NEW YORK (AP) -- A Delaware bankruptcy judge on Friday rejected Washington Mutual Inc.'s reorganization plan, ruling that the protection from future liabilities that it gives to the bank holding company's former executives is too broad.
Bankruptcy Judge Mary Walrath said that the way the reorganization plan calls for doling out up to $10 billion in WaMu assets is reasonable. It calls for dividing disputed assets, paying off WaMu's creditors and ending lawsuits that WaMu, JPMorgan Chase and the Federal Deposit Insurance Corp. filed against one another after WaMu's collapse.
In the largest bank failure in U.S. history, the FDIC seized Seattle-based Washington Mutual Bank and sold its assets to JPMorgan for $1.9 billion in September 2008, after a run on the bank in the midst of the economic meltdown. The company filed for Chapter 11 bankruptcy protection the next day.
But in her 109-page decision, Walrath rejected WaMu's overall reorganization plan because of the wide-ranging protection it sought to give directors, officers and other professionals. She wrote that language used to release them from claims was "much too broad" and "inappropriate" and must be limited to a specific list.
She also noted that WaMu was attempting to shield the executives from any responsibility for "willful misconduct and gross negligence," which she said was too extensive.
WaMu's attorneys could not immediately be reached for comment.
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