Ambac Financial Group, Inc.

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FOR PUBLICATION
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
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In re: 	Chapter 11
Ambac Financial Group, Inc., 	Case No. 10-15973 (SCC)
Debtor.
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BENCH DECISION APPROVING SETTLEMENT STIPULATION
AND INSURER AGREEMENT 1
A P P E A R A N C E S:
DEWEY & LE BOEUF LLP
Attorneys for the Debtor
1301 Avenue of the Americas
New York, NY 10019
By: Peter A. Ivanick, Esq.
Richard W. Reinthaler, Esq.
One Embarcadero Center, Suite 400
San Francisco, CA 94111
By: Bennett G. Young, Esq.
WACHTELL, LIPTON, ROSEN & KATZ
Co-Counsel for the Debtor
51 West 52 nd Street
New York, NY 10019
By: Peter C. Hein, Esq.
Christopher Lee Wilson, Esq.
1 This decision was dictated on the record of the hearing held on September 12, 2011. It has been modified
to include full citations and defined terms, and reflects minor additional non-substantive modifications. The
findings of fact and conclusions of law herein shall constitute the Court’s findings of fact and conclusions of law
pursuant to Bankruptcy Rule 7052, made applicable to this proceeding pursuant to Bankruptcy Rule 9014. To the
extent any finding of fact later shall be determined to be a conclusion of law, it shall be so deemed, and to the extent
any conclusion of law later shall be determined to be a finding of fact, it shall be so deemed.
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MORRISON & FOERSTER LLP
Attorneys for the Official Committee of Unsecured Creditors
1290 Avenue of the Americas
New York, NY 10104
By: Anthony Princi, Esq.
Jamie A. Levitt, Esq.
Renee L. Freimuth, Esq.
KOHN SWIFT & GRAF, PC
Attorneys for Police and Fire Retirement System of the City of Detroit
One South Broad Street, Suite 2100
Philadelphia, PA 19107
By: Denis F. Sheils, Esq.
Barbara L. Moyer, Esq.
WOLF HALDENSTEIN ADLER FREEMAN & HERZ LLP
Attorneys for Police and Fire Retirement System of the City of Detroit
270 Madison Avenue
New York, NY 10016
By: Gregory M. Nespole, Esq.
Demet Basar, Esq.
Malcom T. Brown, Esq.
LOWENSTEIN SANDLER PC
Attorneys for Lead Plaintiffs and the Class in the Securities Litigation
1251 Avenue of the Americas, 18th Floor
New York, NY 10020
By: Michael S. Etkin, Esq.
Before the Court is the Amended Order, Pursuant to Section 105(a) of the Bankruptcy
Code and Bankruptcy Rule 9019 (A) Approving the Settlement Stipulation and the Insurer
Agreement and (B) Approving Ambac’s Entry into the Settlement Stipulation and the Insurer
Agreement and Performance of all of its Obligations Thereunder. The Court assumes familiarity
with the background and history of the Ambac chapter 11 proceedings, as well as that of the
Securities Litigation and Derivative Actions which are the subject of the proposed settlement.
Procedural Background
On June 28, 2011, Ambac Financial Group, Inc. (the “Debtor” or “Ambac”) filed a
motion (the “9019 Motion”) seeking approval of its entry into the Settlement Stipulation and
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Insurer Agreement. No objections were filed to the 9019 Motion, nor were any objections raised
at the hearing held on July 19, 2011. After the hearing, the Court entered an order approving
Ambac’s entry into the Settlement Stipulation and the Insurer Agreement.
The Debtor subsequently informed the Court that the plaintiffs in the Derivative Actions2
had not been served with the 9019 Motion. On July 25, 2011, the Debtor filed a notice of
presentment of the Amended Order approving Ambac’s entry into the Settlement Stipulation and
the Insurer Agreement, which notice set an objection deadline of July 28, 2011. After objections
to the Amended Order were received, the Court set August 10, 2011 as a hearing date on the
Amended Order.
At the August 10 hearing, counsel for certain of the plaintiffs in the Derivative Actions
appeared, pressed their objections, and requested that they be afforded an opportunity to conduct
discovery and present evidence as to why the Settlement Stipulation and Insurer Agreement
should not be approved over their objection. It bears noting that, prior to their filing objections
to the entry of the Amended Order on July 27, 2011, none of the plaintiffs in the Derivative
Actions had appeared or filed anything in this chapter 11 case, which has been pending since
November 8, 2010; indeed, as of the date of this decision, no plaintiff has sought leave to pursue
the Derivative Actions on behalf of the Ambac estate.
In response to the Derivative Plaintiffs’ request, the Court set September 8 as the date for
a third and final hearing on the Settlement Stipulation and Insurer Agreement in order to allow
the parties a month’s time to conduct limited discovery and file additional submissions. An
evidentiary hearing on the Amended Order was held on September 8 and 9, 2011.
2 	In re Ambac Financial Group, Inc. Shareholders Derivative Litigation, C.A. No. 3521-VCL (Del. Ch.) (the
“Delaware Derivative Action”), In re Ambac Financial Group, Inc. Derivative Litigation, Case No. 08 Civ. 854
(SHS) (SDNY) (the “New York Derivative Action,” and, together, the “Derivative Actions”).
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Of the filed objections, only the objections filed by (i) the Police and Fire Retirement
System of the City of Detroit (“PFRS”), plaintiff in the Delaware Derivative Action, and (ii)
Catherine Rubery, a plaintiff in the New York Derivative Action (together, the “Derivative
Plaintiffs”), remain unresolved. These objectors request that the Court vacate its July 19 order
and reject the Amended Order to the extent that it releases and bars shareholder derivative
claims. PFRS also purports to seek this Court’s authorization to pursue these derivative claims
on behalf of the Debtor, but it has not filed a proper motion requesting standing. The Derivative
Plaintiffs have raised both procedural and substantive objections to the entry of the Amended
Order.
On August 9, the Debtor filed a reply to the objections, which reply was joined by both
the Official Committee of Unsecured Creditors (the “Creditors’ Committee”) and the lead
plaintiffs in the Securities Litigation.3 After the hearing on August 10, each of the parties filed
supplemental pleadings. On September 6, the Debtor filed its Supplemental Brief in Support of
the Amended Order, which was accompanied by the Declaration of Stephen M. Ksenak, Senior
Managing Director and General Counsel of the Debtor. PFRS filed a Pre-Hearing Memorandum
in Further Support of its objection, which was accompanied by the Expert Report of Lawrence
A. Weiss. At the hearing held on September 8, 2011, Mr. Ksenak testified, and Dr. Weiss
testified at the continuation of the hearing on September 9, 2011.
The Procedural Objections
I begin with the procedural objections, which relate primarily to the lack of notice of the
Debtor’s 9019 Motion given to the Derivative Plaintiffs. Notwithstanding the fact that it is
unclear whether (i) the failure to provide notice to these parties was inadvertent or (ii) the Debtor
3 	In re Ambac Fin. Group, Inc. Sec. Litig., No. 08-cv-411-NRB (SDNY) (consolidated) (the “Securities
Litigation”).
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was required to give such notice, the Court overrules the procedural objections. The Derivative
Plaintiffs have conceded that, regardless of what happened prior to the July 19 hearing, they
received actual notice of this Court’s entry of the order granting the 9019 Motion on July 20,
2011. July 20 was 21 days prior to the August 10 hearing and some 50 days prior to the
September 8 hearing. Whatever deficiencies may have existed with respect to notice have been
cured, and the Derivative Plaintiffs have now agreed that they have been afforded an opportunity
to object and be heard on the merits. Accordingly, it is unnecessary for the Court to determine
whether notice was actually required to be given to the Derivative Plaintiffs pursuant to this
Court’s Amended Case Management Order or otherwise.
The Substantive Objections
With respect to the substantive objections asserted by the Derivative Plaintiffs, the Court
finds that, upon commencement of the Debtor’s chapter 11 case, the derivative claims which are
the subject of the Derivative Actions became property of the Debtor’s estate. See, e.g., iXL
Enters., Inc. v. GE Capital Corp., 167 F. App’x 824, 826 (2d Cir. 2006) (citations omitted). The
Debtor has the sole authority to prosecute such claims or to seek Court approval to settle them
pursuant to Bankruptcy Rule 9019. As the Second Circuit noted in Smart World Technologies,
LLC v. Juno Online Servs., Inc., 423 F.3d 166, 175 (2d Cir. 2005), while authority to pursue a
Rule 9019 motion may, in certain rare circumstances, be vested in parties to the bankruptcy
proceeding other than the debtor, Rule 9019 primarily vests authority to settle or compromise
solely in the Debtor. Based on the facts before me, I find that the Debtor and its Board (with the
support of the Creditors’ Committee) have appropriately valued the merits of the securities
action and the derivative claims encompassed in the settlement, and I am unable to find the
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presence of rare circumstances which would make derivative standing appropriate here for the
Derivative Plaintiffs.
For the reasons set forth below, moreover, the Derivative Plaintiffs’ standing as parties in
interest in the bankruptcy sense is tenuous at best given the absence of any evidence that the
Derivative Plaintiffs have any economic stake in the outcome of this chapter 11 case, inasmuch
as there exists at least $1.7 billion of general unsecured debt ahead of them in the capital
structure which would have first claim on the proceeds of any settlement of claims belonging to
the estate. Nonetheless, the Court has fully considered the objections on the merits and overrules
them for the following reasons.
Applicable Law
I note, as I did at each of the hearings on the proposed Rule 9019 settlement, that the
decision to accept or reject a compromise or settlement is within the sound discretion of the
bankruptcy court under Bankruptcy Rule 9019, 4 and that here in the Southern District of New
York we apply the Iridium factors in evaluating a proposed settlement. Those factors are as
follows:
(1) the balance between the litigation’s possibility of success and the settlement’s future benefits;
(2) the likelihood of complex and protracted litigation, with its attendant expense, inconvenience,
and delay;
(3) the paramount interests of creditors;
(4) whether other parties in interest support the settlement;
(5) the competency and experience of counsel supporting, and the experience and knowledge of
the bankruptcy court judge reviewing the settlement;
(6) the nature and breadth of releases to be obtained by officers and directors; and
(7) the extent to which the settlement is the product of arm’s length bargaining.
See Motorola, Inc v. Official Comm. Of Unsecured Creditors and JP Morgan Chase Bank, N.A.
(In re Iridium Operating LLC), 478 F.3d 452, 462 (2d Cir. 2007).
4 	Rule 9019(a) of the Federal Rules of Bankruptcy Procedure provides, in pertinent part, that “[o]n motion by
the [debtor] and after notice and a hearing, the court may approve a compromise or settlement.”
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Perhaps the best formulation of how the Court should approach the task of evaluating a
settlement can be found in the Supreme Court’s seminal decision in Protective Comm. for Indep.
Stockholders of TMT Trailer Ferry, Inc. v. Anderson:
[The Court must] apprise [itself] of all facts necessary for an intelligent and
objective opinion of the probabilities of ultimate success should the claim be
litigated. Further, the judge should form an educated estimate of the complexity,
expense, and likely duration of such litigation, the possible difficulties of
collecting on any judgment which might be obtained, and all other factors
relevant to a full and fair assessment of the wisdom of the proposed compromise.
Basic to this process in every instance, of course, is the need to compare the terms
of the compromise with the likely rewards of litigation.
390 U.S. 414, 424-25 (1968). In determining whether to approve a proposed settlement, courts
have held that a bankruptcy court need not “conduct a ‘mini-trial’ to determine the merits of the
underlying litigation” or the numerous issues of law and fact raised by the dispute and resolved
by the settlement. In re Ashford Hotels, Ltd., 226 B.R. 797, 802 (Bankr. S.D.N.Y. 1998).
“[T]he court’s responsibilities are to ‘familiarize itself with all facts necessary for an intelligent
and objective opinion, canvass the issues, and see whether the settlement falls below the lowest
point in the range of reasonableness.’” Id. (citations omitted); see also Norman v. Stein, 464
F.2d 689, 693 (2d Cir. 1972). Having conducted a two-day evidentiary hearing on the proposed
settlement and reviewed three rounds of submissions by the parties in connection with the three
hearings that have been held on the proposed settlement, the Court believes it has discharged its
obligation to familiarize itself with the facts relevant and necessary to its decision.
Decision
The Court will now address the merits of the objections of the Derivative Plaintiffs. With
respect to the first Iridium factor, and consistent with the requirements of SmartWorld, the
Debtor has made a substantial showing regarding its consideration of the merits of the claims
proposed to be settled and the likelihood of success on those claims. In connection with this
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evaluation, the Debtor determined that there exist high barriers to recovery under Delaware law
on the theoretical claims against Ambac’s officers and directors which are to be released as part
of the proposed settlement. See In re Citigroup Inc. Shareholder Derivative Litigation, 964 A.2d
106 (Del. Ch. 2009). Only a finding of bad faith by the Debtor’s directors could result in a
monetary recovery to the estate, and the Debtor has concluded, after considering the
extraordinary difficulty of proving bad faith on the part of a board which was composed of a
majority of independent directors, that the derivative claims are of little to no value under
controlling Delaware law. Among other things, the Debtor (through the testimony of Mr.
Ksenak and substantial documentary evidence) has pointed to the extensive systems, policies,
and controls which it had in place during the relevant period and has argued convincingly that
they are more than applicable law requires to rebut a claim of bad faith, gross negligence, or
failure to exercise oversight, claims which are asserted in the derivative actions. Specifically, for
example, the Debtor demonstrated that its Forms 10-K for the years 2005 through 2007 each
reflect Ambac’s external auditor’s determination that the controls in place at Ambac were
adequate.
The level of transparency regarding its RMBS, CDO, and so-called CDO-squared
exposures that was exhibited by Ambac during the relevant period also contradicts a conclusion
of intentional wrongdoing or reckless concealment of information by Ambac’s officers and
directors. Ambac, like dozens of other financial institutions, as well as the United States itself,
fell prey to the myriad complex macroeconomic forces and market conditions that led to the
subprime financial crisis. As the Delaware Chancery Court stated in Citigroup, in words that are
compellingly applicable here:
Citigroup has suffered staggering losses, in part, as a result of the recent problems
in the United States economy, particularly those in the subprime mortgage
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market. 	It is understandable that investors, and others, want to find someone to
hold responsible for these losses, and it is often difficult to distinguish between a
desire to blame someone and a desire to force those responsible to account for
their wrongdoing. 	Our law, fortunately, provides guidance for precisely these
situations in the form of doctrines governing the duties owed by officers and
directors of Delaware corporations. 	This law has been refined over hundreds of
years, which no doubt included many crises, and we must not let our desire to
blame someone for our losses make us lose sight of the purpose of our law.
Ultimately, 	the 	discretion 	granted 	directors 	and 	managers 	allows 	them 	to
maximize shareholder value in the long term by taking risks without the
debilitating 	fear 	that 	they 	will 	be 	held 	personally 	liable 	if 	the 	company
experiences losses. 	This doctrine also means, however, that when the company
suffers losses, shareholders may not be able to hold the directors personally liable.
In re Citigroup Inc. Shareholder Derivative Litigation, 964 A.2d at 139.
Ambac has also preliminarily established that the Derivative Plaintiffs’ allegations
regarding the sales of stock by Ambac officers and directors during the relevant period and the
claims related to those allegations appear unlikely to have merit. At the September 8 hearing,
Mr. Ksenak provided a plausible explanation for the timing of the stock sales by the defendant
officers and directors and also provided documentary evidence that purchases of stock by such
individuals continued both during and after the relevant time period. Further, unlike some
companies, Ambac has not been required to restate any of its audited financial statements from
the relevant time period. No government enforcement proceedings have been commenced
against any Ambac director or officer relating to the 2006-2009 time period, nor have any such
individuals been charged with insider trading or other criminal wrongdoing.
In arguing that the likelihood of success on the derivative claims and the magnitude of
potential damages renders the release of those claims unfair, the Derivative Plaintiffs mistakenly
equate what they view as Ambac’s losses from its exposure to the CDO and CDO-squared
market with any demonstration that the defendant officers and directors caused those losses; no
such nexus has been established. Indeed, beyond pointing to the well-pled allegations of its
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complaint and the largely irrelevant fact that the complaint in the Securities Litigation survived a
motion to dismiss in the District Court, PFRS has entirely failed to address the issue of
likelihood of success on the merits of the derivative claims. Moreover, even assuming certain of
these claims had merit, the Court is convinced that pursuing such claims would not result in a net
benefit to the estate. The Derivative Plaintiffs posit that “[o]ne would think that the estate would
be better off in any situation in which it was able to obtain more than the cost of pursing [sic] the
claims.” One would indeed, but it is the Debtor’s (and the Creditors’ Committee’s) view that
this is not such a situation. The Court agrees. Nothing in Iridium or other applicable case law
requires a debtor to gamble with the estate’s interest at the behest of an out-of-the-money party
who has nothing to lose by a roll of the litigation dice.
The Derivative Plaintiffs further argue that because their proffered expert, Lawrence
Weiss, estimates “damages” from the Derivative Actions to be in the range of $15.6 to $17.1
billion, the Court should not approve the proposed settlement; they have not, however, presented
any evidence showing a likelihood of success in the Derivative Actions which would yield this
extraordinary level of recovery or any level of monetary recovery which would establish that the
Debtor’s evaluation of the proposed settlement does not pass muster under the first prong of
Iridium.
On cross-examination, Dr. Weiss admitted that he has never valued a public company, a
bond insurer, or a financial guarantee company. Dr. Weiss also confirmed that, in preparing his
expert report, he performed no evaluation of the merits of the Derivative Actions, and that his
estimated damages amount was merely calculated by comparing the current value of Ambac with
the “hypothetical” value of what Ambac “might” be worth had it not guaranteed CDOs and
CDO-squareds. His testimony also revealed that, in calculating this hypothetical value, Dr.
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Weiss relied on assumptions that did not take into account, among other things, the general
recession affecting the United States, the effect of the loss of Ambac’s and other bond insurers’
AAA credit ratings, or the fact that the market for guarantees for non-CDO mortgage backed
securities has suffered substantial losses and has primarily dried up at this time. Simply put, the
assumptions on which Dr. Weiss’s opinion are based are highly flawed and at odds with reality.
At best, Dr. Weiss’s expert report and testimony must be viewed as a mechanical and
legally irrelevant mathematical analysis of Ambac’s balance sheet and the effect of its CDO and
CDO-squared exposure; it speaks not at all to whether the defendants in the Derivative Actions
can, as a matter of Delaware law, be held liable. While the Court is sympathetic to the
Derivative Plaintiffs’ understandable desire to blame someone for the staggering losses Ambac
sustained, neither the strength of that desire nor the magnitude of the losses suffered equates to a
demonstration of causation or legal liability.
The second Iridium factor — the likelihood of complex and protracted litigation, with its
attendant expense, inconvenience, and delay — also favors the proposed settlement. It is without
serious dispute that, in the absence of the proposed settlement, litigation of the Securities
Litigation and the Derivative Actions could continue for several years, during which time such
costs and delays would continue. The Debtor has demonstrated that (contrary to the assertions of
PFRS) its estate is receiving value for the release of the derivative claims through the settlement
by (i) avoiding the significant legal costs in the actions (approximately $20 million, according to
Mr. Ksenak’s testimony) which would well exceed the $2.5M that the Debtor will pay in
connection with the settlement and (ii) enabling the Debtor’s management to continue to work
toward the Debtor’s reorganization instead of focusing their attention on litigation-related
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activities which could delay such reorganization and cause the Debtor to, among other things,
incur substantial administrative expenses.
In considering the third Iridium factor — the paramount interests of creditors — the
Court concludes that the support of the Creditors’ Committee here weighs heavily in favor of
approval of the proposed settlement. The Debtor’s over $1.7 billion in unsecured creditors have
spoken: they support the settlement. These unsecured creditors stand ahead of the Derivative
Plaintiffs in the Debtor’s capital structure, and, under the absolute priority rule, they are the
constituency which would stand to benefit from any recovery in the Derivative Actions brought
on behalf of the Debtor, not the structurally subordinated Derivative Plaintiffs who are not
currently slated to receive any distribution from the Debtor’s estate. Stated differently, even if
the Derivative Actions could be successfully litigated to judgment or a more lucrative settlement,
an amount in excess of $1.7 billion would have to be recovered from the insurers and the
individual defendants in order for the Derivative Plaintiffs to receive any potential recovery.
Based on the information disclosed on a confidential basis to the Court regarding the insurance
coverage available to the Ambac director and officer defendants, while some additional coverage
does exist beyond the $24.6 million proposed to be paid in connection with the Settlement
Stipulation and Insurer Agreement, the amount of available coverage does not nearly reach
beyond the amount of the unsecured claims against the Debtor. The fact that there may be
additional available insurance coverage (or, as the Derivative Plaintiffs have speculated, some
other assets flowing to the Debtor’s estate from non-debtors or other litigation recoveries) is not
relevant to the Court’s determination pursuant to Bankruptcy Rule 9019 as to the reasonableness
of the proposed settlement.
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In addition, it is abundantly clear that if there was any possibility of a more lucrative
settlement of the Securities Litigation and/or the Derivative Actions, the Creditors’ Committee,
after performing its own independent analysis, would have objected to the settlement proposed
by the Debtor. Despite repeated requests by the Court to do so, the Derivative Plaintiffs have not
put forth any theory as to why the Creditors’ Committee would ignore the possibility of any
reasonable settlement which would be more favorable to their constituency. Notwithstanding the
Derivative Plaintiffs’ arguments and observations about the possible conflicting interests of the
Debtor’s Board members and their counsel, I find that the Creditors’ Committee serves as a very
reliable check on the business judgment of the Debtor, and I place far greater weight on the
Committee’s support for the settlement than the views of the Derivative Plaintiffs who have
nothing at stake in terms of potential recovery in the bankruptcy case. There is absolutely no
evidence in the record that the Creditors’ Committee’s determination is in any way tainted; its
support for the proposed settlement is dispositive of both the third and fourth Iridium factors.
Regarding the sixth Iridium factor — the nature and breadth of releases to be obtained by
officers and directors — the Debtor has established that it has determined, in the exercise of its
business judgment, that the injunctions and releases being given through the proposed settlement
are appropriate in nature and scope and that the settlement would not be achievable without such
provisions. The Debtor submits that the settling parties have conditioned the effectiveness of the
settlement upon the Court’s approval of the release and injunction provisions and that the D&O
insurers are unwilling to pay their portion of the settlement amount absent such approval. The
Creditors’ Committee has also conducted its own independent analysis of these provisions and
supports them as a component of the overall settlement. I note that the releases and injunctions
are one integral aspect of a multi-faceted settlement, and I find no reason to disagree with the
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Debtor’s business judgment in evaluating the appropriateness of such releases and injunctions in
connection with the overall settlement.
The Court concludes that the seventh Iridium factor — the extent to which the settlement
is the product of arm’s length bargaining — has indisputably been met. There has been no
evidence presented that the settlement, achieved through numerous mediation sessions taking
place under the watchful eye of retired District Judge Nicholas Politan over the course of more
than one year, was the result of anything other than arm’s length negotiating. The involvement
of the Creditors’ Committee as an independent fiduciary and its support for the settlement also
supports my finding in this regard. The fact that the Derivative Plaintiffs did not participate in
the mediation sessions or settlement discussions does not alter this conclusion.
After considering the evidence presented, I am satisfied that the proposed settlement
passes muster under the Iridium factors and falls well above the lowest point in the range of
reasonableness. The Court finds that the Debtor has made a reasonable business judgment that,
among other things, the claims asserted in the Derivative Actions lack merit, and that, even if
those claims did have merit, the Debtor has exercised sound business judgment in determining
that such claims are not worth pursuing and that the settlement is fair and equitable and in the
best interest of the estate.
Finally, there is no merit to the Derivative Plaintiffs’ argument that under the Supreme
Court’s recent decision in Stern v. Marshall, 131 S. Ct. 2594 (2011), I should “abstain” from
deciding the claims at issue in the Derivative Actions. The Debtor is not asking this Court to
hear and adjudicate these claims. As the Debtor accurately observed in its Supplemental Brief,
This argument results from a misreading of Stern v. Marshall. That case has
nothing to do with the Court's in rem jurisdiction to administer property of the
estate. 	The ‘narrow’ issue in Stern was whether a bankruptcy court had subject
matter jurisdiction to hear and finally resolve a debtor’s counterclaim against a
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third party. See Stern v. Marshall, 131 S. Ct. 2594. 	Here, the Debtor does not
seek to try the Derivative Actions in the bankruptcy court. 	Instead, the Debtor
seeks this Court’s approval of its disposition of the claims at issue in the
Derivative Actions, assets which are property of the Debtor’s estate.
See Debtor’s Supplemental Brief [Docket No. 548] at ¶ 27; see also Safety Harbor Resort & Spa,
2011 Bankr. LEXIS 3238, *2-3 (M.D. Fla. 2011) (discussing narrow scope of Stern). This is the
correct view of Stern v. Marshall and of the Court’s jurisdiction and constitutional authority in
this case. Unfortunately, Stern v. Marshall has become the mantra of every litigant who, for
strategic or tactical reasons, would rather litigate somewhere other than the bankruptcy court.
Whatever Stern v. Marshall may ultimately be held to mean, this Court is confident that, as a
matter of law and practice, it most certainly does not stand for the proposition that the
bankruptcy court cannot approve the compromise and settlement of a claim which is indisputably
property of a debtor’s estate.
For these reasons and based on the entirety of the record of the hearings held on (i) July
19, 2011, (ii) August 10, 2011, and (iii) September 8 and 9, 2011, the Court overrules the
Derivative Plaintiffs’ objections and will enter the Amended Order.5
Dated: September 23, 2011
New York, New York
/s/ Shelley C. Chapman
United States Bankruptcy Judge
5 	On September 13, 2011, the Court entered the Amended Order [Docket No. 558].
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