Class Plaintiff's Response to Automatic Stay - equitatus

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Case 11-03620-bjh Doc 40 Filed 02/21/12 Entered 02/21/12 23:34:41 Desc Main Document Page 8 of 34 savings. The investors will never be made whole. The California class litigation presents the best chance they have of any meaningful mitigation of their losses caused by Greenberg. PROCEDURAL BACKGROUND 5. On August 31, 2011, the first class action was filed against RE Loans, its managers/majorityin interest members, its attorneys (Greenberg), and Wells Fargo, now captioned Noble, et al. v. R.E. Loans, LLC, et al., case no. RG11593201, and is pending in California Superior Court in Alameda County (“Noble Class Action”). On November 4, 2011, a second class action entitled Mendes v. B-4 Partners, LLC, et al., case no. RG 11603095, was also filed in the Alameda Superior Court (“Mendes Class Action”). The California State Court recently granted the plaintiffs in the Noble Class Action and the Mendes Class Action leave to file a consolidated and amended complaint (“Consolidated Complaint”), and ordered that the two class actions be consolidated. 6. On January 30, 2012, a third class action was filed, entitled Nolan v. Wells Fargo Capital Finance and Greenberg Traurig, case no. RG12614850. Plaintiff Nolan has agreed to join in the Consolidated Complaint. The three consolidated cases are referred to as the “California Class Litigation,” and the operative complaint for all purposes here is the Consolidated Complaint attached to the Declaration of Ilana S. Rubel in Support of the Greenberg Parties’ Amended Motion Pursuant to Sections 362 and 1059(a) of the Bankruptcy Code and Rule 7065 of the Federal Rules of Bankruptcy Procedure for an Order Extending the Automatic Stay, or, In the Alternative, for the Issuance of a Preliminary Injunction, filed January 30, 2012 (Doc. No. 29-2, Exhibit B). 7. Each of the plaintiffs in the California Class Litigation (the “California Class Plaintiffs”) was named as a defendant in adversary proceedings filed by Wells Fargo and Greenberg on November 28, 2011 and November 29, 2011, respectively (A.P. Nos. 11-03618-bjh and 11-03620-bjh, the “Adversary Proceedings”). 1 On December 21, 2011, the Noble, Mendes and Batroa plaintiffs stipulated with Wells Fargo and Greenberg that their state court actions would be temporarily stayed until the issues raised by Wells Fargo and Greenberg in the Adversary Proceedings have been 1 The Adversary Proceedings were filed after the California state court judge stated that the claims in the Noble Amended Complaint are not pleaded as derivative claims belonging to the bankrupt entities. Order dated November 8, 2011. 2
Case 11-03620-bjh Doc 40 Filed 02/21/12 Entered 02/21/12 23:34:41 Desc Main Document Page 9 of 34 resolved. Plaintiff Nolan has also agreed to abide by the stipulation. 8. On February 1, 2012, the Debtor filed a proposed joint plan of reorganization (the “Plan”), together with a proposed disclosure statement (the “Disclosure”), in their chapter 11 cases. FACTUAL BACKGROUND 9. The California Class Plaintiffs represent over 1400 investors in RE Loans and over 600 investors in Mortgage Fund ‘08 (“MF08”). As alleged in the Consolidated Complaint, Greenberg and Wells Fargo together compromised the rights and interests of investors in RE Loans and MF08 and caused them devastating financial injury. The California Class Litigation claims are the investors’ only chance to mitigated the losses inflicted on them by Greenberg and Wells Fargo. The factual allegations supporting the California Class Plaintiffs’ claims in the Consolidated Complaint are summarized below. 10. RE Loans was a “hard money” lender that used funds from investors to make secured real estate development loans, returning profits from these loans to the investors. RE Loans investormembers were given equity membership interests in return for their contributions. As limited liability company members, they had important contractual control rights. For instance, members holding a majority of interests could remove the RE Loans managers ("Managers" or "RE Loans Managers"), vote to dissolve RE Loans, or (with limited exceptions) amend the RE Loans operating agreement. CC 48. 2 11. RE Loans grew rapidly from its formation in 2002 through 2006. CC 52. By early 2007, the Managers had raised more than $700 million from approximately 1400 members, and RE Loans had more than $55 million operating cash on hand. Id. 52, 55. The portfolio loans were performing well, providing members with an average annualized yield exceeding 8%. Id. RE Loans members had no reason to doubt that their investments were safe and profitable. 12. In 2007, the RE Loans Managers encountered two major problems. First was the realization that, from 2002 through 2006, they had violated state and federal securities laws in the sales of RE 2 Citations to the Consolidated Complaint are in the form "CC at __." 3
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Class Plaintiff's Response to Automatic Stay - equitatus

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