Class Plaintiff's Response to Automatic Stay - equitatus

Case 11-03620-bjh Doc 40 Filed 02/21/12 Entered 02/21/12 23:34:41 Desc Main
Document Page 7 of 34
INTRODUCTION
1. Greenberg Traurig, LLP (“Greenberg”) is not entitled to any of the relief it seeks in this
Adversary Proceeding. Greenberg has no concern for the Debtor or the administration of this
Chapter 11 bankruptcy. Its request for stay protection is nothing but a thinly-veiled and flimsy effort
to avoid, minimize or postpone liability it faces in the California state proceedings for its own
wrongdoing. Greenberg’s motion is completely at odds with the purposes of the Bankruptcy Code,
which exists to protect the Debtor, not Greenberg. The Debtor does not see the need for the so-called
“protection” Greenberg claims is so important, and neither should this Court.
2. Greenberg’s argument that class plaintiffs are asserting claims of the estate is meritless. The
California class plaintiffs unquestionably own the claims they assert in the California class action.
Each claim alleges breaches of duties owed directly to the RE Loans investors, not to RE Loans itself.
Each claim alleges direct and individual harm to the investors, not RE Loans. Because these claims
do not belong to the estate, they are not stayed under § 362(a)(3).
3. Greenberg’s request that the stay be extended to prevent harm to the estate confuses and
ultimately fails to apply the proper standards required to enjoin third party litigation pursuant to §§
362 and 105. A stay is not automatic and may be granted only in unusual circumstances, after a
traditional analysis of the merits of injunctive relief. Greenberg cannot show that any of the
necessary factors are met here. It utterly fails to demonstrate that allowing the California class
litigation to proceed will irreparably harm the reorganization. Its argument to this effect is largely
based on factually-unsupported speculation. Moreover, neither §§ 362 nor 105 could possibly be
utilized to move the state court claims here for resolution.
4. The California class litigation is critical to the RE Loans investors injured by Greenberg’s
illegal conduct. The state law claims allege that Greenberg committed a number of acts, including
common law and securities fraud, that directly and individually harmed investors in RE Loans and
Mortgage Fund ’08 (“MF08”). Greenberg, acting in concert with Wells Fargo Foothill, LLC, (“Wells
Fargo”) stripped the investors of valuable membership rights and compromised the security of their
investments. Many of the investors lost their entire retirement funds, and others lost their life
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