ANCHOR SAVINGS BANK v. USA

Filing 364

ORDER granting 349 Motion to Strike, denying 354 Motion to Intervene, and denying 357 Motion to Intervene Signed by Judge Lawrence J. Block. (mt) Copy to parties.

United States Court of Federal Claims
No. 95-39
Filed August 31, 2012
Not for Publication

ANCHOR SAVINGS BANK, FSB,
Plaintiff,
Motion to Intervene; Subject-Matter
Jurisdiction; Collateral Attack; RCFC 24

v.
UNITED STATES OF AMERICA,
Defendant.

Edwin Louis Fountain, Jones Day, Washington, DC, for plaintiff.
Jacob A. Schunk, Commercial Litigation Branch, Civil Division, United States
Department of Justice, Washington, DC, for defendant.
Linda Neufeld, pro se.
Paul Allan Traina, Engstrom, Lipscomb & Lack, Los Angeles, CA, for intervenorplaintiff-applicants.
OPINION AND ORDER
Block, Judge.
Before the court are two motions to intervene filed by owners of Dime Litigation
Tracking Warrants, which are securities that derive their value from the outcome of this
litigation. Also before the court is defendant’s motion to strike several letters written by alleged
Litigation Tracking Warrant owners. The movants and some of the letter-authors seek to
intervene in this litigation; other letter-authors wish to merely inform the court of the plight of
Litigation Tracking Warrant owners. However, as will be explained below, the bankruptcy court
handling Washington Mutual, Inc.’s bankruptcy had already decided the issues underlying the
warrant owners’ motions to intervene and raised in the letters written by alleged warrant owners.
Therefore, the warrant owners’ motions to intervene will be denied. And because none of the
warrant owners’ letters were filed as motions, as required by RCFC 7(b), defendant’s motion to
strike the letters will be granted.

I. The Litigation Tracking Warrants
The Litigation Tracking Warrants were issued by Dime Bancorp, Inc., the successor-ininterest to Anchor Savings Bank. According to SEC Filings associated with the Litigation
Tracking Warrants, the warrant owners would be entitled to shares of Dime Bancorp, Inc.
common stock once plaintiff has, among other things, prevailed in this action and collected its
judgment. Dime Bancorp, Inc., Form 8-A, SEC File 0-32125, Ex. 3, available at
http://tinyurl.com/dimeltw8a. A $356 million judgment was entered in plaintiff’s favor in 2008.
Anchor Sav. Bank, FSB v. United States, 81 Fed. Cl. 1 (2008). That judgment was appealed and
subsequently remanded so this court may clarify how it calculated damages. Anchor Sav. Bank,
FSB v. United States, 597 F.3d 1356, 1373–74 (Fed. Cir. 2010), aff’g in part, remanding in part,
81 Fed. Cl. 1 (2008).
Prior to the 2008 judgment, Dime was acquired by Washington Mutual, Inc (“WMI”), the
holding company of Washington Mutual Bank (“WMB”). WMI ratified the Litigation Tracking
Warrant Agreement, thereby stepping into the shoes of Dime Bancorp, Inc. In Re Washington
Mutual, Inc. (WMI), 464 B.R. 656, 659 (Bankr. D. Del. 2012). Pursuant to the amended
Litigation Tracking Warrant Agreement, WMB “would continue the prosecution and control of
the Anchor Litigation and, upon receipt of any recovery, the LTW Holders [would be] entitled to
receive common stock of WMI having a value representing eighty-five percent (85%) of the net
recovery.” Pl.’s App. 3 at 17, ECF No. 360-3; see WMI, 464 B.R. at 659.
Nevertheless, WMB was one of many institutions to fail during the 2008 Global
Financial Crisis. The bank was seized by the Office of Thrift Supervision (“OTS”) on
September 25, 2008. See WMI, 464 B.R. at 660. WMB was then placed with the FDIC for
receivership. Id. The FDIC then sold WMB to JPMorgan Chase in a whole-bank purchase and
assumption transaction, a common method for resolving large bank failures. See id. With its
most significant asset in the hands of another bank, WMI had no choice but to file for bankruptcy
on September 26. Id.
II. Washington Mutual, Inc.’s Bankruptcy
The Litigation Tracking Warrant owners filed claims as a class in the WMI bankruptcy.
They alleged that their warrants were debt obligations of WMI. Id. at 658. WMI disagreed,
contending that these warrants constituted equity interests in WMI. Id. at 660. The dispute over
the warrants’ character is significant because in bankruptcy, a failed company’s creditors get
paid before the bankrupt company’s common shareholders. See 11 U.S.C. § 510(b) (claims
arising from the purchase or sale of equity securities must be subordinated); see also 11 U.S.C. §
101(16)(C) (definition of “equity security” includes warrants).
On January 3, 2011, the bankruptcy court held that the Litigation Tracking Warrants were
equity, not debt, and subordinated the warrants to the status of common shareholders. WMI, 464
B.R. at 667, 670. This meant that the warrant owners were not likely to receive much for their
warrants, regardless of what happened in the Anchor Litigation. Most important for our
purposes, the bankruptcy court found “that the LTWs do not entitle the LTW Holders to an

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interest in the Anchor Litigation itself. They are only entitled to the issuance of common stock
in WMI.” Id. at 671 (emphasis added); see id. at 660–61.
III. Discussion
RCFC 24(a) requires the court to permit a non-party to intervene who “claims an interest
relating to the property or transaction that is the subject of the action.” In cases where a nonparty asserts “a claim or defense that shares with the main action a common question of law or
fact,” the court may, in its discretion, permit the non-party to intervene. RCFC 24(b). Under
neither standard is intervention warranted.
In this case, intervention is not required under RCFC 24(a) because the warrant owners
have no interest in the property or transaction that is the subject of this action. The warrant
owners claim otherwise. In their motions to intervene and in their letters submitted to the court,
the warrant owners claim that they are directly entitled to 85% of the proceeds of the Anchor
judgment by virtue of owning Litigation Tracking Warrants. But this is not true. As the
bankruptcy court explained, the warrants do not “entitle the LTW Holders to an interest in the
Anchor Litigation itself.” Id. at 671. Thus, the warrant owners have no property interest
sufficient to require intervention under RCFC 24(a).
Allowing the warrant owners to intervene is also inappropriate under the rule for
permissive intervention. RCFC 24(b). Far from sharing a “common question” with the main
action in this case, the warrant owners raise claims that amount to nothing less than a collateral
attack on a bankruptcy court’s judgment. This court does not have jurisdiction over such claims.
See Allustiarte v. United States, 256 F.3d 1349, 1351–52 (Fed. Cir. 2001). If the warrant owners
wish to challenge the bankruptcy court’s judgment, then the proper venue for asserting such an
appeal is the United States District Court for the bankruptcy court’s district, which in this case is
the District of Delaware. See Celotex Corp. v. Edwards, 514 U.S. 300, 313 (1995). Because the
warrant owners’ claims constitute a collateral attack on the bankruptcy court’s judgment, the
court cannot permit the warrant owners to intervene under RCFC 24(b).
Finally, to the extent the letter-authors have informally requested to intervene, their
requests must be denied. Requests for court orders must be “made by motion.” RCFC 7(b)(1).
The letter-authors’ requests were not “made by motion.” Id. Therefore, defendant’s motion to
strike the letters will be granted.

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IV. Conclusion
In summary, the court hereby enters the following orders:
•
•
•

Defendant’s Motion to Strike, ECF No. 349, is GRANTED.
Neufeld’s Motion to Intervene, ECF No. 354, is DENIED.
Rosenbaum, et al.’s, Motion to Intervene, ECF No. 357, is DENIED.
IT IS SO ORDERED.

s/

Lawrence J. Block

Lawrence J. Block
Judge

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