2 possible reasons:
1) The assumption of many of us on this board is that the hedges and E.C. couldn't come to a settlement agreement. However, that flies in the face of the "we got them by the you know what" theory. So, perhaps the hedges think they can get by this nasty Insider Trading business in one piece using lawyers, plausible deniability, etc., and avoid any criminal prosecution. Maybe Appaloosa’s expensive criminal attorneys do have them covered from criminal liability.
If they can avoid criminal charges (high standard of proof), then it becomes a civil matter (lower standard of proof), and they are willing to gamble in civil court.
If the E.C. wanted everything and the kitchen sink, then the hedges may have said, with so many $billions at stake, “What the heck, we got nothing to lose and a lot to gain, so let’s go for it.”
2) We may have completely missed an obvious explanation, e.g., the E.C. & Susman never wanted a ‘deal’ to begin with, or they later came to that conclusion.
Think of it. If we Truly have the goods on them, then settling for the FJR and some “payback” for their ill-gotten gains may be ‘chump change’ and not alter the GSA & POR at all (since the hedges are no longer party), and Rosen could still try to ‘bury’ the extra money in the waterfall where it won’t reach equity (like he’s trying to do with the NOL’s.) If we can – at least in civil court – show that they were guilty of insider trading, etc., then wouldn’t that DESTROY the GSA & POR? Judge Walrus said the GSA & POR were ‘Fair and Reasonable”, “In Good Faith”, and “no evidence of wrong doing.”
If we show that the whole game was rigged – the insider trading of senior and junior bonds, the careful construction of the POR with the acquisition by the hedges of WAHUQ’s who would own the reorganized company and all those NOL’s, and (perhaps) a stand-off between JPMC and the hedges with a subsequent deal being made – would this not Completely Destroy the GSA/POR and render the judge’s previous ruling and ‘opinion’ on them worthless? This would be just as good as or better than an appeal. This would wipe out the whole thing.
If the E.C. and Susman feel solid about the evidence and their case, why settle for less?