State Bar No. CA 52099

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Wine USA, Inc., .... "Bankruptcy Code") and Rule 9019(a) of the Federal Rules of .... under section 1011 of the California Insurance Code in June 2003,.
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THEODORE B. STOLMAN (State Bar No. CA 52099) [email protected] WHITMAN L. HOLT (State Bar No. CA 238198) [email protected] STUTMAN, TREISTER & GLATT, P.C. 1901 Avenue of the Stars, 12th Floor Los Angeles, CA 90067 Telephone: (310) 228-5600 Facsimile: (310) 228-5788

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ROBERT W. JONES (State Bar No. TX 10951200) [email protected] BRENT R. MCILWAIN (State Bar No. TX 24013140) [email protected] PATTON BOGGS LLP 2001 Ross Avenue, Suite 3000 Dallas, TX 75201-8001 Telephone: (214) 758-1500 Facsimile: (214) 758-1550

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Reorganization Counsel for Debtor and Debtor in Possession

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UNITED STATES BANKRUPTCY COURT CENTRAL DISTRICT OF CALIFORNIA SANTA ANA DIVISION

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In re:

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FREMONT GENERAL CORPORATION, a Nevada corporation,

17 Debtor. 18 Tax I.D. 95-2815260 19 20 21 22 23 24 25 26 27 28

Debtor's Mailing Address: 2727 East Imperial Highway Brea, California 92821

§ § § § § § § § § § § § § § § § § § § § § § § §

CASE NO. 8:08-bk-13421-ES CHAPTER 11 NOTICE OF MOTION AND MOTION FOR ORDER APPROVING STIPULATION BETWEEN THE DEBTOR, FREMONT REORGANIZING CORPORATION, FREMONT COMPENSATION INSURANCE GROUP, INC., AND CALIFORNIA INSURANCE COMMISSIONER STEVE POIZNER (AS STATUTORY LIQUIDATOR OF FREMONT INDEMNITY COMPANY AND STATUTORY CONSERVATOR OF FREMONT LIFE INSURANCE COMPANY) SETTLING CLAIMS AMONG THE PARTIES; MEMORANDUM OF POINTS AND AUTHORITIES; DECLARATION OF DONALD E. ROYER IN SUPPORT THEREOF

Date: Time: Place:

Hearing May 14, 2009 10:30 a.m. Courtroom 5A 411 West Fourth St. Santa Ana, California

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TABLE OF CONTENTS

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Page

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MEMORANDUM OF POINTS AND AUTHORITIES ............................4

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I. STATUS OF THE CASE AND JURISDICTION ..........................4

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II. FACTUAL BACKGROUND ..........................................4

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A.

The Debtor's Corporate Structure And PrePetition Operations. ..................................4

B.

Litigation Between The Fremont Entities And The Commissioner. .........................................6

C.

The Commissioner's Four Proofs Of Claim And The Debtor's Pending Objections Thereto. .................10

D.

Summary Of The Stipulation. ..........................12

7 8 9 10 11 III. ARGUMENT ..................................................15 12 A.

Applicable Legal Standards. ..........................15

B. 14

The Stipulation Is Reasonable, Fair, And Equitable; It Should Be Approved By The Court. .......18

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IV. CONCLUSION .................................................21

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DECLARATION OF DONALD E. ROYER .................................22

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TABLE OF AUTHORITIES

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CASES

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Anaconda-Ericsson Inc. v. Hessen (In re Teltronics Servs., Inc.), 762 F.2d 185 (2d Cir. 1985) .............................. 17

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Century Glove, Inc. v. First Am. Bank, 860 F.2d 94 (3d Cir. 1988) ............................... 20 In re Coram Healthcare Corp., 315 B.R. 321 (Bankr. D. Del. 2004) ....................... 17

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In re Flight Trans. Corp. Sec. Litig., 730 F.2d 1128 (8th Cir. 1984) ............................ 17 Fremont Indem. Co. v. Fremont Gen. Corp., 148 Cal. App. 4th 97 (2007) ............................... 7 Fremont Indem. Co. v. Fremont Gen. Corp., 2007 Cal. App. Unpub. LEXIS 1645 (Feb. 28, 2007) .......... 7

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Key3Media Group, Inc. v. Pulver.com, Inc. (In re Key3Media Group, Inc.), 336 B.R. 87 (Bankr. D. Del. 2005), aff'd, 2006 U.S. Dist. LEXIS 72049 (D. Del. Oct. 2, 2006) ....................... 15 Kowal v. Malkemus (In re Thompson), 965 F.2d 1136 (1st Cir. 1992) ............................ 20 In re Lee Way Holding Co., 120 B.R. 881 (Bankr. S.D. Ohio 1990) ..................... 17

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Martin v. Kane (In re A & C Props.), 784 F.2d 1377 (9th Cir. 1986), cert. denied, 479 U.S. 854 (1986) .................... 16, 17 Nellis v. Shugrue, 165 B.R. 115 (S.D.N.Y. 1994) ............................. 17 Newman v. Stein, 464 F.2d 689 (2d Cir. 1972), cert. denied sub nom. Benson v. Newman, 409 U.S. 1039 (1972) .................. 17

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Official Comm. of Unsecured Creditors v. James Talcott, Inc. (In re Int'l Distrib. Ctrs., Inc.), 103 B.R. 420 (S.D.N.Y. 1989) ............................. 17

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Russian Standard Vodka (USA), Inc. v. Allied Domecq Spirits & Wine USA, Inc., 523 F. Supp. 2d 376 (S.D.N.Y. 2007) ...................... 16 U.S. Bancorp Mortgage Co. v. Bonner Mall P'ship, 513 U.S. 18 (1994) ....................................... 16 United States v. Alaska Nat'l Bank (In re Walsh Constr., Inc.), 669 F.2d 1325 (9th Cir. 1982) ............................ 16 Woodson v. Fireman's Fund Ins. Co. (In re Woodson), 839 F.2d 610 (9th Cir. 1988) ............................. 15 STATUTES AND RULES 11 U.S.C. § 105(a) ........................................ passim 11 U.S.C. § 1107(a) ............................................ 4 11 U.S.C. § 1108 ............................................... 4 28 U.S.C. § 157 ................................................ 4 28 U.S.C. § 157(b) ............................................. 4 28 U.S.C. § 1334 ............................................... 4 28 U.S.C. § 1408 ............................................... 4 28 U.S.C. § 1409 ............................................... 4 Cal. Civ. Proc. Code § 425.16 ................................. 10 Cal. Ins. Code § 1011 .......................................... 5 Cal. Ins. Code § 1016 .......................................... 5 Fed. R. Bankr. P. 9019(a) ................................. passim Fed. R. Bankr. P. 9027(c) ..................................... 10 Local Bankruptcy Rule 9013-1 ................................... 2 Local Bankruptcy Rule 9013-1(o) ................................ 2

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TO THE HONORABLE UNITED STATES BANKRUPTCY JUDGE ERITHE A. SMITH;

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THE OFFICE OF THE UNITED STATES TRUSTEE; THE OFFICIAL COMMITTEE OF

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UNSECURED CREDITORS; THE OFFICIAL COMMITTEE OF EQUITY HOLDERS; AND

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OTHER INTERESTED PARTIES:

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PLEASE TAKE NOTICE that Fremont General Corporation, the

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debtor and debtor in possession in the above-captioned chapter 11

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case (the "Debtor"), hereby moves (the "Motion") pursuant to

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section 105(a) of title 11 of the United States Code (the

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"Bankruptcy Code") and Rule 9019(a) of the Federal Rules of

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Bankruptcy Procedure (the "Bankruptcy Rules") for an order

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approving the Stipulation and Agreement Regarding the Global and

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Integrated Settlement and Release of Claims and Disputes (the

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"Stipulation") entered into between the Debtor, Fremont

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Reorganizing Corporation, f/k/a Fremont Investment & Loan ("FRC"),

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and Fremont Compensation Insurance Group, Inc. ("FCIG")

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(collectively, the "Fremont Entities"), on the one hand, and

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California Insurance Commissioner Steve Poizner (the

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"Commissioner"), the statutory liquidator of Fremont Indemnity

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Company in Liquidation ("Indemnity") and the statutory conservator

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of Fremont Life Insurance Company in Conservation ("Life" and

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together with the Commissioner and Indemnity, the "Insurance

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Entities"), on the other hand.

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executed Stipulation is attached as Exhibit "A" to the accompanying

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Declaration of Donald E. Royer (the "Royer Declaration").

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A true and correct copy of the

As set forth in the accompanying Memorandum of Points and

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Authorities and the Royer Declaration, the Stipulation was

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negotiated in good faith and is reasonable, fair, and equitable.

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Approval of the Stipulation provides immediate benefits to the

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Debtor's estate and all its stakeholders, while also avoiding the

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potential for future complex litigation.

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Stipulation, the Debtor has resolved what are, by far, the largest

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claims asserted against its chapter 11 bankruptcy estate on terms

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that the Debtor believes are eminently reasonable.

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Indeed, by the

The Motion is based on and supported by these moving

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papers, the following Memorandum of Points and Authorities, the

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Royer Declaration, the pleadings and records on file herein, and

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all such other evidence or argument as may be submitted to the

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Court at or before any hearing on this Motion. PLEASE TAKE FURTHER NOTICE that, notwithstanding the

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availability of so-called "negative notice" procedures under Local

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Bankruptcy Rule 9013-1(o)(1), the Debtor has set this Motion for

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hearing on May 14, 2009 at 10:30 a.m., or as soon thereafter as

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counsel may be heard, before the United States Bankruptcy Court for

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the Central District of California (the "Court") in Courtroom 5A

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located at the Ronald Reagan Federal Building and United States

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Courthouse, 411 West Fourth Street, Santa Ana, California.

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PLEASE TAKE FURTHER NOTICE that Local Bankruptcy Rule

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9013-1(f) requires that any objection, joinder, or response to the

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Motion must be in writing; must be accompanied by supporting

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evidence; must comply with Local Bankruptcy Rule 9013-1; must be

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filed with the Court no later than 14 days before the hearing on

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the Motion; and must be served on counsel to the Debtor at the

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addresses set forth in the caption of this pleading.

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Bankruptcy Rule 9013-1(h) provides that if you do not timely file

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and serve an objection or response to the Motion, the Court may

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find that you have consented to the relief requested herein.

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Also, Local

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WHEREFORE, the Debtor respectfully requests that the

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Court enter an order approving the Stipulation and granting such

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other and further relief that may be appropriate.

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DATED:

April 23, 2009

/s/Whitman L. Holt THEODORE B. STOLMAN WHITMAN L. HOLT STUTMAN, TREISTER & GLATT PROFESSIONAL CORPORATION

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ROBERT W. JONES BRENT R. MCILWAIN PATTON BOGGS LLP Reorganization Counsel for Debtor and Debtor in Possession

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MEMORANDUM OF POINTS AND AUTHORITIES

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I.

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STATUS OF THE CASE AND JURISDICTION

On June 18, 2008 (the "Petition Date"), the Debtor

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commenced this case by filing a voluntary petition under chapter 11

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of the Bankruptcy Code.

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1107(a) and 1108, the Debtor continues to operate and manage its

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business as a debtor in possession.

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Pursuant to Bankruptcy Code sections

This Court has jurisdiction over the Motion pursuant to 28 U.S.C. §§ 157 and 1334.

Venue is proper pursuant to 28 U.S.C.

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§§ 1408 and 1409.

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defined in 28 U.S.C. § 157(b).

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relief sought herein are section 105(a) of the Bankruptcy Code and

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Bankruptcy Rule 9019(a).

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This is a "core" proceeding as that term is

II. A.

The statutory predicates for the

FACTUAL BACKGROUND

The Debtor's Corporate Structure And Pre-Petition Operations.

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Fremont General Corporation, the Debtor, is a financial

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services holding company and a publicly held Nevada corporation

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with approximately 78 million shares of outstanding common stock

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(excluding certain restricted shares).

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business operations were generally conducted through two

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intermediate holding companies – one for the "banking side" and one

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for the "insurance side."

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The Debtor's pre-petition

On the banking side, the Debtor owns 100% of the common

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stock of Fremont General Credit Corporation, which in turn owns

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100% of the common stock of FRC.

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commercial and residential real estate financing on a nationwide

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basis.

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estate market, however, FRC began to experience significant losses

FRC historically engaged in

With the deterioration in the “subprime” residential real

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and was subjected to numerous regulatory demands by the FDIC and

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the California Department of Financial Institutions.

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to those regulatory demands, FRC's deposits and principal banking

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assets were sold to or assumed by CapitalSource, Inc. or its

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designee in a transaction approved by this Court after the Petition

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Date (the "CapitalSource Transaction").

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Transaction closed on or about July 25, 2008, and FRC subsequently

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surrendered its banking charter to the state of California and

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changed its name from Fremont Investment & Loan to Fremont

In response

The CapitalSource

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Reorganizing Corporation.

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Transaction, seizure of FRC by the FDIC was avoided and significant

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value was preserved for all stakeholders.

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As a result of the CapitalSource

On the insurance side, the Debtor owns 100% of the common

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stock of FCIG.

FCIG in turn owns 100% of bare title to the common

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stock of Indemnity and 100% of bare title to the common stock of

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Life.

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under section 1011 of the California Insurance Code in June 2003,

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which proceeding was subsequently converted into a state

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"liquidation" proceeding under section 1016 of the California

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Insurance Code in July 2003.

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the Commissioner obtained all the powers of the directors, officers

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and managers of Indemnity, as well as sole control over all of

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Indemnity's property.

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proceeding in June 2008.

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or statutory liquidator, the Commissioner fulfills a role very

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broadly analogous to that of a bankruptcy trustee under the

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Bankruptcy Code.

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Indemnity was placed into a state "conservation" proceeding

In connection with those proceedings,

Life was placed into a state "conservation" In his capacity as statutory conservator

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B.

Litigation Between The Fremont Entities And The Commissioner. Acting as liquidator of Indemnity, the Commissioner filed

three pre-petition actions against the Debtor, FRC, and/or FCIG.

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1.

The NOL I Action.

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The litigation styled Fremont Indemnity Company v.

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Fremont General Corporation, et al., Los Angeles Superior Court

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Case No. BC316472, is generally referred to as the "NOL I Action."

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On June 2, 2004, the Commissioner, acting as statutory liquidator of Indemnity, filed a complaint against the Debtor and

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its wholly owned subsidiary FCIG, asserting eleven causes of action

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based principally on the Debtor’s alleged misappropriation of

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Indemnity’s net operating losses (“NOLs”) in the consolidated group

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for federal income tax purposes of which the Debtor is the common

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parent (the "Consolidated Group").

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In the NOL I Action, the Commissioner seeks a judicial

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declaration that the Debtor’s receipt of the benefit of the NOLs

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was improper.

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ordering the Debtor to: (1) file an amended consolidated federal

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income tax return for 2002 to abstain from taking a worthless stock

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deduction for Indemnity’s stock and (2) restore the NOLs that were

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allegedly misappropriated from Indemnity.

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additionally seeks compensatory damages in excess of $400 million,

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punitive damages, pre-judgment interest, and costs of suit.

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The Commissioner further seeks an injunction

The Commissioner

On or around July 16, 2004, the Commissioner amended his

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NOL I Action complaint to add a fraud cause of action based upon

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the Debtor’s alleged misrepresentations and concealments which

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allegedly induced Indemnity and the Commissioner to enter into a

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July 2, 2002 letter agreement that, inter alia, specifically

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acknowledged the Debtor’s rights in the NOLs generated by

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Indemnity.

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agreed to make contributions to Indemnity, the sum of which could

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total up to $92.75 million.

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In exchange for this letter agreement, the Debtor

The Debtor demurred to the First Amended Complaint.

On

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January 25, 2005, with respect to every cause of action except the

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fraud cause of action, the state trial court sustained the demurrer

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without leave to amend.

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the state trial court sustained the demurrer with leave to amend.

With respect to the fraud cause of action,

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After the filing of two amended complaints and two

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further demurrers, on January 3, 2006, the state trial court

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entered a Judgment of Dismissal of the NOL I Action.

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On or about January 26, 2006, the Commissioner appealed.

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After full briefing, a California appellate court reversed the

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trial court’s dismissal and permitted most of the Commissioner's

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claims to survive demurrer.

That appellate ruling resulted in two

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lengthy written decisions.

See Fremont Indem. Co. v. Fremont Gen.

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Corp., 148 Cal. App. 4th 97 (2007); Fremont Indem. Co. v. Fremont

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Gen. Corp., 2007 Cal. App. Unpub. LEXIS 1645 (Feb. 28, 2007).

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On May 2, 2007, the NOL I Action was remanded.

The

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Commissioner then filed a Fourth Amended Complaint against the

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Debtor and FCIG, which essentially consolidated his First and Third

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Amended Complaints.

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including motions to compel.

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the operative NOL I complaint in February 2008 to assert the same

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causes of action against FRC (replacing a fictitiously named

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defendant), apparently on the theory that Indemnity's NOLs were

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utilized to shelter income generated by FRC's subprime lending.

The parties engaged in some written discovery, The Commissioner subsequently amended

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The state court invited summary judgment motions, but the

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NOL I Action was automatically stayed as against the Debtor by the

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commencement of the Debtor's bankruptcy proceeding on the Petition

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Date.

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Fremont Entities pursuant to a voluntary agreement.

The case has also remained stayed as to the non-debtor

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2.

The NOL II Action.

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The litigation styled Fremont Indemnity Company v.

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Fremont General Corporation, et al., Los Angeles Superior Court

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Case No. BC320766, is generally referred to as the "NOL II Action."

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On August 27, 2004, the Commissioner filed a complaint

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against the Debtor and its wholly owned subsidiary FCIG for twelve

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causes of action based principally on (1) the Debtor’s alleged

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misappropriation of Comstock Insurance Company’s (“Comstock”) NOLs

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and (2) the Debtor’s alleged diversion of assets from Comstock and

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Fremont Reinsurance Co. Ltd. (Bermuda) ("FreRe"), a former

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subsidiary of Indemnity.

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The Commissioner seeks a judicial declaration that the

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Debtor’s receipt of the benefit of the Comstock NOLs was improper,

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and further seeks an injunction, compensatory damages, punitive

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damages, pre-judgment interest, and costs of suit.

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The NOL II Action generally followed the same procedural

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route described above for the NOL I Action.

It too was stayed as

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against the Debtor upon the commencement of the Debtor's bankruptcy

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proceeding and has remained stayed as to the non-debtor defendants

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pursuant to a voluntary agreement.

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3.

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The litigation styled Insurance Commissioner of the State

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The Artwork Action.

of California v. Fremont General Corporation, et al., Adv. Proc.

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08-ap-01258-ES (Bankr. C.D. Cal.) is generally referred to as the

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"Artwork Action."

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The Debtor believes it owns all of the Fremont Fine Arts

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Collection (the “Art Collection”).

Toward the start of 2008, the

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Debtor made arrangements to auction some of the Art Collection

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through Christie’s.

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Debtor’s ownership of the Art Collection, and on April 3, 2008, the

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Commissioner applied ex parte for an order enjoining the Christie’s

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auction.

In March 2008, the Commissioner questioned the

The Debtor opposed the Commissioner’s ex parte

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application.

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liquidation denied the ex parte application and ordered the

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Christie’s auction to proceed.

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auction proceeds were placed into an escrow account.

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The California state court supervising Indemnity's

Pursuant to that court’s order, the

On May 19, 2008, the Commissioner filed his Artwork

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Action Adversary Complaint in state court.

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defendants the Debtor, FRC, Nicole Maury (the Debtor's former art

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curator), James McIntyre (a former officer and director of the

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Debtor and Indemnity), Louis Rampino (another former officer and

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director of the Debtor and Indemnity), and Thea Stuedli (the

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Debtor's current CFO).

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following five causes of action, all of which stem from the

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parties' dispute about who owns the Art Collection: (1) conversion;

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(2) possession of personal property; (3) quiet title; (4)

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accounting; and (5) breach of fiduciary duty.

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That complaint named as

The Adversary Complaint asserts the

In response to the Adversary Complaint, the Debtor filed

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a motion to strike certain of the "findings" contained therein,

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which motion remains pending due to the automatic stay.

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Maury and Stuedli filed a special motion to strike the allegations

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Defendants

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against them pursuant to California's "anti-SLAPP" laws.

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CIV. PROC. CODE § 425.16.

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following a hearing on July 10, 2008.

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See CAL.

Maury and Stuedli's motion was denied

On July 11, 2008, the Debtor effected removal of the

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Artwork Action by filing a copy of its notice of removal in the

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state court.

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McIntyre, and Rampino filed answers to the Commissioner's Adversary

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Complaint in this Court.

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Artwork Action on August 8, 2008.

See FED. R. BANKR. P. 9027(c).

Following removal, FRC,

The Commissioner then moved to remand the After briefing and a hearing,

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this Court denied the remand motion and scheduled further events in

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the Artwork Action adversary proceeding, including a pre-trial

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conference in August 2009.

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and Stuedli answered the Adversary Complaint.

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C.

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On October 3, 2008, the Debtor, Maury,

The Commissioner's Four Proofs Of Claim And The Debtor's Pending Objections Thereto.

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On September 4, 2008, this Court entered the Stipulated

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Order Regarding the Claims Bar Date [Docket No. 200], thereby

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establishing November 10, 2008 as the general claims bar date

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pursuant to Bankruptcy Rule 3003(c)(3).

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On November 6, 2008, the Commissioner served four proofs

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of claim on the Debtor's counsel (collectively, the "Proofs of

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Claim"1).

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The Court treated those Proofs of Claim as filed on

Due to the length of their various exhibits, the Debtor believes it would be wasteful to file complete copies of each of the Proofs of Claim with this Motion. The Debtor has, however, included a collection of the face page and narrative riders for each of the Proofs of Claim as a single Exhibit "B" to the Royer Declaration so that the Court and other parties in interest can appreciate the magnitude and nature of the disputes being resolved by the Stipulation. The Debtor will make complete copies of any of the four Proofs of Claim, or any other document referenced herein, available upon request.

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November 7, 2008, and assigned them numbers 671, 672, 674, and 760

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on the Court's claims register.

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copies of each of the four Proofs of Claim were treated as filed on

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November 12, 2008 and assigned numbers 788, 797, 820, and 824 on

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the Court's claims register (collectively, the "Duplicate Claims").

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The Proofs of Claim can generally be described as follows:

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• POC #1:

Subsequently, purely duplicate

This claim, alleged to be "[i]n excess of

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$455,967,297.00," is based upon the tax aspects of the NOL I and

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NOL II cases.

Specifically, by this claim, the Commissioner seeks

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damages based upon alleged breaches of state insurance statutes

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supposedly resulting from the Debtor's prior use of NOLs generated

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by Indemnity and Comstock.

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• POC #2:

This claim, alleged to be [i]n excess of

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$29,790,413," is based upon the Commissioner's non-tax-related

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allegations in the NOL II Action.

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revolves around very fact-intensive issues arising from

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transactions involving FreRe and Comstock.

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• POC #3:

More specifically, this claim

This claim is a purportedly "secured" claim in

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excess of $4.2 million.

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completely with the Artwork Action.

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• POC #4:

The substance of this claim overlaps

This unliquidated claim asserts alleged rights

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to damages for breach of fiduciary duty and indemnification for

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taxes, interest, penalties, and/or fines relating to the Debtor's

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filing of federal income tax returns for the Consolidated Group in

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taxable years 2003 through 2007.

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Claim, this longstanding dispute was not the subject of any pending

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state court litigation, and it also raises issues of federal income

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tax law regarding whether Indemnity remains a member of the

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Unlike the other three Proofs of

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Consolidated Group.

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In the aggregate, the Commissioner's four Proofs of Claim

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seek over 485 million dollars from the Debtor's estate.

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asserted amount makes the Commissioner the Debtor's largest

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potential creditor by far.

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legal bases behind all of the four Proofs of Claim, however,

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believes that it ultimately has no liability of any kind to the

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Commissioner, and is willing to litigate with the Commissioner over

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the merits of each of the Proofs of Claim.

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This

The Debtor disputes the factual and

Toward that end, the Debtor has filed substantive

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objections to POC #1, POC #3 (as to the alleged "secured" status),

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and POC #4 (collectively, the "Objections").

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452 & 461-462.)

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lengthy motion for summary judgment, which motion was supported by

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substantial evidence that was required to be filed under seal.

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(See Docket Nos. 463 & 521.)

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the Objections for hearing on the merits on March 12, 2009.

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(See Docket Nos. 451,

The Debtor's objection to POC #1 was joined with a

The Debtor initially set all three of

The Commissioner responded to the Objections by filing an

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ex parte motion for a continuance and longer briefing schedule,

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which motion the Court granted.

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D.

(See Docket Nos. 496-497 & 499.)

Summary Of The Stipulation.2 The overarching purpose of the Stipulation is to provide,

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with one exception,3 for a full and global resolution of all

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2

Nothing in this summary shall be construed in any way to limit or alter any of the provisions of the Stipulation, or to guide in the interpretation of the Stipulation in any other proceeding. This summary is provided merely as a convenience to the Court and parties in interest evaluating the Stipulation.

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That one exception is the so-called "Rampino litigation" that the Commissioner brought against former Indemnity officers and directors in California state court. None of the Fremont

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disputes between the Fremont Entities and the Insurance Entities,

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including, but not limited to, all four Proofs of Claim, the NOL I

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Action, the NOL II Action, the Artwork Action and all other claims.

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More specifically, the Commissioner has agreed to the

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final disallowance and expungement of all the Proofs of Claim and

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the Duplicate Claims (see § III.C), to dismiss all pending

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litigation against the Fremont Entities (see § III.G), and to give

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broad releases of any other claims against the Fremont Entities

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(see § III.H.1).

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In exchange for the settlements and releases contained in

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the Stipulation, the Fremont Entities have agreed to the following:

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• The Debtor will allow the Commissioner to retain

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$4,100,000.00 of the funds in the disputed Artwork Action escrow

14

account (to be allocated between Indemnity and Life at the

15

Commissioner's discretion), with the Debtor retaining the balance

16

of the funds in escrow (approximately $300,000) and retaining the

17

unsold artwork, which is estimated to have a value of one to two

18

million dollars (see § III.E).

19

• The Debtor will agree to the Commissioner having an

20

allowed general unsecured non-priority claim against the Debtor's

21

estate in the amount of $5,000,000.00 (see § III.D).

22 23 24 25

• FRC will pay Indemnity the sum of $5,000,000.00 (see § III.F). • FCIG will transfer the record title to its equity interests in Indemnity and Life to one of the Insurance Entities or

26 27 28

Entities are parties to that action, but the officers and directors could potentially assert indemnification claims back against the Debtor based upon the outcome of that case.

13

1

an affiliate, thereby removing those entities completely from the

2

Consolidated Group (see §§ III.A.2(b), III.A.2(c) & III.B).

3

• The Fremont Entities will reasonably cooperate with the

4

Commissioner in resolving certain tax issues regarding Indemnity's

5

status vis-a-vis the Consolidated Group (see § III.A).

6

• The Fremont Entities will provide reciprocal and mutual

7

releases to the Insurance Entities, subject to preservation of

8

certain "Fremont Preserved Claims" against various parties and

9

entities, including officers and directors (see § III.H.2).

10

• In the event that Indemnity has to return any funds

11

paid by FRC, Indemnity will be provided with limited revival rights

12

that allow the Commissioner to assert further claims against any or

13

all of the Fremont Entities (see § IV.E).

14

The Stipulation is not effective until approved by this

15

Court and the relevant state courts – the three courts shall

16

continue to retain jurisdiction (based upon litigation posture)

17

over the parties for purposes of the Stipulation (see §§ IV.A &

18

V.K).

19

approval of the Stipulation (see § IV.C.2).

20

have negotiated certain provisions intended to avoid the need for

21

future litigation related to the Stipulation (see §§ V.I & V.J).

22

The parties have agreed to stay all litigation pending Moreover, the parties

The Stipulation is the product of very extended, good

23

faith, and arm's length negotiations between the Debtor, FRC, FCIG,

24

and the Commissioner.

25

the detailed review and input of both official committees.

26

Debtor believes the settlement embodied in the Stipulation fairly

27

resolves significant and massive claims without the cost and delay

28

attendant to litigating the disputes, and is reasonable under the

The Stipulation has further benefited from

14

The

1

circumstances.

The Debtor submits, therefore, that consummation of

2

the Stipulation is in the best interests of the Debtor's estate,

3

creditors, shareholders, and all parties concerned.

4 5 6

III. ARGUMENT A.

Applicable Legal Standards. Section 105(a) of the Bankruptcy Code provides in

7

relevant part that "[t]he court may issue any order, process, or

8

judgment that is necessary or appropriate to carry out the

9

provisions of this title."

10 11 12 13

11 U.S.C. § 105(a).

Bankruptcy

Rule 9019(a) in turn states: On motion by the trustee and after notice and a hearing, the court may approve a compromise or settlement. Notice shall be given to creditors, the United States trustee, the debtor, and indenture trustees as provided in Rule 2002 and to any other entity as the court may direct.

14 15 16

Fed. R. Bankr. P. 9019(a). The U.S. Court of Appeals for the Ninth Circuit has long

17

recognized that "[t]he bankruptcy court has great latitude in

18

approving compromise agreements."

19

Co. (In re Woodson), 839 F.2d 610, 620 (9th Cir. 1988).

20

"[p]ursuant to Bankruptcy Rule 9019(a), the authority to approve a

21

compromise settlement is within the sound discretion of the

22

bankruptcy court.

23

court must determine whether the compromise is fair, reasonable,

24

and in the best interest of the estate."

25

Pulver.com, Inc. (In re Key3Media Group, Inc.), 336 B.R. 87, 92

26

(Bankr. D. Del. 2005) (citations omitted), aff'd, 2006 U.S. Dist.

27

LEXIS 72049 (D. Del. Oct. 2, 2006).

28

Woodson v. Fireman's Fund Ins. Indeed,

In exercising this discretion, the bankruptcy

Key3Media Group, Inc. v.

"The federal courts have a well-established policy of

15

1

encouraging settlement to promote judicial economy and limit the

2

waste of judicial resources."

3

v. Allied Domecq Spirits & Wine USA, Inc., 523 F. Supp. 2d 376, 384

4

(S.D.N.Y. 2007); see also, e.g., U.S. Bancorp Mortgage Co. v.

5

Bonner Mall P'ship, 513 U.S. 18, 27-28 (1994) (discussing the

6

general utility of settlement vis-à-vis judicial economy).

7

force of this established federal policy is particularly acute in

8

the bankruptcy context, where "[t]he purpose of a compromise

9

agreement is to allow the trustee and the creditors to avoid the

Russian Standard Vodka (USA), Inc.

The

10

expenses and burdens associated with litigating sharply contested

11

and dubious claims."

12

1377, 1380-81 (9th Cir. 1986), cert. denied, 479 U.S. 854 (1986).

13

Accordingly, in approving a proposed agreement, the Court need not

14

conduct an exhaustive investigation of the claims sought to be

15

compromised.

16

Walsh Constr., Inc.), 669 F.2d 1325, 1328 (9th Cir. 1982).

17

it is sufficient that the Court find that the proposed settlement

18

was negotiated in good faith and is reasonable, fair, and

19

equitable. See In re A & C Props., 784 F.2d at 1381.

20

Martin v. Kane (In re A & C Props.), 784 F.2d

See, e.g., United States v. Alaska Nat'l Bank (In re

The Ninth Circuit has further identified the following

21

factors for consideration in determining whether a proposed

22

settlement agreement is reasonable, fair, and equitable:

23

(a)

the probability of success in the litigation;

(b)

the difficulties, if any, to be encountered in the matter of collection;

(c)

the complexity of the litigation involved, and the expense, inconvenience, and delay necessarily attending it;

24 25 26 27

Rather,

28

16

1

(d)

2

the paramount interest of the creditors and a proper deference to their reasonable views in the premises.

3

See id. (quoting In re Flight Trans. Corp. Sec. Litig., 730 F.2d

4

1128, 1135 (8th Cir. 1984)). Consideration of these factors does not require the Court

5 6

to determine whether the settlement presented is the best one that

7

could possibly be achieved.

8

115, 123 (S.D.N.Y. 1994) (stating that the task of a bankruptcy

9

judge is not to determine whether settlement was the best that

See, e.g., Nellis v. Shugrue, 165 B.R.

10

could be obtained); In re Coram Healthcare Corp., 315 B.R. 321, 330

11

(Bankr. D. Del. 2004) ("[T]he court does not have to be convinced

12

that the settlement is the best possible compromise.").

13

the Court need only canvass the issues to determine whether the

14

proposed settlement falls "below the lowest point in the zone of

15

reasonableness."

16

(emphasis added), cert. denied sub nom. Benson v. Newman, 409 U.S.

17

1039 (1972); see also, e.g., Anaconda-Ericsson Inc. v. Hessen (In

18

re Teltronics Servs., Inc.), 762 F.2d 185, 189 (2d Cir. 1985).

Rather,

Newman v. Stein, 464 F.2d 689, 698 (2d Cir. 1972)

Although the Court should give weight to the reasonable

19 20

views of all parties in interest during the 9019 process,

21

"objections do not rule.

22

are favored in bankruptcy."

23

881, 891 (Bankr. S.D. Ohio 1990).

24

great deference to the recommendations of the estate's

25

representative when considering negotiated agreements.

26

Official Comm. of Unsecured Creditors v. James Talcott, Inc. (In re

27

Int'l Distrib. Ctrs., Inc.), 103 B.R. 420, 423 (S.D.N.Y. 1989).

28

///

It is well established that compromises In re Lee Way Holding Co., 120 B.R.

17

In fact, courts generally accord

See, e.g.,

1 2

B.

The Stipulation Is Reasonable, Fair, And Equitable; It Should Be Approved By The Court.

3

The Stipulation is equitable and appropriate.

As such,

4

it should be approved by this Court pursuant to Bankruptcy Rule

5

9019(a) for a number of reasons.

6

First, the Stipulation provides for the resolution of

7

nearly half a billion dollars of claims for consideration totaling

8

approximately $14.1 million from all of the Fremont Entities.

9

Indeed, specifically with respect to the Debtor, the direct impact

10

on its estate is only $9.1 million ($4.1 million by virtue of the

11

Debtor waiving its claim to ownership of a portion of the artwork

12

escrow and $5 million by virtue of the Commissioner's allowed

13

claim).

14

resolution of the largest claims asserted in this bankruptcy case,

15

one well above the "lowest point in the range of reasonableness."

16

There can be no real question that this is a favorable

Second, the Stipulation eliminates the need for what

17

would likely be very difficult, complicated, time-consuming, and

18

costly litigation.

19

all of the pending and potential litigations would ultimately

20

prevail if those matters actually proceeded to trial, the Debtor

21

also acknowledges the uncertainty inherent in any litigation.

22

uncertainty is only exacerbated here by the "first impression"

23

nature of many of the Commissioner's unprecedented theories of

24

California insurance and federal income tax law.

25

Although the Debtor believes its position in

Such

Apart from this indeterminacy about the ultimate result

26

lies the burdens associated with the process of pursuing the

27

pending litigation with the Commissioner to finality.

28

Commissioner could conceivably challenge this Court's jurisdiction

18

The

1

over some or all of his Proofs of Claim, which could require

2

lengthy and complicated briefing.

3

taken the position that certain of his claims cannot be resolved

4

without substantial discovery.

5

position, the discovery process would unquestionably be lengthy and

6

expensive.

7

to be joined in some or all of the disputes.

8

outcome on the merits, it is reasonable to expect that either the

9

Fremont Entities or the Commissioner would appeal any adverse

Moreover, the Commissioner has

If a court were to agree with this

In addition, third parties (such as the IRS) may need Regardless of the

10

ruling on any of the Proofs of Claim or in the underlying state

11

court litigation.

12

complicated issues of law, necessitating lengthy briefing and

13

further delay.

14

disposition of all the Commissioner's claims on the merits (even

15

assuming the Fremont Entities prevailed on all scores) could take

16

many years and cost several million dollars.

17

eliminates the need for those additional costs and uncertainty.

18

Such appeals would raise difficult and

It is not unrealistic to expect that a full

The Stipulation

Third, the Stipulation resolves one of the major

19

contingencies overshadowing all aspects of this bankruptcy case,

20

including the plan process and the Debtor's ability to make

21

meaningful distributions to its stakeholders.

22

Commissioner's claims against FRC would likely impair the Debtor's

23

ability to obtain any meaningful dividends from FRC, leaving value

24

trapped at FRC until the Commissioner's claims were finally

25

resolved.

26

the Debtor would probably need to provide for pro rata reserves of

27

nearly $500 million for the Commissioner's claims as it made

28

distributions from its bankruptcy estate, thereby substantially

The pendency of the

Moreover, absent an estimation or similar proceeding,

19

1

diluting its other creditors.

Indeed, until the Commissioner's

2

claims were resolved, it would remain highly uncertain whether

3

there is even a penny of value in this case for equity (if allowed

4

in full, the Commissioner's Proofs of Claim would likely deplete

5

the value of this estate, even ignoring potential administrative

6

expenses and priority claims).

7

pall of uncertainty that had been hanging over this case, thereby

8

helping move matters toward an equitable resolution.

9

the progress of this chapter 11 case, the Stipulation furthers an

Thus, the Stipulation resolves a

By advancing

10

interest of utmost federal concern.

See, e.g., Kowal v. Malkemus

11

(In re Thompson), 965 F.2d 1136, 1145 (1st Cir. 1992) (noting "the

12

important policy favoring efficient bankruptcy administration");

13

Century Glove, Inc. v. First Am. Bank, 860 F.2d 94, 98 (3d Cir.

14

1988) (emphasizing how "issues central to the progress of the

15

bankruptcy petition, those likely to affect the distribution of the

16

debtor's assets, or the relationship among the creditors, should be

17

resolved quickly" (citation and quotation marks omitted)).

18

Fourth, the Stipulation is the product of very lengthy

19

arm's length negotiations between the Commissioner's counsel and

20

the Fremont Entities' various counsel.

21

the final Stipulation took well over a month, and involved numerous

22

difficult legal and factual issues that had to be researched,

23

drafted, discussed, and resolved.

24

that certain issues carried the potential to "blow up" this

25

agreement, but the different professionals on both the Fremont side

26

and the Commissioner's side worked hard to reach a consensual

27

resolution of the disputes.

28

reviewed and approved by both the Creditors Committee and the

Indeed, the negotiation of

At several points, it appeared

Moreover, the Stipulation has been

20

1

Equity Committee.

2

estate's stakeholders have considered and blessed the proposed

3

resolution of the Commissioner's litigation and claims.

4

Accordingly, the official representatives of the

In sum, the Stipulation is a fair and equitable

5

resolution of its subject matter.

6

benefits to the Debtor's estate and case.

7

IV.

8 9

The Stipulation provides myriad It should be approved.

CONCLUSION

For the reasons and based on the authorities set forth above, the Debtor respectfully requests that the Court enter an

10

order approving the Stipulation and granting such other and further

11

relief that may be appropriate.

12 13 14 15

DATED:

April 23, 2009

/s/Whitman L. Holt THEODORE B. STOLMAN WHITMAN L. HOLT STUTMAN, TREISTER & GLATT PROFESSIONAL CORPORATION

16 -and17 18 19 20

ROBERT W. JONES BRENT R. MCILWAIN PATTON BOGGS LLP Reorganization Counsel for Debtor and Debtor in Possession

21 22 23 24 25 26 27 28

21

1

DECLARATION OF DONALD E. ROYER

2

I, Donald E. Royer, declare as follows:

3

1.

I am over eighteen years of age and I have personal

4

knowledge of each of the facts stated in this declaration.

5

called as a witness, I could and would testify as to the matters

6

set forth below based upon my personal knowledge.

7

2.

If

I submit this declaration in support of the Motion

8

for Order Approving Stipulation Between the Debtor, Fremont

9

Reorganizing Corp., Fremont Compensation Insurance Group, and

10

California Insurance Commissioner Steve Poizner (as Statutory

11

Liquidator of Fremont Indemnity Co. and Statutory Conservator of

12

Fremont Life Insurance Co.) Settling Claims Among the Parties (the

13

"Motion"1) filed by Fremont General Corporation, debtor and debtor

14

in possession in the above-captioned chapter 11 case (the

15

"Debtor").

16

3.

17

Counsel for the Debtor.

18

since November 2007.

19

business and operations, particularly with respect to matters

20

involving litigation pending against the Debtor and matters arising

21

in this chapter 11 bankruptcy case.

22

4.

I am an Executive Vice President of and the General I have been employed in that capacity

As a result, I am familiar with the Debtor's

I am familiar with that certain Stipulation and

23

Agreement Regarding the Global and Integrated Settlement and

24

Release of Claims and Disputes (the "Stipulation") entered into

25

between the Debtor, Fremont Reorganizing Corporation, f/k/a Fremont

26 27 28

1

All capitalized terms used but not otherwise defined herein shall have the meanings ascribed to them in the Motion and the accompanying Memorandum of Points and Authorities.

22

1

Investment & Loan ("FRC"), and Fremont Compensation Insurance

2

Group, Inc. ("FCIG") (collectively, the "Fremont Entities"), on the

3

one hand, and California Insurance Commissioner Steve Poizner (the

4

"Commissioner"), the statutory liquidator of Fremont Indemnity

5

Company in Liquidation ("Indemnity") and the statutory conservator

6

of Fremont Life Insurance Company in Conservation ("Life" and

7

together with the Commissioner and Indemnity, the "Insurance

8

Entities"), on the other hand.

9

executed Stipulation is attached hereto as Exhibit "A."

10

5.

A true and correct copy of the

The Stipulation is intended to resolve, on a

11

complete and global basis, the various litigation claims that the

12

Commissioner has asserted or could assert against the Fremont

13

Entities, including the so-called "NOL I Action," the "NOL II

14

Action," and the "Artwork Action."

15

pending against the Debtor in California state court for a number

16

of years.

17

already has required substantial investments of time and expense in

18

connection with the Debtor's defense of that litigation.

19

The two NOL cases have been

The Artwork Action is of more recent vintage, but

6.

The Stipulation also resolves the four proofs of

20

claim filed by the Commissioner in this bankruptcy case.

21

been provided with copies of those proofs of claim, which I

22

understand were treated by the Court as filed on November 7, 2008,

23

and were assigned numbers 671, 672, 674, and 760 on the Court's

24

claims register (collectively, the "Proofs of Claim").

25

their significant size, it would be unreasonable to include the

26

entirety of all four Proofs of Claim with this filing, but attached

27

hereto as Exhibit "B" is a true and correct collection of the face

28

page and narrative rider accompanying each of the Proofs of Claim,

23

I have

Due to

1

which were accessed using the publicly available ECF/PACER system.

2

The Proofs of Claim collectively assert claims against the Debtor's

3

estate in excess of $485,000,000.

4

7.

The Stipulation is the result of extended, good

5

faith, and arm's length negotiations between the Fremont Entities'

6

various counsel and the Commissioner.

7

comprehensive resolution of the subject disputes and provides

8

guidance for the resolution of any further disputes that may arise

9

between the respective parties.

It represents a

In my business judgment, the

10

resolution of these disputes through the Stipulation is

11

unquestionably in the best interests of the Debtor's estate and its

12

terms easily surpass the lowest point in the zone of

13

reasonableness.

14

8.

The process of negotiating the interwoven terms of

15

the final Stipulation required significant effort on the part of

16

the Fremont Entities' management and various professionals.

17

myriad disputes between the Fremont Entities and the Commissioner

18

involved numerous difficult legal and factual issues that had to be

19

researched, drafted, discussed, and resolved.

20

was spent working on the Stipulation, and the final agreement

21

represents a collection of various compromises about extremely

22

difficult issues by both sides.

23

9.

The

Well over a month

Although I believe that all the claims asserted by

24

the Commissioner against the Fremont Entities would ultimately fail

25

on the merits, I also recognize that there is uncertainty about the

26

result.

27 28

The Stipulation resolves that uncertainty. 10.

Due to the complex and contested nature of the

Commissioner's various claims, my experience as in-house counsel

24

CHAPTER 11

In re: Fremont General Corp., Debtor(s).

CASE NUMBER 8:08-bk-13421-ES

.NOTE: When using this form to indicate service of a proposed order, DO NOT list any person or entity in Category I. Proposed orders do not generate an NEF because only orders that have been entered are placed on the CM/ECF docket.

PROOF OF SERVICE OF DOCUMENT I am over the age of 18 and not a party to this bankruptcy case or adversary proceeding. My business address is: 1901 Avenue of the Stars, 12th Floor, Los Angeles, CA 90067.

The foregoing document described NOTICE OF MOTION AND MOTION FOR ORDER APPROVING STIPULATION BETWEEN THE DEBTOR, FREMONT REORGANIZING CORPORATION, FREMONT COMPENSATION INSURANCE GROUP, INC., AND CALIFORNIA INSURANCE COMMISSIONER STEVE POIZNER (AS STATUTORY LIQUIDATOR OF FREMONT INDEMNITY COMPANY AND STATUTORY CONSERVATOR OF FREMONT LIFE INSURANCE COMPANY) SETTLING CLAIMS AMONG THE PARTIES; MEMORANDUM OF POINTS AND AUTHORITIES; DECLARATION OF DONALD E. ROYER IN SUPPORT THEREOF will be served or was served (a) on the judge in chambers in the form and manner required by LBR 5005-2(d); and (b) in the manner indicated below: I. TO BE SERVED BY THE COURT VIA NOTICE OF ELECTRONIC FILING (“NEF”) – Pursuant to controlling General Order(s) and Local Bankruptcy Rule(s) (“LBR”), the foregoing document will be served by the court via NEF and hyperlink to the document. On April 23, 2009, I checked the CM/ECF docket for this bankruptcy case or adversary proceeding and determined that the following person(s) are on the Electronic Mail Notice List to receive NEF transmission at the email address(es) indicated below: See following page. Service information continued on attached page II. SERVED BY U.S. MAIL OR OVERNIGHT MAIL(indicate method for each person or entity served): On April 23, 2009, I served the following person(s) and/or entity(ies) at the last known address(es) in this bankruptcy case or adversary proceeding by placing a true and correct copy thereof in a sealed envelope in the United States Mail, first class, postage prepaid, and/or with an overnight mail service addressed as follows. Listing the judge here constitutes a declaration that mailing to the judge will be completed no later than 24 hours after the document is filed. See following page.

Service information continued on attached page III. SERVED BY PERSONAL DELIVERY, FACSIMILE TRANSMISSION OR EMAIL (indicate method for each person or entity served): Pursuant to F.R.Civ.P. 5 and/or controlling LBR, on I served the following person(s) and/or entity(ies) by personal delivery, or (for those who consented in writing to such service method), by facsimile transmission and/or email as follows. Listing the judge here constitutes a declaration that personal delivery on the judge will be completed no later than 24 hours after the document is filed.

Service information continued on attached page

I declare under penalty of perjury under the laws of the United States of America that the foregoing is true and correct.

04/23/2009 Date

Melissa Altamirano Type Name

/s/

Melissa Altamirano

Signature

This form is mandatory. It has been approved for use by the United States Bankruptcy Court for the Central District of California. January 2009

486037v1

F 9013-3.1

CHAPTER 11

In re: Fremont General Corp., Debtor(s).

CASE NUMBER 8:08-bk-13421-ES

SERVICE BY THE COURT VIA NOTICE OF ELECTRONIC FILING (“NEF”) Kristen N Beall

[email protected], [email protected]

Dustin P Branch Frank Cadigan

[email protected] [email protected]

Jesse S Finlayson

[email protected], [email protected]

Jean M. Healey

[email protected]

Matthew Heyn

[email protected]

Whitman L Holt

[email protected]

Mark D Houle

[email protected]

Michelle Hribar

[email protected]

Lewis R Landau Kerri A Lyman

[email protected] [email protected]

Robert S Marticello Sarah D Moyed David L Osias

[email protected]

[email protected] [email protected], [email protected]

Jonathan Petrus

[email protected]

David M Poitras

[email protected]

Michael B Reynolds Jonathon Shenson Evan D Smiley

[email protected], [email protected] [email protected]

[email protected]

Philip E Strok

[email protected]

Samuel J Teele

[email protected]

United States Trustee (SA) Alan Z Yudkowsky Scott H Yun

[email protected]

[email protected]

[email protected]

This form is mandatory. It has been approved for use by the United States Bankruptcy Court for the Central District of California. January 2009

486037v1

F 9013-3.1

CHAPTER 11

In re: Fremont General Corp., Debtor(s).

CASE NUMBER 8:08-bk-13421-ES

SERVICE BY U.S. MAIL The Honorable Erithe Smith USBC - Central District of California Ronald Reagan Federal Building and United States Courthouse 411 West Fourth Street, Ste. 5041 Santa Ana, CA 92701-4593

Fremont General Corporation 2727 E. Imperial Highway Brea, CA 92821-6713 Attention: General Counsel

Fremont Investment & Loan 2727 East Imperial Highway Brea, CA 92821-6713 Attention: General Counsel

John Thomas Gilbert John W. Schryber Robert W. Jones PATTON BOGGS LLP 2001 Ross Avenue, Suite 3000 Dallas, TX 75201-8001

United States Trustee 411 West Fourth Street, Suite 9041 Santa Ana, CA 92701-4593

Internal Revenue Service P.O. Box 21126 Philadelphia, PA 19114

U.S. Department of Justice Tax Division Civil Trial Section, Western Region P. O. Box 683 Ben Franklin Station Washington, DC 20044

United States Attorney's Office Tax Division Federal Building, Room 7211 300 North Los Angeles Street Los Angeles, CA 90012

Securities Exchange Commission 5670 Wilshire Boulevard, 11th Floor Los Angeles, CA 90036

Employment Development Department Bankruptcy Group MIC 92E P. O. Box 826880 Sacramento, CA 94280-0001

Franchise Tax Board Attention: Bankruptcy P. O. Box 2952 Sacramento, CA 95812-2952

Wells Fargo Bank N.A. Attn: Keith Endersen 350 W. Colorado Blvd., Suite 210 Pasadena, CA 91105

Bank of New York Attn: Bridget Schessler 1 Oxford Center 301 Grant Street Pittsburgh, PA 15219

HSBC Bank USA, N.A. Attn: Robert A. Conrad 452 Fifth Avenue New York, NY 10016

Tennenbaum Capital Partners, LLC Attn: Steve Wilson 2951 28th Street, Suite 1000 Santa Monica, CA 90405

Rita Angel 9 E. 79th St. New York, NY 10021

Rita Angel c/o Joshua T. Angel Herrick & Feinstein 2 Park Avenue New York, NY 10016

Dennis G. Danko Loretta M. Danko, Ttee Dennis & Loretta M. Danko Fam Tr. U/A 7/7/88 10941 E. Buckskin Trail Scottsdale, AZ 85255

Howard Amster 23811 Chagrin Blvd., Suite 200 Beachwood, OH 44122

James M. Rockett Bingham McCutchen LLP 3 Embarcadero Center San Francisco, CA 94111

CapitalSource TRS Inc. Attn: Chief Legal Officer 4445 Willard Avenue, 12th Floor Chevy Chase, MD 20815

Federal Deposit Insurance Corporation Division of Supervision and Consumer Protection San Francisco Regional Office 25 Jessie Street at Ecker Square, Suite 2300 San Francisco, CA 94105

State of California Department of Financial Institutions 111 Pine Street, Suite 1100 San Francisco, CA 94111-5613

Rabia Cebeci, Esq. Security Exchange Commission 5670 Wilshire Blvd., 11th Floor Los Angeles, CA 90036

This form is mandatory. It has been approved for use by the United States Bankruptcy Court for the Central District of California. January 2009

486037v1

F 9013-3.1

CHAPTER 11

In re: Fremont General Corp., Debtor(s).

CASE NUMBER 8:08-bk-13421-ES

REQUEST FOR SPECIAL NOTICE

Attys for the Official Committee of Equity Security Holders Weiland, Golden, et al. Attn: Evan D. Smiley, Esq. 650 Town Center Drive, Suite 950 Costa Mesa, CA 92626

Attys for Bank of New York Pillsbury Winthrop Shaw Pittman Attn: Mark D. Houle, Esq. 650 Town Center Drive, Suite 700 Costa Mesa, CA 92626-7122

Attys for Official Committee of Unsecured Creditors Klee, Tuchin, Bogdanoff & Stern LLP Attn: Lee R. Bogdanoff, Esq. 1999 Avenue of the Stars, 39th Floor Los Angeles, CA 90067-6049

Attys for iStar Financial, Inc. Katten Muchin Rosenman LLP c/o Thomas J. Leanse, Dustin P. Branch 2029 Century Park East, Suite 2600 Los Angeles, CA 90067-3012

Attys for HSBC Bank USA, National Assn., as Trustee Ropes & Gray LLP Attn: Mark R. Somerstein, A. Vanderwal 1211 Avenue of the Americas New York, NY 10036-8704

Attys for Wells Fargo Bank, NA Arent Fox LLP Attn: Andrew I. Silfen, Sally Siconolfi 1675 Broadway New York, NY 10019

Attys for Wells Fargo Bank, NA Wells Fargo Bank, NA Attn: James R. Lewis 45 Broadway, 14th Floor New York, NY 10006

Attys for Interested Party Ronald J. Nicholas, Jr. George B. Piggott, Esq. 2 Park Plaza, Suite 300 Irvine, CA 92614-8513

Bk Attys for NY State Teachers' Retirement System Jesse S. Finlayson, Michael R. Williams Finlayson Augustini & Williams 110 Newport Center Drive, Suite 100 Newport Beach, CA 92660

Bk Attys for NY State Teachers' Retirement System Michael S. Etkin, S. Jason Telle Lowenstein Sandler PC 65 Livingston Avenue Roseland, NJ 07068

Attys for NY State Teachers' Retirement System Salvatore J. Graziano Bernstein Litowitz Berger & Grossmann 1285 Avenue of the Americas New York, NY 10019

Attys for Water Garden Company Harold A. Olsen Strook & Stroock & Lavan LLP 180 Maiden Lane New York, NY 10038

Attys for Defs Stephen H. Gordon and David S. De Pillo Steven A. Marenberg, Charles E. Elder Irell & Manella LLP 1800 Avenue of the Stars, Suite 900 Los Angeles, CA 90067-4276

Attys for Defs Stephen H. Gordon and David S. De Pillo Kerri A. Lyman, Esq. Irell & Manella 840 Newport Center Drive, Suite 400 Newport Beach, CA 92660

Attys for Iron Mountain Info Mgmt. Frank F. McGinn Bartlett Hackett Feinberg, P.C. 155 Federal St., 9th Floor Boston, MA 02110

Attys for Kelly Capital David L. Osias, Rober R. Barnes Allen Matkins Leck, et al. 501 West Broadway, 15th Fl. San Diego, CA 92101

Attys for Ronald A. Groden David W. Wirt, Katherine H. Harris Locke Lord Bissell & Liddell, LLP 111 South Wacker Drive Chicago, IL 60606

Attys for Ronald A. Groden Kelly S. Sinner, Esq. Locke Lord Bissell & Liddell, LLP 300 S. Grand Ave., Suite 2600 Los Angeles, CA 90071

Attys for James McIntyre James McIntyre c/o Robert R. Kinas, Esq. Snell & Wilmer LLP 3883 Howard Hughes Parkway, Suite 1100 Las Vegas, Nevada 89169

LA County Treasurer and Tax Collector PO Box 54110 Los Angeles, CA 90051-0110

This form is mandatory. It has been approved for use by the United States Bankruptcy Court for the Central District of California. January 2009

486037v1

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CHAPTER 11

In re: Fremont General Corp., Debtor(s).

CASE NUMBER 8:08-bk-13421-ES

Authorized Agent for America's Servicing Company John D. Schlotter, Esq. McCalla Raymer, LLC 1544 Old Alabama Rd. Roswell, GA 30076-2102

Attorneys for Creditors Marcy Johannesson, Wendy Horvart, Robert Anderson, Linda Sullivan, Armando Salas and James K. Hopkins Michael D. Braun, Esq. Braun Law Group, P.C. 10680 W. Pico Blvd., Suite 280 Los Angeles, CA 90064

Attorneys for Thomas Whitesell Moses Lebovits, Esq. Christopher G. Brady, Esq. Daniels, Fine, Israel, Schonbuch & Lebovits, LLP 1801 Century Park East, 9th Floor Los Angeles, CA 90067

Attorneys for NY State Comptroller Thomas P. DiNapoli Johnston de F. Whitman, Jr. Joshua K. Porter Entwistle & Cappucci LLP 280 Park Avenue, 26th Fl. West New York, NY 10017

Attorneys for the Commonwealth of Massachusetts Jean M. Healey John M. Stephan Assistant Attorneys General Commonwealth of Massachusetts Office of the Attorney General One Ashburton Place Boston, MA 02108

George T. Caplan Epstein Becker & Green P.C. 1925 Century Park East, Suite 500 Los Angeles, CA 90067

Barry Freeman David Poitras Jeffer, Mangels, Butler & Marmaro LLP th 1900 Avenue of the Stars, 7 Floor Los Angeles, CA 90067

Michael C. Lieb Willenken Wilson Loh & Lieb LLP 707 Wilshire Blvd., Suite 3850 Los Angeles, CA 90017

Scott Pearce Senior VP & Estate Trust Officer Conservation & Liquidation Office rd 425 Market Street, 23 Floor San Francisco, CA 94105

Thomas J. Welsh, Esq. Orrick, Herrington & Sutcliffe LLP 400 Capitol Mall, Suite 3000 Sacramento, CA 94105

Lisa Chao, Esq. Deputy Attorney General California Department of Justice 300 South Spring Street, Room 1702 Los Angeles, CA 90013

SERVICE BY OVERNIGHT MAIL

This form is mandatory. It has been approved for use by the United States Bankruptcy Court for the Central District of California. January 2009

486037v1

F 9013-3.1

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