Free Letter - District Court of Delaware - Delaware

Case 1:07-cv-00717-SLR Document 17 Filed O1/18/2008 Page 1 of 3
Rnctmaos. Larrou 6. Fianna
A PROFESSIONAL A$$¤CtAT10w
oar; noomzv Seems
920 Notrm Kerio 5"raaerr
Wrtmtrtcrrow, Detawanr. sooo: Dierzcr Dim. NuMeEn
Sratvtzu .J Fnwamrw (302,651:/700 BOEMGS IJEQE
ix“|NEMAN@R$..F" COM
Fm esoziesn-wot
vvwvv.r=u.i=.coM
January 18, 2.008
VIA E-·FILE & HAND DELIVERY
The Honorable Mary Pat Thynge
United States District Court
District of Delaware
844 King Street
Wilmington, DE l980l
Re: Inrerncrtionnl Brotherhood 0fElecIricaI Workers Local 98 Pension Fund v
Angelo R. Mozilo, el nl., CLA. No. 07»372 *** (MPT) and Admit Blumberg v.
Angelo R. Mozilo, et al., C.A. No. 07-717 *** {MPT)
Dear Magistrate Judge Thynge:
We are counsel for defendants Angelo Mozilo, Henry Cisneros, Robert Donato, Harley
Snyder, Jeffrey Cunningham, Martin Melone, Robert Parry, Oscar Robertson, Keith Russell,
David Sambol and nominal Defendant Countrywide Financial Corporation (“Countrywide" or
the "Company" and collectively "Defendants°’) in the above—referenced actions. For the reasons
set forth in the attached motion and summarized below, Defendants respectfully request a
telephonic conference with the Court at the earliest convenience ofthe Court.
On Ianuary 15, 2008, Plaintiffs tiled a motion for partial summary judgment in these
actions seeking a judgrnent exceeding $2 hillion that is inconsistent with the schedule that the
parties previously agreed to and this Court ordered Plaintiffs motion is premature in that it
entirely ignores the need for this Court to resolve the threshold legal issue of whether plaintiffs
inappropriately tiled these cases without tirst making demand on the Countrywide board of
directors asking it to consider whether prosecution of this lawsuit on Countrywide’s behalf
would be in the Company’s and shareholders best interests. Demand is required under
substantive Delaware law as a condition to the right of any shareholder to bring a shareholder
derivative case like these, unless the Court specifically finds that demand was excused as futile.
We have tiled herewith an emergency motion to stay plaintiffs’ motion for partial
summary judgrnent (a courtesy copy of which is attached hereto), Given that a response to
plaintiffs motion would otherwise be due ten business days after January 15, 2008, we hereby
request a telephonic conference with the Court at Your Honor’s earliest convenience.
The grounds for Det`endants’ motion to stay are summarized below:
att 1-2245204-1

Case 1:07-cv-00717-SLR Document 17 Filed O1/18/2008 Page 2 of 3
The Honorable Mary Pat Thynge
January 18, 2008
Page 2
• Plaintiffs’ motion ignores the Court—ordered schedule whereby plaintiffs already have
moved to have the IBEW and Blzrmberg cases consolidated (which motion is pending),
upon the granting of which motion, plaintiffs would tile a consolidated amended
complaint and Defendants would have 60 days to move to dismiss the consolidated
amended complaint, See CA. No. 07*372, D.l. 9 (so ordered Nov. 13, 2007); CA. No,
07-·717, Di. 5 (so ordered Dec. 3, 2007). Defendants have twice been on the verge of
tiling motions to dismiss for failure to make demand on the board of directors (among
other things), and one week before Defendants were to file their motions, plaintiff
decided to amend the complaint or filed a substantially similar action that it sought to
have consolidated.
• Plaintiffs have brought these cases as shareholder derivative actions ostensibly on behalf
of Countrywide. Under controlling Delaware law, before filing a shareholder derivative
lawsuit a shareholder must first demand action from the corporation’s board of directors
or plead particuiarized facts demonstrating that making such pre~suit demand would have
been futile. Levine v Smith, 591 A.2d 194 (Del. 1991). Accord Allison v. Geneml
Moiors Corp., 604 F. Supp. 1l06 (D. Del. 1985). Unless plaintiffs can meet the difficult
burden of demonstrating, through particularized factual allegations, that presuit demand
on the board of directors should be excused, plaintiffs have no standing to prosecute these
cases and no legal right to move for summary judgment or any other relief. Upon tiling
of a consolidated amended complaint, Defendants intend to move to dismiss for failure to
make demand (among other grounds) and submit that the Court should address this
fundamental issue of corporate governance before getting to the merits of the underlying
litigation. Defendants submit that litigation of plaintiffs’ motion for partial summary
judgment would result in an enormous waste of the parties and the Court’s time, energy
and resources because Defendants believe demand was required under Delaware and if
the Court agrees, this case must be dismissed.
¤ Plaintiffs’ rush to tile their motion for partial summary judgment before the cases are
consolidated, before a consolidated complaint has been tiled and before the substantive
question of presuit demand has first been decided by this Court likely results from two
facts. First, Bank of America Corporation recently announced (January il, 2008) that it
had entered into a definitive merger agreement to acquire all ofthe outstanding shares of
Countrywide stock. Under controlling precedent hom the Delaware Supreme Court,
plaintiffs will lose standing to maintain these derivative suits upon the consummation of
the transaction, and plaintiffs will lose any right to sue derivatively for relief on behalf of
Countrywide because any such claims will pass to Bank of America. See Lewis v. Ward,
852 A.2d 896 (Del. 2004). Second, Defendants have informed plaintiffs and the Court
that they intend to move to transfer this case to the United States District Court for the
Central District of California, where Countrywide has its principal place of business,
where all material events at issue in these cases took place, and where other related
shareholder derivative lawsuits are pending.
tu li zszassuint

Case 1:07-cv-00717-SLR Document 17 Filed O1/18/2008 Page 3 of 3
The Honorable Mary Pat Thynge
ianuary E8, 2008
Page 3
Deieudants respectfuliy request El conference with the Court to discuss these concems,
and are availabie at Your I~Ienor’s earliest convenience,
Respectfully,
Steven J. (#4025)
S}?/lll
cc: Robert D. Goldberg, Esquire (Haiitd Delivery)
Edward Micheletti, Esquire (Hand Deiivery)
Alexander Arnoid Gershon, Esquire (By Electronic Mail)
Thomas A. Beck, Esquire
Brian Er Pastuszenski, Esquire
iu r l-3245304-I

Case 1:07-cv-00717-SLR

Document 17

Filed 01/18/2008

Page 1 of 3

Case 1:07-cv-00717-SLR

Document 17

Filed 01/18/2008

Page 2 of 3

Case 1:07-cv-00717-SLR

Document 17

Filed 01/18/2008

Page 3 of 3