Bank of America Files Limited Objection

Just a heads up that Bank of America has filed a Limited Objection to the Motion for Order Authorizing Creditors’ Committee to Pursue Certain Estate Causes of Action – the pdf is located in the Bankruptcy section.


5 Responses to “Bank of America Files Limited Objection”

  1. 1 Another Former Secretary 24 March 2009 at 5:00 pm

    Can one of you lawyer types explain what this document means to us?

  2. 2 Former Associate 24 March 2009 at 10:14 pm

    My skimming of it reveals the following crude analysis. Observer can correct me if I’m wrong. At the big picture level, the Committee of Creditors is asking the judge for permission to file certain lawsuits within the bankruptcy case that would traditionally belong to the debtor. Those two types of claims are (1) against former shareholders for having taken money from the firm when it was potentially insolvent, and (2) against BofA/Citibank on the basis that they terminated their security interest in the firm’s A/R and bank accounts and erroneously tried to revive it. BofA cares about this last category for two reasons.
    First, I think BofA is trying to clarify that while the Committee can bring the claims on the debtor’s behalf, the Committee will step into the shoes of the debtor so that any defenses that the banks would have had against the debtor will also apply against the Committee. This doesn’t seem that controversial.
    The second point is that the Committee has asked the judge to allow it to bring claims now relating only to the timing of the security filings, reserving the right to bring any other claims against the banks later on. The Committee probably wants to do this claim now because if it prevails, the judge could order the banks to return $50 million to the debtor’s estate, forcing the banks to take a number and line up with the rest of us unsecured creditors. That would give the Committee a much better sense of how much is at play in the estate. BofA doesn’t want to let the Committee split up claim–if there are other claims against hte banks, they should all be brought at once so the banks don’t have to defend against multiple successive lawsuits.
    I have no idea how the judge will rule on this, but I guess we’ll know more after Friday’s hearing (I get all my updates from this site and Callaw).

  3. 3 Observer 26 March 2009 at 10:24 pm

    (I haven’t been able to get the document to open for me, so I am unable to see what they have said.)

  4. 4 Observer 28 March 2009 at 7:35 pm

    On Friday, Judge Montali took this matter under submission. It seems he will rule sometime next week.

    As expected, the key issue is whether the Committee can pursue some claims (secured vs. unsecured status) now, but reserve rights for the Committee or the Debtor to bring other claims against the banks later. A transcript of the hour-long hearing should prove quite interesting when it becomes available

    FA summarized the legal context well above.

    On the one hand, resolving whether the banks are secured or unsecured (and don’t or do have to return payments to the bankruptcy estate) is a key issue in this Ch. 11 case. On the other hand, the banks made a quite legitimate point that any claims against them should be brought by one party in the case at one time. The bankruptcy appellate case law supports that position. There really should be no reason why the Committee and the Debtor can’t state now any and all claims that may exist against the banks.

    It’s fair to have the Committee make a serious choice at this stage: Sue now and get an earlier answer on the secured claim issue, or wait until later so as to preserve possible additional claims against the banks.

    My prediction is that Montali will grant the Committee the requested status as authorized to bring claims on behalf of the estate, but expressly state that standard rules of claim preclusion/collateral estoppel will apply. In other words, I don’t think he will permit the Committee to have its requested potential two bites at the apple, but he will say that it is premature to decide whether any later claims (not yet articulated or alleged) are or are not barred by claim preclusion/collateral estoppel.

  5. 5 Noway 30 March 2009 at 4:37 pm

    Regarding the Recorder article and March 3 post re “Where Some of the Heller Money Went,” the bankruptcy filing, listing shareholders who got their capital out in 2008 is wrong in at least one respect. It includes at least one person whose name was simply mistyped, Judy Gold, who actually resigned as a shareholder many years ago, becoming a salaried employee, and did not receive one dime of capital (or draw against in the firm’s profits) in 2008 — and never had the amount of capital listed next to her name in the bankruptcy court filing anayway.

    Apparently there are also other errors in the filing and they are going to fix it someday.

    An associate who had made this kind of mistake at Heller Ehrman would (a) have been ordered to fix it immediately and (b) would then have been fired.

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