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Federal Judge May Postpone Consideration of WaMu-FDIC Dispute

By Brent Kendall, Of DOW JONES NEWSWIRES

WASHINGTON -(Dow Jones)- A federal trial judge here suggested Wednesday that she may postpone her consideration of a Washington Mutual Inc. lawsuit that seeks billions of dollars from the Federal Deposit Insurance Corp. stemming from the government's seizure of the holding company's banking assets in 2008.

U.S. District Court Judge Rosemary Collyer questioned whether she should proceed while similar litigation unfolds in a federal bankruptcy court in Delaware that is further along in its deliberations.

"To have you litigate in two places just doesn't make sense," Collyer told the parties during an afternoon court hearing.

Collyer, however, also said there were legal issues that only her court had jurisdiction to consider.

Washington Mutual argues in its lawsuit that the FDIC wrongly seized and sold certain banking assets to JPMorgan Chase & Co. (JPM), which paid $1.9 billion to the government in September 2008 for WaMu's banking operations.

The holding company also argues that the FDIC sold WaMu's banking assets to JPMorgan for less than they would have sold for in liquidation proceedings.

WaMu and its creditors would prefer to have many issues in the case resolved in the Delaware bankruptcy court.

In addition to asking Collyer to stay the Washington, D.C. litigation, WaMu's lawyers asked the judge Wednesday to dismiss counter-claims made by the FDIC.

Lawyers for the FDIC argued that Collyer should not postpone her consideration of the case, and they asked her to dismiss most portions of WaMu's lawsuit.

Collyer did not immediately rule on either side's requests, saying she needed more time to think about the issues.

WaMu's bank failure was the largest in U.S. history. The bank holding company filed for bankruptcy protection the day after the FDIC seized its banking assets.

U.S. Bankruptcy Judge Mary Walrath in Delaware, who is overseeing Washington Mutual's bankruptcy, has declined to defer to the federal court in Washington, a decision that the FDIC and JPMorgan are appealing.

-By Brent Kendall, Dow Jones Newswires; 202-862-9222; brent.kendall@ dowjones.com

  (END) Dow Jones Newswires
  11-04-091800ET
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