April 20 (Bloomberg) -- JPMorgan Chase & Co., fighting Lehman Brothers Holdings Inc. over $8.6 billion the defunct firm wants back, won dismissal of some of Lehman’s claims, leaving it to fight the rest.
U.S. Bankruptcy Judge James Peck said Lehman cannot claim money from JPMorgan for securities transactions governed by so- called safe harbor law, devised to protect banks dealing with weak companies. Lehman is entitled to pursue the remaining “complex and fact driven causes of action,” he said in a decision filed yesterday in Manhattan.
Lehman’s suit alleges the New York-based lender helped cause its 2008 collapse by demanding $8.6 billion in collateral. JPMorgan, which loaned $70 billion to Lehman’s brokerage around the time of the bankruptcy, sued Lehman back after the suit, alleging the firm defrauded its lender into making the loan.
JPMorgan is pleased with the ruling and will continue to fight the remaining claims, which it believes “are likewise without merit,” spokeswoman Jennifer Zuccarelli said in an e- mail today.
“JPMorgan continued to support Lehman and extend credit throughout the firm’s financial distress, which was the basis for the collateral requests at issue,” she said.
Kimberly Macleod, a Lehman spokeswoman, said she couldn’t immediately comment on Peck’s ruling.
‘Hardest to Prove’
The remaining claims -- including an allegation that Jamie Dimon, JPMorgan’s chief executive officer, promised to return $5 billion in collateral -- “are probably the hardest things to prove,” said Chip Bowles, a bankruptcy lawyer with Bingham Greenebaum Doll LLP in Louisville, Kentucky. “They’re not just issues of contract but verbal agreements.”
JPMorgan, the largest U.S. bank, has tried to move the case to a district judge, saying it raises legal issues beyond the jurisdiction of a bankruptcy judge. Peck can’t rule on Lehman’s allegation that JPMorgan caused monetary damage to failing Lehman in 2008, the bank has said. Lehman says the suit confines itself to bankruptcy matters.
U.S. District Judge Richard Sullivan in New York is “working on” a decision on whether Lehman’s suit belongs in district court, according to court papers. Peck should rule first on JPMorgan’s move to dismiss the case, Sullivan told both sides, according to a transcript of a Dec. 30 court session.
Lehman filed the biggest bankruptcy in U.S. history in September 2008, listing $613 billion in debt.
The lawsuit is Lehman Brothers Holdings Inc. v. JPMorgan Chase Bank NA, 10-03266, U.S. Bankruptcy Court, Southern District of New York (Manhattan). The district case is Lehman Brothers Holdings Inc. v. JPMorgan Chase Bank, 11-cv-6760, U.S. District Court, Southern District of New York (Manhattan).