1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 HARVEY S. SCHOCHET (State Bar No. 62673) MANUELLA W. HANCOCK (State Bar No. 193003) STEEFEL, LEITT & WEISS A Protessional Corporation One Embarcadero Center, 30th FJoor San Francisco. California 94111 Telephone: (415) 788-0900 Facsimile; (415) 788-20J9 Attorneys for Ramius Capital Group LLC UNITED STATES BANKRUPTCY COURT NORTHERN DISTRICT OF CALIFORNIA SAN FRANCISCO DIVISION In re: NORTHPOINT COMMUNICATIONS GROUP, INC., NORTHPOINT COMMUNICATIONS, INC NORTHPOINT COMMUNICATIONS OF VIRGINIA, INC., and NORTHPOINT INTERNATIONAL, INC. Debtors. Case No. 01-30127-C7 (Jointly Administered with: 01-30125-C7, 01-30126-C7, and 0l-30128-C7) Chapter 7 OPPOSITION OF EQUITY SECURITY HOLDER INC., RAMIUS CAPITAL GROUP LLC TO MOTION FOR. ORDER APPROVING COMPROMJSE OF CONTROVERSY WITH VERIZON COMMUNICATIONS, INC.; REQUEST FOR FURTHER CONTINUANCE OF HEARING ON MOTION FOR ORDER APPROVING COMPROMISE; REQUEST FOR APPOINTMENT OF EQUITY SECURITY HOLDERS' COMMITTEE Date: September 13, 2002 Time: 9:30 a.m. Place: 235 Pine St., 19th Floor San Francisco, CA 94104 Judge: Thomas E. Carlson Ramius Capital Group LLC ("Ramius"), an equity security holder of the Debtor, hereby opposes the Trustee's Motion Pursuant to F.R.B.P. 9019 for Order Approving Compromise of Controversy with Verzon Communications (the "motion") on the basis that Ramius, together with other equity security holders and creditors, have not had, and are entitled to, a reasonable opportunity, with reasonable resources, to evaluate the proposed compromise - a OPPOSITON TO MOTION FOR ORDER APPROVING COMPROMISE 16943:63161331 - 1 -

		1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 compromise that, if approved, would fully and irrevocably affect the recovery rights of each and every holder of a claim and interest in this case. The proposed compromise seeks approval of a settlement in the amount of, at most, 17% of the damages alleged by the Trustee in her complaint against Verizon. The settlement would yield little return to creditors and equity security holders. The settlement should not be approved without a meaningful opportunity - under the circumstances of this case - by the affected equity security holders and creditors to evaluate it. The Trustee has offered no compelling justification for seeking approval of the proposed settlement without that review. Accordingly, Ramius respectfully requests that the hearing on this matter be continued for not less than six weeks and that the Court appoint an equity security holders' committee with an opportunity to engage counsel and other professionals to assist it in evaluating the proposed compromise and the basis for the compromise. I. STATEMENT OF FACTS A. The Verizon Litigation On or about August 4, 2001, the Trustee filed a Second Amended Complaint against Verizon Communications,Inc. ("Verizon") in the San Francisco Superior Court entitled Communications Inc. v. Verizon Communications. Inc et aJ., Case No. 317249. The complaint alleged, among other things, breach of contract, fraud and negligent misrepresentation with respect to Verlzon's actions in terminating a merger between Verizon, NorthPoint Communications Group, Inc. ("NCG") and NorthPoint Communications, Inc. ("NCI")(NCG and NCI collectively "NorthPoint"). The complaint further alleged that Verizon's wrongful acts and omissions, including Verizon's refusal to consummate the merger and purchase NorthPoint common stock as part of the closing of the merger, damaged NorthPoint "in excess of $1 billion. . . [plus] punitive damages." It is Ramius' understanding that the Trustee has expended at least several million dollars litigating the Verizon suit over the course of the past year, involving discovery of several hundred thousand pages of documents amd over 60 depositions. OPPOSITON TO MOTION FOR ORDER APPROVING COMPROMISE 16943:63161331 - 2 -

		1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 B. The Settlement On July 17 and 18, 2002, the parties participated in a two-day mediation. During and following the mediation, the parties engaged in extensive discussions with the mediator, culminating in a proposed settlement. On August 13, 2002. the Trustee brought this motion seeking approval of the settlement, submitting only the proposed settlement agreement, a declaration of the Trustee and a one paragraph declaration of the mediator in support of the settlement in the public record. On August 19, 2002, certain bondholders brought an emergency motion to continue the hearing on the motion for at least fifteen (15) days to permit the bondholders to conduct discovery regarding the proposed settlement. On August 23 and 28, 2002. counsel for the bondholders and one equity security holder appeared at hearings on the continuance motion These two parties were granted the right to review the confidential documents underlying the settlement. On August 30, 2002. this Court entered a "Procedures Order" designed to maintain confidentiality and privileges pertaining to the litigation, thereby imposing substantial constraints on the ability even of those parties to evaluate the case. In addition, the Procedures Order set a deadline of September 10, 2002 - six business days from entry of the order - for submitting written opposition to the motion and a hearing date on the motion of September 13, 2002. Finally, the Procedures Order provided that all testimony offered in favor of the settlement at be submitted under seal and presentation of evidence and argument in favor of the settlement the hearing could be offered in camera at the discretion of the Trustee's counsel. II. DISCUSSION A. Rule 9019 Prohibits Approval of a Compromise without Proper Notice The purpose of the notice requirements of F.R.B.P. 9019 is to allow those parties with a pecuniary interest in the settlement to have an opportunity lo be heard and to object if they find it unsatisfactory. . . [and] to prevent the making of concealed agreements which are unknown to the creditors and unevaluated by the court," Saccurato v. Masters. Inc. (In re OPPOSITON TO MOTION FOR ORDER APPROVING COMPROMISE 16943:63161331 - 3 -

		1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Masters. Inc.), 149 B.R. 289, 292-3 (H.D,N. Y. 1992) (failure to give notice to the special notice list is grounds for overturning bankruptcy court approval of settlement). Courts will only waive the notice requirement where there is some evidence that the interested parties have actually been apprised of the contents and basis for settlement. See In re Glinz, 66 B.R. 88,91 (D. ND 1986) (upholding settlement where objecting creditors' committee had an adequate opportunity to raise objections). At least one court has found that in camera proceedings to approve settlements are prohibited absent a showing of urgent need such as national security. In re Taylor, 59 B.R. 176, 177 (Bankr. S.D.TK. 1986) (refusing to grant settlors' motion to hold in camera review of settlement absent showing of national security risk). It stands to reason that this "opportunity to be heard and object" must be analyzed under the circumstances of each proposed compromise. The overwhelming majority of Rule 9019 compromises involve settlement of avoidance actions and other routine bankruptcy matters, often subject only to a "notice and hearing" procedure. Other compromises require an actual hearing. It is a rare event indeed, however, possibly unprecedented, where a proposed compromise involves clearly cognizable claims in excess of $1 billion against a defendant capable of satisfying a judgment in that amount. much less a compromise that, if approved, will fully, finally and irrevocably affect Ihe recovery rights of thousands of holders of claims and Interests 1n the case. Notwithstanding the Taylor the case. Ramius does not question the purpose and wisdom of the confidentiality protections imposed here. Those protections, however, only compound the difficulty of any meaningful analysis of this proposed settlement. The Trustee has I had at her disposal millions of dollars to litigate and evaluate the case, not to mention a full year to do so. To the best of Ramius' knowledge. creditors and equity holders, with the possible exception of the bank group, have had no involvement in the case or access to evidence, much less committee representation to protect their respective interests. The proposed settlement will provide a very modest distribution on claims and interests, no matter how the bank claims and equity interests are treated here. The holders of unsecured claims and interests have not had a reasonable opportunity, along with reasonable OPPOSITON TO MOTION FOR ORDER APPROVING COMPROMISE 16943:63161331 - 4 -

		1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 resources and means, to evaluate the proposed settlement. Claims pending against this estate exceed $750 million before taking into account equity interests. The interim solution in the Procedures Order, well intended as it was, does not address the fairness and due process problems inherent here. It is not fair to expect any party in interest to expend their own individual funds and to absorb in 11 calendar days, including a holiday weekend, what took the Trustee and her litigation counsel a year to evaluate, with $7.5 million in a litigation fund at their disposal. Moreover, it is highly improbable that any party could digest "over a quatter of a million pages of documents and. . . over 60 depositions of percipient witnesses" in those 11 days, particularly where the attorneys are barred from discussing their findings with their clients. The attorneys for the two parties that did attempt to review this enormous amount of material did so for their own individual clients, not in a representative capacity on behalf of the thousands of other claimants and equity holders whose recoveries depend on the Verizon suit. Ramius respectfully submits that the disparity in resources and infomation has not afforded these thousands of parties an "opportunity to be heard and object." B.No Substantial Injury Will Result From a Continuance. The Trustee has suggested that the settlement should be approved on a standard 21 days' notice procedure because interest in the amount of approximately $500,000 per month is accruing on the bank group debt. In point of fact, even over two months, $1 million in accruing interest represcnts only .13% of the proposed $175 million settlement amount, .57% of the $750 million in creditor claims against the estate and .1 % of the $1 billion alleged to be at stake in the Verizon litigation, without even taking punitives into account. Under the circumstances, these fractional percentages are, to say the least, negligible. They ceItainty should not eviscerate fairness and due process. III. CONCLUSION For the foregoing reasons, Ramius respectfully requests that the Court continue the hearing on the motion for not less than six weeks, appoint an equity security holders' committee OPPOSITON TO MOTION FOR ORDER APPROVING COMPROMISE 16943:63161331 - 5 -

		1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 and authorize such committee to retain counsel and other professionals to assist in it evaluating the proposed settlement. Date: September 10, 2002 STEEFEL, LEITT & WEISS A Protessional Corporation By: Harvey S. Schochet Attorneys for Ramius Capital Group LLC OPPOSITON TO MOTION FOR ORDER APPROVING COMPROMISE 16943:63161331 - 6 -

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