Judge narrows Lehman $8.6 billion lawsuit vs. JPMorgan
By Jonathan Stempel
(Reuters) - A federal judge has narrowed Lehman Brothers Holdings Inc's $8.6 billion lawsuit against JPMorgan Chase & Co (JPM.N: Quote), potentially reducing how much creditors of what was once the fourth-largest U.S. investment bank may ultimately recover.
U.S. Bankruptcy Judge James Peck in Manhattan said Lehman may not recover various sums transferred to JPMorgan, once its main "clearing" bank handling third-party dealings, in August and September 2008.
Peck cited "safe harbor" rules designed to protect healthier banks such as JPMorgan in their dealings with weaker banks.
"These are systemically significant transactions between sophisticated financial players at a time of financial distress in the markets -- in other words, the precise setting for which the safe harbors were intended," Peck wrote on Thursday in a 92-page decision.
Peck let stand other Lehman claims, saying safe harbors do not let "systemically important" banks such as JPMorgan, the largest U.S. bank, act in a "commercially unreasonable" manner. He said Lehman may pursue claims involving intentional misconduct or which are not otherwise covered by safe harbors.
Lehman filed for Chapter 11 protection on September 15, 2008, in what was a primary driver of the global financial crisis and remains by far the largest U.S. bankruptcy.
"JPMorgan grabbed assets for itself at a critical time in its banking relationship with Lehman," Peck wrote. "The issues presented are especially difficult ones that one day may help to define what constitutes acceptable conduct by major financial institutions during times of crisis."
Kimberly MacLeod, a Lehman spokeswoman, declined to comment. JPMorgan spokeswoman Jennifer Zuccarelli was not immediately available for comment. Both companies are based in New York. Continued...