Bondholder lawsuit over WaMu seizure revived

NEW YORK Fri Jun 24, 2011 11:30am EDT

A Washington Mutual Bank (WaMu) is shown here in Solana Beach, California September 26, 2008.REUTERS/Mike Blake

A Washington Mutual Bank (WaMu) is shown here in Solana Beach, California September 26, 2008.

Credit: Reuters/Mike Blake

NEW YORK (Reuters) - A U.S. appeals court on Friday revived a lawsuit by bondholders of the failed Washington Mutual Bank who are challenging the thrift's seizure by the FDIC and sale to JPMorgan Chase & Co (JPM.N).

The D.C. Circuit Court of Appeals said a lower court erred in dismissing the case on the grounds that the bondholders had first failed to exhaust their administrative remedies before suing.

The FDIC seized WaMu on September 25, 2008, and JPMorgan bought the thrift's banking assets for $1.9 billion. The bondholders complained that this price drastically undervalued WaMu's assets. WaMu's holding company, Washington Mutual Inc WAMUQ.PK, filed for bankruptcy protection the next day.

(Reporting by Jonathan Stempel; Editing by Derek Caney)

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