Judge revives Dexia's mortgage lawsuit vs. JPMorgan
By Jonathan Stempel
(Reuters) - A federal judge has revived a closely watched lawsuit accusing JPMorgan Chase & Co (JPM.N: Quote) of misleading Belgian-French bank Dexia SA (DEXI.BR: Quote) into buying more than $1.6 billion of troubled mortgage debt.
Citing a recent federal appeals court decision involving American International Group Inc (AIG.N: Quote) and Bank of America Corp (BAC.N: Quote), U.S. District Judge Jed Rakoff in Manhattan said he had lacked jurisdiction when he decided on April 2 to throw out much of Dexia's lawsuit against JPMorgan.
That ruling had dismissed claims for all but $5.7 million, or less than 1 percent, of the roughly $774 million of damages that Dexia had sought from the largest U.S. bank.
In finding on Friday that he had no jurisdiction under an obscure 1919 federal law known as the Edge Act, Rakoff reinstated the dismissed claims and sent the case back to the New York state court where it began in January 2012.
"Those who don't believe in ghosts have never been in court, where legal claims are regularly seen rising from the grave," Rakoff wrote on Friday. "This is a case in point."
JPMorgan spokesman Justin Perras declined to comment. Timothy DeLange, a partner at Bernstein Litowitz Berger & Grossmann representing Dexia, also declined.
The lawsuit is one of many accusing banks of trying to boost profit by packaging low-quality mortgages into seemingly safe securities, while fraudulently hiding the risks or failing to ensure the loans were underwritten properly.
Dexia alleged it was misled about the quality of 65 residential mortgage-backed securities certificates it bought from 51 offerings between 2005 and 2007 by JPMorgan, Bear Stearns Cos and Washington Mutual Inc. Continued...