Free Letter - District Court of Delaware - Delaware

Case 1 :04-cv-01494-JJF Document 82 Filed 06/06/2006 Page 1 of 3
Cunrns, MALLEPPREVOST, COLT as. Mosua LLP
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June 6, 2006
VIA E CF AND FEDERA L EXPRESS
The Honorable Joseph J. Faman, Jr.
United States District Court
District of Delaware
844 King Street
Wilmington, DE 19801
Re: Magten Asset Management Corp. and Law Debenture Trust Co. of New
York v. North Western Corporation, C.A. N0. 04-1494-JJ F
Magten Asset Management Corp. v. Paul Hastings Janofslqy & Walker,
LLP, C.A. N0. 04-1256-JJF
Magten Asset Management Corp. v. Mike J Hanson and Ernie .L Kindt,
C.A. No. 05-0499-JJF
Dear Judge Faman:
This firm is co-counsel to NorthWestern Corporation ("NorthWestern"), along
with the firm of Greenberg Traurig, LLP, in connection with the action pending before this Court
styled Magten Asset Management Corp., et al. v. North Western Corp., Civil Action No, O4-
1389-JJ F.
We write this letter in response to the June 5, 2006 letter sent to the Court on
behalf of Magten Asset Management Corp. and Law Debenture Trust Co. of New York
(collectively, "Plaintiffs’), in which Plaintiffs seek to lift the stay of discovery which is currently
in effect in the three above-referenced actions (the "Consolidated Actions").
Northwestem opposes the relief which Plaintiffs seek. ln its Motion for a
Protective Order, NorthWestem has requested that this Court limit discovery consistent with the
prior decision of the Bankruptcy Court, which granted in part and denied in part NorthWestem’s
motion to dismiss Plaintiffs’ claims in August 2004. In a lengthy written opinion which
carefully considered and parsed through Plaintiffs’ complaint and theories of relief the
Bankruptcy Court seriously questioned the viability of Plaintiff`s’ claims, and narrowly limited
the potential scope of the litigation. Vifhile stopping short of complete dismissal, the Bankruptcy
Court found that Plaintiffs could only proceed with their claims if they were to prove that The
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Case 1:04-cv-01494-JJF Document 82 Filed 06/06/2006 Page 2 of 3
Hon. Joseph J. Farnan, Jr.
June 6, 2006
Page 2
Bank of New York, which served as the Indenture Trustee for the QUIPS securities in 2002
(prior to the time that the QUIPS were acquired by Plaintiffs), was fraudulently induced to
execute the documents which evidenced the release of obligations on the QUIPS as to
NorthWestern’s former subsidiary and the assumption of those obligations by NorthWestern.
Plaintiffs first attempted to commence discovery from NorthWestem only in late
January 2006, after this Court had withdrawn the reference from the Bankruptcy Court and taken
jurisdiction. ln disregard of the Bankruptcy Court’s prior decision, Plaintiffs served broad
discovery requests on a wide array of issues well beyond the scope of the surviving theory of
relief which was identified by the Bankruptcy Court. As a result, NorthWestern filed the Motion
for a Protective Order described above in February 2006, in which the defendants in the other
two Consolidated Actions have joined. That Motion is currently pending decision by Your
Honor.
Rather than await and abide by this Court’s determination on the Motion for a
Protective Order, Plaintiffs now seek to circumvent that Motion and proceed with discovery in
advance of a decision by the Court. Obviously, granting Plaintiffs’ request would be tantamount
to a denial of the Motion for a Protective Order. The protective relief which NorthWestem seeks
in the Motion would be obviated if Plaintiffs are allowed to forge ahead with the full-scale
discovery they have improperly demanded, which would also undercut the pi.u·pose of the stay of
discovery contemplated under Local Rule 30.2. While we do not wish to belabor here the
arguments set forth more fully in the Motion, it is respectfully submitted that Plaintiffs’ request
for relief ofthe stay should be denied until the Court has considered and ruled upon the merits of
NorthWestern’s Motion for a Protective Order.
Furthermore, Plaintiffs have shown no justification for the relief they seek. The
underlying transactions at issue occurred in 2002, prior to NorthWestern’s bankruptcy case.
Although Plaintiffs brought their action against NorthWestem in 2004, Plaintiffs did not seek
discovery until January 2006. Throughout this period, there has never been any suggestion that
the passage of time or change in circumstances would impact the availability of documents or
witnesses, and there is no need fbr any such concern.
The announcement made approximately six weeks ago of the intended acquisition
by Babcock & Brown Infrastructure Ltd. creates no sudden exigency, nor should it come as a
surprise. Plaintiffs have been aware that NorthWestern has engaged in talks with several
potential purchasers for a sale of the corporation over the course of more than a year, which has
been the subject of frequent reports in the press. As a practical matter, the actual completion of
a sale is expected to take at least six to nine months. This process requires not only preparation
and agreement on final documentation, but also regulatory approvals which NorthWestern must
obtain as a public utility from state and federal agencies. Further, the structure of the transaction
is such that NorthWestem will remain as the operating company. Thus, NorthWestern will
remain the same after the consummation of the transaction. There is no reason to expect that
Plaintiffs’ ability to obtain evidence will be impaired by a sale.
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Case 1:04-cv-01494-JJF Document 82 Filed 06/06/2006 Page 3 of 3
Hon. Joseph J. Farnan, Jr.
June 6, 2006
Page 3
In short, Plaintiffs should not be allowed to pre-empt a decision by this Court and,
for the reasons set forth above and in NorthWestem’s Motion for a Protective Order, their
request to proceed with discovery should be denied.
Respectfully submitted,
. Pi
cc: Clerk of Court (Via ECE)
Dale R. Dube, Esq. (Via E-Mail: [email protected])
Bonnie Steingart, Esq. (Via E-Mail: steinbo@friedh·a1d<.com)
Gary L. Kaplan, Esq. (Via E-Mail: [email protected])
John W. Brewer, Esq. (Via E-Mail: [email protected])
Kathleen M. Miller, Esq. (Via E-Mail: [email protected])
Bijan Amini, Esq. (Via E-Mail: [email protected])
Amanda Darwin, Esq. (Via E-Mail: [email protected])
John V. Snellings, Esq. (Via E-Mail: [email protected])
Stanley T. Kaleczyc, Esq. (Via E-Mail: [email protected])
Kimberly Beatty, Esq. (Via E-Mail: [email protected])
Denise Seastone Kraft, Esq. (Via E-Mail: [email protected])
Paul Spagnoletti, Esq. (Via E-Mail: [email protected])
Steven J. Reisman, Esq. (Via E-Mail: [email protected])
Victoria Counihan, Esq. (Via E-Mail: counihanv@g,tlaw.com)
Alan W. Kornberg, Esq. (Via E-Mail: al Kelley A. Cornish, Esq. (Via E-Mail: [email protected])
Neil B. Glassman, Esq. (Via E-Mail: nglassma;[email protected])
Charlene P. Davis, Esq. (Via E-Mail: [email protected])
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