JPMorgan

Breach of Contract Claims against J.P. Morgan and EMC Dismissed as Time-Barred

On August 19, in an oral ruling from the bench, Vice Chancellor J. Travis Laster of the Delaware Chancery Court dismissed as time-barred loan repurchase claims brought by U.S. Bank as trustee of an RMBS trust against JPMorgan and EMC Mortgage.  U.S. Bank alleged that EMC misrepresented the quality of more than US$500 million worth of mortgages that were sold to the trust in 2006 and that both EMC and JPMorgan, which took over as the servicers of the trust in 2011, failed to notify the trustee of the faulty loans.  Vice Chancellor Laster, following the Delaware Chancery Court’s 2012 decision in Central Mortgage Co. v. Mortgage Stanley Capital Holdings LLC., held that Delaware’s three-year statute of limitations for breach of contract claims began to run on the day the allegedly false representations were made.  He held that the contract’s accrual provision could not extend the statute of limitations and that no other tolling doctrines applied to render plaintiff’s claims timely.  He also held that the alleged failure to notify claim was derivative of the underlying claim for breach of representation and subject to the same limitations period.  Vice Chancellor Laster did not dismiss U.S. Bank’s claims for unjust enrichment and failure to provide documents, finding them well pled and not time barred.  Hearing Transcript.

European Commission Imposes EUR 1.71 Billion Fine for Participating in Illegal Cartels

On December 4, the European Commission announced that it had fined eight international banks a total of more than 1.7 billion for their participation in illegal cartels in markets for financial derivatives covering the European Economic Area.

Using the cartel settlement procedure, the Commission reached two separate decisions; one decision involved seven separate bilateral infringements relating to interest rate derivatives denominated in Japanese yen.  The companies involved were UBS, RBS, Deutsche Bank, JPMorgan, Citigroup and RP Martin.

The other decision was made in relation to a collusion by four banks in relation to interest rate derivatives denominated in euro.  The banks were Barclays, Deutsche Bank, RBS and Société Générale.  Utilizing the Commission’s 2006 Leniency Notice, Barclays and UBS received complete immunity from fines.  Announcement.

JPMorgan Settles FHFA’s $33 Billion RMBS Suit

On October 25, the FHFA announced that JPMorgan had agreed to pay it $5.1 billion to settle a number of RMBS-related claims asserted by the FHFA, including in a lawsuit relating to Fannie Mae’s and Freddie Mac’s alleged purchase of $33 billion of RMBS.  Under the settlement agreement, JPMorgan will pay a total of $2.74 billion to Freddie Mac and $1.26 billion to Fannie Mae to resolve the claims asserted in the lawsuit that JPMorgan made misrepresentations in the offering documents for the RMBS it sold to those mortgage companies.  JPMorgan also will pay $670 million to Fannie Mae and $480 million to Freddie Mac to resolve separate claims related to single-family mortgages purchased by those entities.  The FHFA alleged that JPMorgan breached representations and warranties in the contracts concerning those loan sales.  Settlement Agreement and attachments.

FDIC’s $388M MBS Suit Brought On Behalf Of Colonial Bank Survives Motion to Dismiss

On September 27, Judge Louis L. Stanton of the Southern District of New York denied a motion by JPMorgan, Citigroup and several other banks to dismiss a lawsuit filed by the FDIC, as receiver for Colonial Bank, involving $388 million in RMBS.  Judge Stanton rejected the defendants’ arguments that the claims were barred by the statute of limitations, finding that publicly available information about troubles in the mortgage industry in 2007 did not put the plaintiff on notice of facts constituting an alleged violation of federal securities laws in connection with the specific transactions at issue.  Judge Stanton also held that the FDIC’s allegations of misstatements in the offering documents were sufficiently detailed to survive the pleading stage.  The court concluded that it was premature to rule on whether a defendant may be liable under Section 11 of the Securities Act of 1933 when it did not underwrite the particular tranche of a securitization that the plaintiff purchased.  Opinion.

Bank Hapoalim Brings $361M RMBS Lawsuit Against JPMorgan

On August 10, Bank Hapoalim BM, an Israeli bank, filed a summons with notice against JPMorgan Chase & Co. in New York state court in connection with its purchase of $361 million in residential mortgage-backed securitites.  Bank Hapoalim alleges that the purchase offerings were based on fraudulent misrepresentations and omissions regarding the characteristics of the mortgage loans underlying the securities.  Bank Hapoalim asserts that Goldman Sachs either knew the information in the offerings was wrong or was negligent in not knowing.  Bank Hapoalim asserts causes of action for common law fraud, fraudulent inducement, negligent misrepresentation, aiding and abetting fraud, declaratory judgment, and contract claims, including rescissory damages.  Summons with Notice.

California Federal Court Partially Dismisses RMBS Claims In Countrywide MDL Action

On April 16, 2012, Judge Mariana R. Pfaelzer of the Central District of California dismissed in part an RMBS action brought by Massachusetts Mutual Life Insurance Co. (“MassMutual”) against Countrywide, JPMorgan, Deutsche Bank, UBS, and various individual defendants. This case, which asserts claims under the Massachusetts Uniform Securities Act (“MUSA”), was transferred to the Countrywide MDL for pre-trial proceedings. In addressing defendants’ initial motions to dismiss on the issues of timeliness, standing and jurisdiction, Judge Pfaelzer found that the court lacked personal jurisdiction over the individual defendants who moved on this ground and dismissed all claims against them with prejudice. Judge Pfaelzer also found that only the Underwriter Defendants could be held liable as a seller under the MUSA, and dismissed the MUSA claims against the other defendants with prejudice. Judge Pfaelzer declined to dismiss the remaining claims based on the statute of limitations. Decision.

Mortgage Servicing and Foreclosure Consent Judgments Approved

On April 4, U.S. District Court Judge Collyer approved the previously announced consent judgments resolving claims by by the DOJ and 49 state AGs against Ally, Bank of America, Citi, JPMorgan and Wells Fargo relating to alleged mortgage servicing and foreclosure practices.  Ally Financial Consent Judgment.  Bank of America Consent Judgment.  Citigroup Consent Judgment.  JP Morgan Consent Judgment.  Wells Fargo Consent Judgment.

FSA fines Ian Hannam Chairman of Capital Markets at JP Morgan Cazenove for Market Abuse

On 3 April 2012 the FSA published a Decision Notice stating that the FSA had decided to fine Ian Hannam £450,000 for two instances of market abuse (improper disclosure). In the FSA’s opinion, Hannam disclosed inside information in two emails sent in September and October 2008 to a prospective client considering buying a stake in Heritage Oil Plc (Heritage), an existing J P Morgan client for which Hannam was the lead adviser. The September email contained information about a potential offer for Heritage and the October email contained information about a new oil find by Heritage.

The Decision Notice states that the FSA accepts that Hannam did not set out to commit market abuse but considers that Hannam’s failings were serious in view of his experience and senior position within J P Morgan. Mr. Hannam has resigned his position as Chairman of J P Morgan in order to appeal the matter to the Upper Tribunal.

Allstate RMBS Lawsuit to Stay in Federal Court

On March 27, 2012, Judge Deborah A. Batts of the Southern District of New York denied Allstate Insurance Co.’s motion to remand its lawsuit against JPMorgan Chase Bank NA to state court. The lawsuit arises out of alleged misrepresentations and omissions by JPMorgan regarding the riskiness and credit quality of over $700 million in RMBS sold to Allstate. Judge Batts found federal subject matter jurisdiction based on the FDIC’s presence as a third-party defendant.  Order.

JPMorgan Sues FDIC in Third-Party Suit

On July 25, 2011, JPMorgan Bank filed a third-party complaint against the FDIC in the Southern District of Ohio, claiming the FDIC indemnified JPMorgan when it agreed to buy assets from Washington Mutual, which went bankrupt in 2008. JPMorgan alleges that it only accepted certain narrow WaMu liabilities in its agreement with the FDIC, specifically excluding liabilities relating to WaMu’s pre-closing activities. Western and Southern Life Insurance Company has since sued JPMorgan for fraudulent misrepresentation in connection with the sale of $650 million in mortgage-backed securities. JPMorgan’s suit against the FDIC seeks all costs, fees and judgments incurred by it as a result of WaMu’s actions. Complaint.