Lehman on losing end of $8.6 billion JPMorgan ‘cash grab’ suit ruling

By Caroline Salls

Pittsburgh, Oct. 2 – A Lehman Brothers Holdings, Inc. request for summary judgment on several counts of a lawsuit seeking recovery of $8.6 billion from JPMorgan Chase Bank, NA was denied by the U.S. District Court for the Southern District of New York.

The court said Lehman and its official committee of unsecured creditors alleged that JPMorgan took unfair advantage of Lehman at a time when Lehman relied on JPMorgan as its main source of credit to sustain critical trading operations.

Specifically, Lehman and the committee claim that actions taken by JPMorgan to mitigate its risk exposure to Lehman during the early days of the financial crisis included “take it or leave it” demands and a coordinated “cash grab” designed to ensure that JPMorgan would be repaid ahead of other creditors in the event of Lehman’s insolvency, according to the ruling.

“As it turned out, JPMC’s concerns regarding Lehman’s financial stability came to fruition, and the court must now decide, long after the fact, whether JPMC’s actions were authorized by the parties’ agreements and governing law,” the ruling said.

In the ruling, the district court said JPMorgan “did not fraudulently induce LBHI to extend collateral,” JPMorgan is not liable for conversion, unjust enrichment or constructive trust and that JPMorgan had a continuing lien over $6.9 billion of Lehman collateral.

The district court ordered the parties to submit a joint letter by Oct. 16 outlining the next steps to be taken in connection with the remaining six counts of the lawsuit, including availability for trial and prospects for settlement.

New York-based Lehman Brothers Holdings Inc. was the fourth-largest investment bank in the United States. The company emerged from bankruptcy on March 6, 2012.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.