Prior to the Petition Date, the Debtor obtained the D&O Policies for the purpose of covering, among other things, any costs incurred by the Debtor in connection with its obligations to indemnify its current and former directors and officers for certain liabilities arising from their employment with or service to the Debtor. Pursuant to Delaware law and its by-laws, the Debtor is obligated to indemnify its current and former directors and officers for certain liabilities arising from their employment with or service to the Debtor.
As noted above, the D&O Policies provide for an aggregate limit of liability of $35 million, which is reduced not only by the amount of any claims paid on behalf of any insured under the D&O Policies but also by amounts paid for costs incurred in defending claims covered under the D&O Policies. As of this date, the Debtor believes amounts available for covered claims under the D&O Policies is approximately $30 million, but the policy limits continue to erode with the costs of ongoing litigation.
Parties asserting claims against directors and officers of Colonial Bank and the Debtor on account of acts or omissions covered by the D&O Policies, including the FDIC-Receiver, the plaintiffs in the Securities Litigation, the plaintiffs in the ERISA Litigation and the Debtor, have engaged in settlement discussions with the defendant directors and officers and, in certain instances, among themselves, regarding a settlement of claims and a division of any amounts payable under the D&O Policies; but as of this date, such efforts at settlement have not resulted in an agreed upon settlement of disputes.
I. Custody and Disposition of Debtor's Business Records
In connection with the appointment of the FDIC-Receiver as receiver for Colonial Bank, the FDIC-Receiver took possession of all documents and electronically stored information relating to Colonial Bank as well as substantially all of the documents and electronically stored information relating to the Debtor and its other subsidiaries. The FDIC-Receiver did not limit its
seizure of records (and the disposition of those records) to the property and records of Colonial Bank. The FDIC-Receiver denies that it has acted improperly in seizing such records.
1. Ownership Disputes.
As part of its sale of the assets of Colonial Bank to BB&T pursuant to the P&A Agreement, the FDIC-Receiver transferred to BB&T a substantial portion of the Books and Records (including electronically stored information) at the Debtor's premises. Other Books and Records were retained by the FDIC-Receiver. The Books and Records are voluminous. In doing so, the FDIC-Receiver did not differentiate between the records, documents and electronically stored information of Colonial Bank and the Debtor in implementing this transaction. Thereafter, the FDIC-Receiver undertook to control and influence the access of the Debtor and others to and the disposition of such documents and electronically stored information of the Debtor through the exercise of certain alleged contractual rights under the P&A Agreement.
During this Chapter 11 bankruptcy case, the Debtor has made repeated requests for access to such documents and electronically stored information in the possession of BB&T. At one point, BB&T stated a willingness, subject to the FDIC-Receiver's agreement, to allow the Debtor access to the documents and electronically stored information in its possession, provided that by doing so neither the FDIC-Receiver nor BB&T would be deemed to have waived any legally recognized privilege held by Colonial Bank or BB&T.
In hopes of obtaining immediate access to these important records in a form that the Debtor could use to discharge its obligations under the Bankruptcy Code, the Debtor negotiated a non-waiver stipulation with BB&T and the FDIC-Receiver (the "Non-Waiver Stipulation"). On March 2, 2010, the Debtor filed with this Court a motion to approve this Non-Waiver Stipulation [Doc No. 589] and by order entered on March 12, 2010 [Doc No. 626], the Court approved the Non-Waiver Stipulation.
For a period of approximately 10 days to two weeks surrounding the entry of the order approving the Non-Waiver Stipulation, the Debtor was provided very limited access to certain documents (but not allowed the opportunity to remove or even make copies of these documents) and no access to electronically stored information. However, the Debtor's access was terminated by action of the FDIC-Receiver even as to the limited number of documents made available to it shortly after the Debtor's review of records began. This denial of access continued unabated into June 2010.
The FDIC-Receiver disputes that it has improperly controlled or withheld the Debtor's access to any of the Books and Records; and that many of the Books and Records contain information regarding Colonial Bank and are therefore subject to the control and disposition of the FDIC-Receiver, even if the records themselves were originated by officers or employees of the Debtor.
2. 2004 Examination and Document Production Request.
As a result of this denial of access, the Debtor filed a motion on June 17, 2010, pursuant to Rule 2004 of the Bankruptcy Rules, requesting authorization for the Debtor to issue one or
more subpoenas to BB&T for the purpose of allowing the inspection and copying by the Debtor of documents and electronically stored information relating to the Debtor, any of its subsidiaries or the assets or liabilities of any of them and the examination of one or more representatives of BB&T relating to such documents, electronically stored information and affairs of the Debtor and its subsidiaries (the "2004 Motion") [Doc. No. 765]. On June 28, 2010, BB&T filed a response and objection to the 2004 Motion [Doc. No. 84]. On the same date, the FDIC-Receiver also filed an objection [Doc. No. 788]. The parties ultimately consented to the entry of an agreed-upon order authorizing the Debtor to issue subpoenas to BB&T for the above-mentioned purposes [Doc. No. 853].
3. Current Status of Document Retrieval.
Since the filing of the 2004 Motion, the FDIC-Receiver, BB&T and the Debtor have engaged in a voluntary production dialogue and process whereby the Debtor hopes eventually to be granted access to the information sought in the 2004 Motion. As of the filing of this Disclosure Statement, however, the Debtor has not yet had access to a substantial amount of electronic records that it had expected to receive. Furthermore, the FDIC-Receiver may still have in its possession and control Books and Records that the Debtor has been unable to review. At this juncture, the Debtor believes that it has access to sufficient Books and Records, after ongoing efforts of more than 18 months to obtain such Books and Records, in order to provide adequate information to Holders of Claims and Equity Interests pursuant to this Disclosure Statement. Nevertheless, it is possible that additional information will be discovered in documents produced to the Debtor after the date of this Disclosure Statement that would make some of the statements contained herein inaccurate or misleading.