENDED SEVENTY-NINTH OMNIBUS (SUBSTANTIVE) OBJECTION TO CLAIMS AND FIRST AMENDED EIGHTY- SECOND OMNIBUS (SUBSTANTIVE) OBJECTION TO CLAIMS 2 Claimants Melba Ann Bartels, Kenneth E. Kido, Steven F. Stein, and Mitchell Stevens (each a Claimant and, collectively, the Claimants ), hereby file the following response and opposition (the "Response") to the Supplemental Objection of WMI Liquidating Trust To First Amended Seventy-Ninth Omnibus (Substantive) Objection To Claims [Dkt. No ] and First Amended Eighty-Second Omnibus (Substantive) Objection To Claims [Dkt. No ] (the "Supplemental Objection," Dkt. No ) filed by the WMI Liquidating Trust ( WMILT ), as successor in interest to Washington Mutual, Inc. and WMI Investment Corp., formerly debtors and debtors in possession (the "Debtors"). Claimants respectfully request that the Court overrule the Supplemental Objection in its entirety and allow Claimants claims, as amended, in their entirety. 1 The Debtors in this Chapter 11 case, along with the last four digits of each Debtor s federal tax identification numbers are: (i) Washington Mutual, Inc. (3725); and (ii) WMI Investment Corp. (5395). The principal offices of WMILT, as defined herein, are located at 800 Fifth Avenue, Suite 4100, Seattle, Washington Pursuant to the Stipulation and Agreement Between WMILT and Claimants regarding the amendment of Claimants claims and the application of the Section 502(b)(7) cap [Dkt. No ], and the Order Approving Stipulation and Agreement [Dkt. No ], which limits the scope of the Supplemental Objection, Claimants respond only to the defenses raised in the Supplemental Objection that relate to the Amended Components of the Amended Claims. Accordingly, Claimants incorporate their responses to the Original Objections [Dkt. Nos , 10584, 10540, 10647, and 10580] and their proofs of claim nos. 376, 1140, 1142, 1085, 1086, 2601, and 3839, as amended, as though set forth in full herein.

2 Case MFW Doc Filed 04/28/16 Page 2 of 17 In support of this Response and in opposition to the Supplemental Objection, Claimants respectfully represent the following: GENERAL STATEMENT IN RESPONSE AND OPPOSITION TO THE SUPPLEMENTAL OBJECTION 1. The Supplemental Objection states that it is a supplemental objection to WMI Liquidating Trust s First Amended Seventy-Ninth Omnibus (Substantive) Objection to Claims [Dkt. No ] (the First Amended Seventy-Ninth Objection ) and WMI Liquidating Trust s First Amended Eighty-Second Omnibus (Substantive) Objection to Change in Control Claims [Dkt. No ] (the First Amended Eighty-Second Objection, and, collectively, the First Amended Objections ). 2. However, the Claimants did not agree to allow the First Amended Objections to be applied to their Original Claims or the Amended Components of their Amended Claims. Instead, WMILT and the Claimants expressly stipulated that the Amended Claims, as defined hereinafter, would be subject to the Original Objections, as defined hereinafter, and that WMILT may file an objection to the Amended Components, as defined hereinafter Rather than file a supplemental objection to the Original Objections, WMILT attempts to incorporate by reference the First Amended Objections, even though the Court denied leave to amend as to these Claimants. 4 As such, any reference to the First Amended Objections should be stricken and/or disregarded, as should any attempt to incorporate the First Amended Objections into the Supplemental Objection. The First Amended Objections cannot be applied to these Claimants. 3 Order Approving Stipulation and Agreement Between WMI Liquidating Trust, Melba Ann Bartels, Kenneth E. Kido, Mitchell Stevens and Steven F. Stein Amending Proofs Of Claim Nos. 376, 1140, 1142, 1085, 1086, 2601 and 3839 and Applying The Section 502(b)(7) Cap (the Amendment Order ) [Dkt. No ] at 6. 4 Order Denying WMILT s Motion for An Order Granting Leave to Amend the Original Objections [Dkt. No ]. 2

3 Case MFW Doc Filed 04/28/16 Page 3 of Since the First Amended Objections are not applicable to these Claimants, this Supplemental Objection to the First Amended Objections likewise should not be applied to these Claimants. 5. Accordingly, WMILT s statements that the First Amended Objections are incorporated into the Supplemental Objection by reference should be stricken. STATEMENT OF FACTS AND PROCEDURAL HISTORY A. The Original Claims and Objections 6. On March 2, 2009, Bartels filed (i) proof of claim number 1140, alleging $976,959 in payments owed pursuant to a change in control agreement ( CIC Agreement ) and (ii) proof of claim number 1142, alleging $70,000 in payments owed pursuant to a special opportunity bonus agreement ( Retention Bonus Component ) On March 5, 2009, Kido filed (i) proof of claim number 1085, alleging $115,000 in payments owed pursuant to a Retention Bonus Component, (ii) proof of claim number 1086, alleging $1,139, in payments owed pursuant to a CIC Agreement, and (iii) proof of claim number 1082, alleging $136, in payments owed pursuant to the WMI Supplemental Executive Retirement Accumulation Plan (Amended and Restated, Effective January 1, 2004) (the SERAP Component ). 8. On March 30, 2009, Stein filed proof of claim number 2601, alleging a total claim amount of $793,493.18, comprised of (i) $68, in payments owed pursuant to the SERAP 5 Prior to filing Claim 1142, Bartels filed proof of claim number 124 ( Claim 124 ), alleging $70,000 in payments owed pursuant to the same special opportunity bonus agreement that forms the basis of Claim Claim 124 was subsequently expunged by this Court s Order Granting Debtors Third Omnibus (Non-Substantive) Objection to Claims [D.I. 1464], entered on August 10, 2009, as an amended and superseded claim. 3

4 Case MFW Doc Filed 04/28/16 Page 4 of 17 Component 6 and (ii) $725,000 in payments owed pursuant to a Retention Bonus Component, dated April 11, 2008 (the Stein Retention Bonus Agreement ). 9. On December 30, 2008, Stevens filed (i) proof of claim number 374, alleging $12, in payments owed pursuant to a SERAP Component 7 and (ii) proof of claim number 376, alleging $75,000 in payments owed pursuant to a Cash Long-Term Incentive Award ( Cash LTI Award Component ). 10. On May 3, 2010, Stevens filed proof of claim number (which, together with the other proofs of claim filed by Claimants above, constitute the Original Claims ), alleging $890,660 in payments owed pursuant to a CIC Agreement. 11. On August 15, 2012, WMILT filed objections to the Original Claims entitled WMI Liquidating Trust s Seventy-Ninth Omnibus (Substantive) Objection to Claims [Dkt. No ] and WMI Liquidating Trust s Eighty-Second Omnibus (Substantive) Objection to Change In Control Claims [Dkt. No ] (collectively, the Original Objections ), in which WMILT objected to the Original Claims among many other claims. 12. In the Original Objections, WMILT raised limited defenses to the Claimants claims. In essence, WMILT objected to the Original Claims by asserting that the CIC Agreements, the Retention Bonus Components, and the Stein Retention Bonus Agreement entered into by Claimants were the obligation of Washington Mutual Bank rather than the Debtors (the Wrong Party Defense ). WMILT further asserted that no change in control occurred pursuant to the terms 6 As set forth in the Objections (as defined below), WMILT allowed a portion of Stein s SERAP Component in the amount allegedly set forth in WMILT s books and records, $34, Pursuant to this Court s Order Granting Debtors Fifty-Seventh Omnibus (Non-Substantive) Objection to Claims [D.I. 6073], entered on November 23, 2010, Stevens SERAP Component was reduced and allowed in the amount set forth in WMILT s books and records, $6, Initially, Stevens filed proof of claim number 2139 ( Claim 2139 ). Thereafter, Stevens filed Claim 3839 seeking to amend and supersede Claim Accordingly, Claim 2139 was expunged by this Court s Order Granting Debtors Forty-Fifth Omnibus (Non-Substantive) Objection to Claims [D.I. 5245], entered on August 9, 2010, as an amended and superseded claim. 4

5 Case MFW Doc Filed 04/28/16 Page 5 of 17 of the CIC Agreements (the No Change In Control Defense ) and that any allowed claims were subject to a cap pursuant to Section 502(b)(7) of the Bankruptcy Code (the Section 502(b)(7) Defense ). 13. Importantly, WMILT did not raise the Banking Regulations, as hereinafter defined, in the Original Objections. B. The First Amended Objections 14. On July 12, 2013, WMILT filed the First Amended Objections that repeated the defenses raised in the Original Objections, but also raised a number of new defenses. In particular, WMILT asserted that Claimants claims should be disallowed by operation of 12 U.S.C. 1828(k) and 12 C.F.R , et seq. (the Automatic Termination Regulation ) as well as of 12 C.F.R. 359, et seq. (the Golden Parachute Regulations and, together with the Automatic Termination Regulation, the Banking Regulations ). 15. On August 23, 2013, this Court entered its Order Denying WMILT s Motion for An Order Granting Leave to Amend the Original Objections [Dkt. No ], thereby precluding WMILT from asserting the additional defenses raised in the First Amended Objections as to the entirety of the employee claims, including the Original Claims of the Claimants. For the avoidance of doubt, in that order the Court precluded WMILT from asserting the Banking Regulations, among other things, as a defense to the entirety of the Original Claims. In the order, the Court found that there had been undue delay by WMILT in seeking to amend the Original Objections and that the claimants would be unduly prejudiced by the amendments. Order Denying WMILT s Motion for An Order Granting Leave to Amend the Original Objections [Dkt. No ]. 5

6 Case MFW Doc Filed 04/28/16 Page 6 of As set forth in the General Statement above, since the Claimants did not agree to the application of the First Amended Objections to their Original Claims or the Amended Components of their Amended Claims, the First Amended Objections are not applicable to these Claimants, or their claims, as amended. C. The Amended Components 17. On July 16, 2014, the Claimants filed their Motion For Leave to Amend Claims To Include Severance Plan Benefits and To Plead Additional Theories Of Recovery In Light of WMI Liquidating Trust s Seventy-Ninth Omnibus (Substantive) Objection To Claims [Dkt. No ]. 18. On July 30, 2014, WMILT filed its Limited Objection To Motion of Kenneth E. Kido, Melba Ann Bartels, Mitchell Stevens and Steven F. Stein For Leave To Amend Proofs of Claim and Plead Additional Theories of Recovery [Dkt. No ]. 19. Thereafter, following extensive arms length negotiations between counsel for Claimants and WMILT, on February 29, 2016, the parties reached a stipulation to permit the Claimants to amend their claims, among other things (the Stipulation ). In turn, on March 1, 2016, the Court entered the Amendment Order. 20. Pursuant to the Amendment Order, Claimants filed amended proofs of claim numbers 376, 1140, 1142, 1085, 1086, 2601 and 3839 on or about March 10, 2016 (the Amended Claims ). The Amended Claims restated the components of the Original Claims and added amounts as additional components (the Amended Components ) in the Amended Claims. 21. The Amended Components in the Amended Claims are as follows: (a) Bartels, Kido, and Stevens amended Claims 1140, 1086 and 3839, respectively ( Amended Claim 1140, Amended Claim 1086, and Amended Claim 3839, respectively), to (1) assert an alternate claim (the Alternate Severance Claim ) under the Washington Mutual Severance Plan (Amended 6

7 Case MFW Doc Filed 04/28/16 Page 7 of 17 and Restated, Effective January 1, 2008), to the extent the Court determines that a change in control did not occur or they are not entitled to change in control payments pursuant to their CIC Agreements; and (2) add an unliquidated claim for attorneys fees and costs pursuant to either Section of the Revised Code of Washington or Section of the California Labor Code, the applicable contracts between the parties, and/or the Employee Retirement Income Security Act ( ERISA ) (the Attorneys Fees Claim ); (b) Bartels, Kido, and Stevens amended Claims 1142, 1085 and 376, respectively ( Amended Claim 1142, Amended Claim 1085, and Amended Claim 376, respectively), to add an Attorneys Fees Claim; and (c) Stein amended Claim 2601 ( Amended Claim 2601 ) to assert (1) additional monies owed pursuant to the Stein Retention Bonus Agreement, (2) a claim pursuant to his CIC Agreement, (3) an Alternate Severance Claim, and (4) an Attorneys Fees Claim. 22. The Amended Claims are deemed to be subject to the Original Objections and the declaratory judgment action which this Court directed WMILT to file 9 and all pleadings filed in connection therewith. Amendment Order, Ex. A at 6. D. The Supplemental Objection 23. Pursuant to the Stipulation and the Amendment Order, WMILT was permitted to file a further objection to the Amended Claims solely with respect to the Amended Components. Id. Accordingly, on April 13, 2016, WMILT filed the Supplemental Objection. 24. By its own terms, and as emphasized by the bold text appearing in the Supplemental Objection, For the avoidance of doubt, [the] Supplemental Objection pertains solely to the 9 WMI Liquidating Trust v. Federal Deposit Insurance Corporation, in its corporate capacity, et al., United States District Court for the District of Delaware, Case No. 1:14-cv (GMS). 7

8 Case MFW Doc Filed 04/28/16 Page 8 of 17 amended components of the Amendment Claimants Second Amended Claims. Supplemental Objection at The Supplemental Objection attempts to incorporate by reference WMILT s arguments as set forth in the First Amended Objections. 10 The Supplemental Objection also objects to the Amended Components Attorneys Fees Claims under the Bankruptcy Code and the Washington Revised Code. RESPONSE TO SUPPLEMENTAL OBJECTION I. The Supplemental Objection Applies Only to the Amended Components 26. As set forth in the Amendment Order, the new defenses raised in the Supplemental Objection apply only to the Amended Components of Claimants Amended Claims. This Response is intended to respond only to the new defenses raised in the Supplemental Objection as they purportedly apply to the Amended Components. II. Claimants Incorporate the Original Responses and the Amended Claims 27. Many of the arguments raised in the Supplemental Objection are redundant and were raised in the Original Objections, filed when Claimants were proceeding pro se, with respect to the Original Claims. The arguments have been, in many cases, thoroughly addressed in Claimants Original Responses, as defined below, and proofs of claim, as amended, and in the responses and claims of other employee claimants in this matter. Claimants specifically refer the Court to the following: (i) Melba Bartel s [sic] Response To WMI Liquidating Trust s Seventy- Ninth Omnibus (Substantive) Objection To Claims [Dkt. No ], (ii) Kenneth E. Kido s Response To WMI Liquidating Trust s Seventy-Ninth Omnibus (Substantive) Objection To Claims [Dkt. No ], (iii) Steven F. Stein s Response to WMI Liquidating Trust s Seventy- 10 As stated in the General Statement set forth above, the Claimants oppose WMILT s attempt to incorporate the First Amended Objections into the Supplemental Objection. 8

9 Case MFW Doc Filed 04/28/16 Page 9 of 17 Ninth Omnibus (Substantive) Objection To Claims [Dkt. No ], (iv) Response To Notice Of WMI Liquidating Trust s Eighty-Second Omnibus (Substantive) Objection To Change In Control Claims [Dkt. No ], and (v) Response To Notice Of WMI Liquidating Trust s Seventy-Ninth Omnibus (Substantive) Objection To Change In Control Claims [Dkt. No ] (collectively, the Original Responses ), which specifically address the arguments raised by WMILT in the Original Objections. Claimants also incorporate by reference Amended Claim 376, Amended Claim 1140, Amended Claim 1142, Amended Claim 1085, Amended Claim 1086, Amended Claim 2601, and Amended Claim 3839, which also address many of the arguments raised by WMILT. 28. In particular, the Wrong Party Defense and the No CIC Agreement Defense are addressed by Claimants in their Original Responses. 11 III. The Banking Regulations Do Not Apply 29. The Supplemental Objection alleges WMILT's theory for disallowance of the Amended Components based upon the Banking Regulations. Supplemental Objection The Banking Regulations are not applicable, for numerous reasons. 31. As this Court has already noted, any decision on the legal issues presented by the Banking Regulations would not be binding on the Federal Deposit Insurance Corporation ( FDIC ) or the Federal Reserve Bank ( FRB ) because they are not parties to the Omnibus Objections. See Order Denying WMI Liquidating Trust s Motion For An Order Granting Leave To Amend The Fifth, Sixth, Seventy-Ninth, Eightieth, Eighty-First, Eighty-Second, Eighty- Fourth, Eighty-Fifth, and Eighty-Eighth Omnibus Objections To Claims [Dkt. No ]. 11 The Claimants reserve their right to seek leave to amend the Original Responses, which were prepared and filed while Claimants were proceeding pro se, if necessary. 9

10 Case MFW Doc Filed 04/28/16 Page 10 of With respect to the Automatic Termination Regulation, Section clearly applies only to employment contracts between a savings association and its employee. Here, Claimants agreements created obligations, as set forth in their claims, as amended, borne by WMI. WMI is not and never was a savings association and, certainly, neither is WMILT. Further, WMI was not in receivership and the FDIC did not take control of WMI. Therefore, the Automatic Termination Regulation provisions of the FDIC regulations do not apply. 33. With respect to the Golden Parachute Regulations, Title 12, Section 1828(k) of the United States Code ( Section 1828(k) ) states that only the FDIC has standing to seek to prohibit any alleged golden parachute payment pursuant to that section. WMILT does not have standing under Section 1828(k)(1-2), which specifically provides in pertinent part that the [FDIC] may prohibit or limit, by regulation or order, any golden parachute payment and shall prescribe, by regulation, the factors to be considered by the [FDIC] in taking any action to avoid a golden parachute payment. The United States Supreme Court has held that "the question whether Congress... intended to create a private right of action [is] definitively answered in the negative" where "a statute by its terms grants no private rights to any identifiable class." Touche Ross & Co. v. Redington, 442 U.S. 560, 576 (1979). For a statute to create such private rights, its text must be "phrased in terms of the persons benefited." Cannon v. University of Chicago, 441 U.S. 677, 692, n. 13 (1979). Indeed, Section 1828(k) grants the FDIC sole authority to regulate and prohibit golden parachutes as part of the larger regulatory and enforcement scheme provided for the FDIC by 12 U.S.C. Chapter 16 and is not phrased in terms related to any class of persons benefitted by that section and certainly does not specify a class that would include WMILT. As such, Section 1828(k) does not create a private right of action, implied or otherwise, in WMILT for the disallowance of any of the Amended Components. Nor does 12 C.F.R , et seq. provide 10

11 Case MFW Doc Filed 04/28/16 Page 11 of 17 WMILT with standing to enforce the federal statutory and regulatory law prohibiting golden parachute payments. 34. Even if WMILT has standing, which Claimants assert it does not, WMILT s attempts to seek the disallowance of the Amended Components are futile, based on the plain reading of the text of Section 1828(k). Section 1828(k) and, necessarily, 12 C.F.R only limit or prohibit golden parachute payments by an insured depository institution or covered company which meets certain conditions. 12 U.S.C. 1828(k)(4)(A). Covered company means any depository institution holding company or any other company who controls an insured depository institution. 12 U.S.C. 1828(k)(5)(D). A depository institution holding company means a bank holding company which is defined by 12 U.S.C and which generally is any company which has control over a bank. 12 U.S.C. 1813(w)(1-2); 12 U.S.C. 1841(a)(1). Thus, payments from a company that does not have control over a bank at the time of payment are not golden parachute payments pursuant to Section 1828(k) and are not prohibited by 12 C.F.R Faigin v. Signature Grp. Hold., Inc., 211 Cal. App. 4th 726, 745 (Cal. Ct. App. Second Dist. 2012) (holding that payments by a former bank after it had ceased its banking business were not subject to FDIC regulation). 35. Moreover, neither WMILT nor WMI have been a depository institution holding company ( DIHC ) since before the date, September 26, 2008, on which the Debtors commenced with this Court a voluntary case pursuant to Chapter 11 of the Bankruptcy Code (the Commencement Date ). WMILT has admitted numerous times that, after the FDIC seized all of Washington Mutual Bank s ( WMB ) assets on September 25, 2008, WMI was no longer a bank holding company and, indeed, only owned Non-Banking Subsidiaries. Disclosure Statement [Dkt. No. 9179] at 49-54; Declaration [Dkt. No. 0013] at 9; Voluntary Petition [Dkt. No. 0001] 11

12 Case MFW Doc Filed 04/28/16 Page 12 of 17 at Exhibit A. Thus, WMI is not a covered company under Section 1828(k). As a result, any payments made by WMI to Claimants after September 25, 2008, such as payment on the Amended Components which have yet to be made pursuant to the Amended Claims, are not subject to Section 1828(k) and are not prohibited by 12 C.F.R See Faigin, 211 Cal. App. 4th at Furthermore, the entity making the payment is the WMI Liquidating Trust, not WMI. Payments made by the WMILT fall outside of the definition of a golden parachute payment. Therefore, such payments are not a prohibited golden parachute payment C.F.R (f) ( Section 359.1(f) ) sets forth the conditions that must be met for a payment to be considered a golden parachute payment. Absent those conditions, an entity need not seek approval from the FDIC to make payments to former officers and employees. One of the necessary conditions requires that the payment or agreement to make payment must be made "by any insured depository institution [ IDI ] or an affiliated depository institution holding company..." Section 359.1(f)(1). Therefore, if the party making the payment is not one of those two types of entities, then the transaction is not and cannot be covered by the Golden Parachute Regulations. 38. This conclusion is a necessary result of a plain reading of the language of the regulations. As courts have repeatedly held, "It is well established that 'when the statute's language is plain, the sole function of the courts at least where the disposition required by the text is not absurd is to enforce it according to its terms.'" Lamie v. United States Trustee, 540 U.S. 526, 534 (2004) (quoting Hartford Underwriters Ins. Co. v. Union Planters Bank, N A., 530 U.S. 1, 6 (2000) (quoting United States v. Ron Pair Enterprises, Inc., 489 U.S. 235, 241 (1989) (quoting Caminetti v. United States, 242 U.S. 470, 485 (1917)). Therefore, one need not go beyond the 12

13 Case MFW Doc Filed 04/28/16 Page 13 of 17 clear language of the provisions of Section 359.1(f). Any entity other than a DIHC or IDI need not seek approval from the FDIC to make payments to former officers and employees. WMI and WMILT are not DIHCs or IDIs. 39. Claimants Amended Components in the Amended Claims simply assert general nonpriority unsecured claims in this bankruptcy case. The definition of a golden parachute payment does not include a pro rata distribution from a bankruptcy estate on a general unsecured nonpriority claim. WMILT cannot establish that the Amended Components fall within the scope of golden parachute payments or that the Distress Event requirement has been met To the extent that WMI and/or WMILT are deemed to be DIHCs, in order for a payment to be a golden parachute payment, the statute requires that the condition set forth in Section 359.1(f)(1)(i) be met, that one of the conditions set forth in Section 359.1(f)(1)(ii) be met, and that one of the conditions set forth in Section 359.1(f)(1)(iii) be met. It is clear that the Amended Components of the Amended Claims are payable after Claimants termination with Debtor, thus satisfying the condition set forth in Section 359.1(f)(1)(i). It is also clear that the payments to Claimants would be made after the bankruptcy of Debtor, the entity making the payment, thus satisfying Section 359.1(f)(1)(ii)(A). Section 359.1(f)(1)(iii)(A) applies to a payment made to a party who was employed by an IDI. Section 359.1(f)(1)(iii)(B) applies to a payment made to a party employed by an insured DIHC. Because the obligations owed to Claimants as set forth in their claims, as amended, were the responsibility of WMI, if the Court were to determine that WMI qualified as a DIHC, Section 359.1(f)(1)(iii)(B) would apply. 41. Section 359.1(f)(1)(iii)(B) requires that the payment be payable to an individual whose employment was terminated at a time when the insured depository institution holding 12 The required Distress Events are enumerated in 12 C.F.R (f)(1)(ii). 13

14 Case MFW Doc Filed 04/28/16 Page 14 of 17 company by which the individual was employed satisfies any of the conditions enumerated in Section 359.1(f)(1)(ii)(A), (C), or (D) (emphasis added). 42. Based on the plain language of Section 359.1(f)(1)(iii)(B), WMI, the purported insured DIHC that was responsible for the obligations owed to Claimants as set forth in their claims, as amended, must satisfy one of the conditions set forth in Section 359.1(f)(1)(ii)(A), (C), or (D) at the time Claimants were terminated, not WMB. 43. At the time Claimants were terminated, WMI plainly did not satisfy the conditions set forth in Section 359.1(f)(1)(ii)(A), (C), or (D). Therefore, for these additional reasons, the Banking Regulations do not apply. 44. Moreover, the purpose of the Golden Parachute Regulations is to disgorge payments made in violation of the regulations. Such regulations were never intended to prohibit the distribution of funds to an unsecured creditor from a bankruptcy estate. IV. The Attorneys Fees Claims 45. The Amended Components of the Amended Claim include claims for (1) attorneys fees and costs pursuant to Section of the Washington Revised Code, (2) attorneys fees and costs pursuant to Section of the California Labor Code, and (3) attorneys fees and costs under ERISA. 46. WMILT objects to all of the Attorneys Fees Claims, asserting that post-petition attorneys fees are not recoverable by an unsecured creditor under the Bankruptcy Code. Supplemental Objection 19. In support of this argument, WMILT cites to two decisions that predate the controlling United States Supreme Court decision in Travelers Casualty & Surety Co. v. Pacific Gas & Electric, 549 U.S. 443 (2007). In Travelers, the bankruptcy creditor filed an amended proof of claim seeking to recover the attorneys fees it incurred in connection with the 14

15 Case MFW Doc Filed 04/28/16 Page 15 of 17 debtor s bankruptcy proceedings. In its analysis of the issue, the Court in Travelers stated, Consistent with our prior statements regarding creditors entitlements in bankruptcy [citation omitted], we generally presume that claims enforceable under applicable state law will be allowed in bankruptcy unless they are expressly disallowed. Travelers, 548 U.S. at 452. The U.S. Supreme Court then went on to expressly reject arguments similar to those being advanced by WMILT in this case. Specifically, the Court stated, Here, the Bankruptcy Code does not clearly and expressly compel courts to follow the Fobian rule; on the contrary, the Code says nothing about unsecured claims for contractual attorney s fees incurred while litigating issues of bankruptcy law. In light of 502(b)(1) s broad, permissive scope, and the Court s prior recognition that the character of [a contractual] obligation to pay attorney s fees presents no obstacle to enforcing it in bankruptcy, it necessarily follows that the Fobian rule cannot stand. Id. at 453 (emphasis in original) (referencing the Fobian rule which was a court-created rule that attorneys fees were not recoverable in bankruptcy proceedings for litigating issues peculiar to federal bankruptcy law ). Accordingly, the argument advanced by WMILT should be rejected. 47. The Supplemental Objection does not raise any arguments specific to the Attorneys Fees Claim pursuant to California Labor Code Section or under ERISA. With regard to the Attorneys Fees Claims pursuant to Washington Revised Code Section , WMILT s argument that the statute does not apply is unpersuasive. The Amended Claims support a finding that such attorneys fees are recoverable and that Section applies. 48. With respect to the Wrong Party Defense, this argument is redundant and has already been addressed in Claimants Original Responses as well as in the Amended Claims, which are incorporated herein by reference. 15

16 Case MFW Doc Filed 04/28/16 Page 16 of 17 Joinder 49. Claimants join in any other responses filed by other Claimants who are similarly situated with regard to the Original Objections and the arguments raised in the Supplemental Objection. Reservation of Rights 50. Insofar as the Supplemental Objections are plainly denominated as substantive objections, to the extent that WMILT should seek to introduce evidence or argument in opposition to the Amended Components of the Amended Claims based on objections other than those recited in the Supplemental Objections, Claimants reserve the right to oppose such objections on any grounds, including but not limited to the fact that such objections are barred by Local Rule (f)(iii). WHEREFORE, for all of the above reasons, Claimants request that the Court enter an order (i) overruling the Supplemental Objection, (ii) declaring that the Amended Claims are valid, (iii) awarding attorneys fees and interest as set forth in the Amended Claims, and (iv) granting such other and further relief as is just and equitable. [Signature Page to Follow] 16

17 Case MFW Doc Filed 04/28/16 Page 17 of 17 Dated: April 28, 2016 Wilmington, Delaware CROSS & SIMON, LLC /s/ Michael J. Joyce Michael J. Joyce (No. 4563) 1105 North Market Street, Suite 901 P.O. Box 1380 Wilmington, Delaware (302) (302) (fax) -and- Stephan Kyle, Esq. KYLE LAW CORPORATION 230 California Street Suite 600 San Francisco, CA (415) (415) (fax) Counsel to Melba Ann Bartels, Kenneth E. Kido, Steven F. Stein, and Mitchell Stevens 17

18 Case MFW Doc Filed 04/28/16 Page 1 of 1 CERTIFICATE OF SERVICE I, Michael J. Joyce, hereby certify that on this 28th day of April, 2016, and in addition to the service provided under the Court s CM/ECF system, I caused copies of the foregoing Response and Opposition of Melba Ann Bartels, Kenneth E. Kido, Steven F. Stein, and Mitchell Stevens to WMI Liquidating Trust s Supplemental Objection to First Amended Seventy- Ninth Omnibus (Substantive) Objection to Claims and First Amended Eighty-Second Omnibus (Substantive) Objection to Claims to be served on the below parties by first class mail and electronic mail: Brian S. Rosen, Esquire Weil, Gotshal & Manges LLP 767 Fifth Avenue New York, New York brian.rosen@weil.com Mark D. Collins, Esquire Paul N. Heath, Esquire Amanda R. Steele, Esquire Richards, Layton and Finger PA 920 N. King Street Wilmington, DE collins@rlf.com heath@rlf.com steele@rlf.com /s/ Michael J. Joyce Michael J. Joyce (No. 4563)