Washington Mutual Inc v. ( 2021 )

NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
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No. 20-1725
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In re: WASHINGTON MUTUAL, INC., et al., Debtors
ALICE GRIFFIN, Appellant
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On Appeal from the United States District Court
for the District of Delaware
(D.C. No. 1-19-cv-00775)
District Judge: Honorable Richard G. Andrews
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Submitted Pursuant to Third Circuit L.A.R. 34.1(a)
December 11, 2020
Before: McKEE, PORTER, FISHER, Circuit Judges.
(Filed: March 23, 2021)
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OPINION *
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FISHER, Circuit Judge.
This appeal arises out of the Chapter 11 bankruptcy of Washington Mutual,
Inc. (WMI). Appellant Alice Griffin was a holder of WMI preferred stock whose
shares were canceled pursuant to WMI’s 2012 plan of reorganization. Under the plan,
Griffin and other preferred shareholders became members of “Class 19,” the plan’s
*
This disposition is not an opinion of the full Court and pursuant to I.O.P. 5.7 does
not constitute binding precedent.
“Preferred Equity Interest” class. 1 In 2019, Griffin objected to a settlement that diluted
her interests in Class 19. That settlement, negotiated by the appellee Liquidating Trust
in 2013, allowed a disputed $72 million claim brought by certain securities
underwriters. The Bankruptcy Court overruled Griffin’s objection. On appeal, the
District Court affirmed. Griffin now appeals a second time, alleging multiple errors.
We will affirm. 2
I. 3
The Bankruptcy Court overruled Griffin’s objection on two grounds. It stated
first: “I believe that the equitable doctrine of laches precludes this objection from
being prosecuted at this time,” i.e., six years after the settlement. 4 Second, it explained
1
App. 834.
2
The Bankruptcy Court had jurisdiction under 28 U.S.C. §§ 157(b), 1334. The
District Court had appellate jurisdiction under 28 U.S.C. § 158(a). “We assess our
own appellate jurisdiction in the first instance.” Seneca Res. Corp. v. Twp. of
Highland, Elk Cty., Pa., 863 F.3d 245, 252 (3d Cir. 2017). Although neither party here
contends this appeal is moot, “[o]ur ‘continuing obligation’ to assure that we have
jurisdiction requires that we raise issues of . . . mootness sua sponte.” Id. (quoting
Ehleiter v. Grapetree Shores, Inc., 482 F.3d 207, 211 (3d Cir. 2007)). This appeal is
not moot. The underlying bankruptcy case is now closed and the Trust has made its
final distribution, but we cannot say these developments “make[] it impossible for the
court to grant ‘any effectual relief whatever.’” Church of Scientology of Cal. v. United
States, 506 U.S. 9, 12 (1992) (quoting Mills v. Green, 159 U.S. 651, 653 (1895)).
Were Griffin to prevail on the merits and the settlement to be set aside, her pro rata
share of the initial distribution made to members of Class 19—including to the
underwriters—would increase accordingly. Meaningful relief therefore remains
possible. We have jurisdiction under 28 U.S.C. §§ 158(d)(1), 1291.
3
“We ‘exercise the same standard of review as the District Court [did] when it
reviewed the original appeal from the Bankruptcy Court.’” In re S.S. Body Armor I
Inc, 961 F.3d 216, 224 (3d Cir. 2020) (alteration in original) (quoting Binder &
Binder, P.C. v. Handel (In re Handel), 570 F.3d 140, 141 (3d Cir. 2009)). Thus, we
review the Bankruptcy Court’s approval of the disputed settlement for an abuse of
discretion. In re Martin, 91 F.3d 389, 391 (3d Cir. 1996).
4
App. 45.
2
that even if laches did not apply, Griffin’s objection failed on the merits because
“th[e] settlement was not in bad faith, was not a breach of fiduciary duty, but really
was a proper exercise of the liquidating trust[’s] obligation under the trust
agreement.” 5 The District Court affirmed on the second ground, noting that “the
Bankruptcy Court’s decision adequately rests on its approval of the merits of the
settlement.” 6 The District Court did not rule on laches.
Griffin contends this was error. In her view, laches was “the sole basis” for the
Bankruptcy Court’s decision and “the District Court was required to review [it].” 7 We
disagree. Where “two independent reasons support a decision, neither can be
considered obiter dictum; each represents a valid holding of the court.” 8 Here, the
Bankruptcy Court analyzed the merits at length. It considered the four factors this
Court has identified as governing the approval of settlements in bankruptcy. 9 It
concluded that “all those factors support approval of the final settlement by a
liquidating trustee.” 10 The Bankruptcy Court then stated that if the settlement had been
submitted for approval, it “would have approved it.” 11 Griffin cannot credibly dismiss
these conclusions as judicial “musings.” 12 The record demonstrates that they were
5
App. 47.
6
App. 67.
7
Appellant’s Br. 13.
8
United States v. Shakir, 616 F.3d 315, 319 n.1 (3d Cir. 2010) (quoting
Kushner v. Winterthur Swiss Ins. Co., 620 F.2d 404, 408 n. 4 (3d Cir. 1980)).
9
See Martin, 91 F.3d at 393.
10
App. 46.
11
App. 48.
12
Appellant’s Br. 13.
3
rather “independent reasons support[ing] [the] decision.” 13 Accordingly, it was “a
valid holding” of the Bankruptcy Court that Griffin’s objection failed on the merits. 14
The District Court was free to affirm on that basis. 15
“We [too] may affirm on any basis supported by the record.” 16 Because we
agree that the Trust acted appropriately in settling the underwriters’ claims, we need
not address Griffin’s laches argument. Instead, we turn to the settlement.
II.
“[T]he ultimate issue on appeal is whether the [B]ankruptcy [C]ourt abused its
discretion when it []approved the compromise” between the Trust and the
underwriters. 17 That compromise did two things. First, it disallowed from Class 18
(ahead of Griffin) a $24 million indemnification claim related to the underwriting of
WMI debt securities. Second, it allowed in Class 19 (Griffin’s class) a $72 million
indemnification claim related to the underwriting of WMI equity securities.
In considering whether to approve this settlement, the Bankruptcy Court was
required “to assess and balance the value of the claim[s] . . . being compromised
13
Shakir, 616 F.3d at 319 n.1.
14
Id.15
See Fellheimer, Eichen & Braverman, P.C. v. Charter Techs., Inc., 57 F.3d
1215, 1224 (3d Cir. 1995) (affirming the District Court, which had “affirmed the
[B]ankruptcy [C]ourt’s [decision] . . . by finding three alternative grounds for
upholding [it]”); Helvering v. Gowran, 302 U.S. 238, 245 (1937) (“In the review of
judicial proceedings the rule is settled that, if the decision below is correct, it must be
affirmed, although the lower court relied upon a wrong ground or gave a wrong
reason.”).
16
TD Bank N.A. v. Hill, 928 F.3d 259, 270 (3d Cir. 2019).
17
Martin, 91 F.3d at 393.
4
against the value to the estate of the acceptance of the compromise proposal.” 18 Four
factors guide this assessment: “(1) the probability of success in litigation; (2) the
likely difficulties in collection; (3) the complexity of the litigation involved, and the
expense, inconvenience and delay necessarily attending it; and (4) the paramount
interest of the creditors.” 19
We find no abuse of discretion in the Bankruptcy Court’s consideration of
these factors, and we agree they favor approval of the settlement. First, the Trust’s
probability of success in litigation was uncertain. Griffin contends that our precedent
made its objection to the underwriters’ claims a slam dunk. 20 But even assuming the
case law was on its side, the Trust still needed to show that the relevant precedents
applied. It still needed to rebut the underwriters’ counterarguments. And even then, as
Griffin acknowledges, a subset of the claims might well have survived as “potential
obligations of WMI.” 21 Success in litigation was hardly guaranteed.
Nor do the remaining factors cast doubt on the Trust’s decision to settle. The
second factor, likely difficulties in collection, is not relevant here because the Trust
was not seeking to collect on the underwriters’ claims, but to defeat them. The third,
however—the litigation’s complexity, cost, duration, and inconvenience—weighed
18
Id.19
Id.20
She cites Eichenholtz v. Brennan, 52 F.3d 478 (3d Cir. 1995) and In re
Cendant Corp. Litig., 264 F.3d 286 (3d Cir. 2001). In Eichenholtz, we observed that
“federal courts [generally] disallow claims for indemnification because such claims
run counter to the policies underlying the federal securities acts.” 52 F.3d at 484. In
Cendant, we cited Eichenholtz for the proposition “that there [is] no express or
implied right to indemnification under the federal securities law.” 264 F.3d at 301.
21
Appellant’s Br. 37.
5
heavily in favor of settlement. Griffin does not disagree. Finally, settlement was
appropriate under the fourth factor, the paramount interest of the creditors. Allowance
of the underwriters’ $72 million claim in Class 19 slightly reduced Griffin’s pro rata
share of the initial distribution, but on net the settlement benefited Class 19 by
eliminating a $24 million senior claim, thereby increasing the odds of an additional
payout.
III.
We decline to reach Griffin’s three remaining arguments. First, she asserts that
the settlement was an ultra vires act and a breach of the Trust’s fiduciary duty. But
she fails to cite any legal authority in support of these claims, and her attempt to
incorporate by reference her arguments before the Bankruptcy Court and the District
Court “does not satisfy the rules of appellate procedure.” 22
Second, Griffin challenges “how the [settlement] was implemented.” 23 No such
argument was raised before the Bankruptcy Court. “We generally do not consider
arguments raised for the first time on appeal and will not do so in this case.” 24
Lastly, Griffin requests a reasonable fee for her efforts to improve the
settlement. She cites two independent grounds for the requested fee award. 25 Neither
22
Norman v. Elkin, 860 F.3d 111, 130 (3d Cir. 2017); see also Fed. R. App. P.
28(a)(8) (requiring the appellant to present her “argument,” including her “contentions
and the reasons for them, with citations to the authorities . . . on which [she] relies”).
23
Appellant’s Br. 34.
24
Gardner v. Grandolsky, 585 F.3d 786, 793 (3d Cir. 2009) (per curiam)
(citation omitted).
25
11 U.S.C. § 503(a), (b)(3)(D), (b)(4); In re S.S. Body Armor I, 961 F.3d at
225.
6
accompanied her one-line request to the Bankruptcy Court for “costs and fees
associated with bringing the Objection.” 26 Griffin’s new grounds are really new
arguments presented for the first time on appeal. We decline to consider them.
IV.
For the foregoing reasons, we will affirm.
26
App. 1561.
7