Lehman Nov 2

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JPMorgan

1. JPMorgan Fights To Keep $8.6B Lehman Suit In Federal Court

   Oct 30, 2015 | Law360

   By Jody Godoy
   
   
   JPMorgan asked a New York federal judge on Friday to keep presiding over Lehman Brothers' claims that JPMorgan made wrongful transactions just before Lehman's bankruptcy, urging the judge not to send the $8.6 billion suit back to bankruptcy court as Lehman has requested.

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Client Attorney Privileged/Attorney Work Product/At Request of Counsel

JPMorgan

1. JPMorgan Fights To Keep $8.6B Lehman Suit In Federal Court

   Oct 30, 2015 | Law360

   By Jody Godoy

   JPMorgan asked a New York federal judge on Friday to keep presiding over Lehman Brothers' claims that JPMorgan made wrongful transactions just before Lehman's bankruptcy, urging the judge not to send the $8.6 billion suit back to bankruptcy court as Lehman has requested.
   
   In October, U.S. District Judge Richard J. Sullivan dismissed most of a suit by Lehman Brothers Holdings Inc. accusing JPMorgan Chase Bank NA of contributing to Lehman's collapse, but preserved Lehman's allegation that JPMorgan made collateral transfers while Lehman was insolvent in violation of the Bankruptcy Code. JPMorgan told the judge the claims don't meet the criteria for transfer back to the bankruptcy court set out in a Supreme Court ruling.
   
   “As the Supreme Court held in Stern v. Marshall, a litigant in a federal proceeding is presumed to have a right to adjudication by an Article III judge, and this presumption is overcome only in 'limited circumstances,'” JPMorgan said.
   
   Judge Sullivan took control of the suit essentially blaming JPMorgan for Lehman’s downfall from the bankruptcy court in August 2014.
   
   Lehman claimed in the suit that in the final days before it filed for bankruptcy, JPMorgan used its “life or death” leverage as Lehman’s primary clearing bank to extract desperately needed liquidity — including more than $5 billion in cash on the day before Lehman's collapse on Sept. 15, 2008 — as collateral to secure credit lines held by brokerage unit Lehman Brothers Inc.
   
   On Oct. 1, Judge Sullivan axed 43 out of 49 of the claims, holding that contracts between the parties allowed the bank to stop extending credit to Lehman. JPMorgan’s demands conditioning extensions of credit on obtaining additional collateral weren’t wrongful, according to the judge.
   
   However, Judge Sullivan preserved some claims in the suit, including allegations that because Lehman was insolvent in the days leading up to its bankruptcy, the transfers were avoidable under the Bankruptcy Code. The judge said that he hadn’t found enough evidence showing that if the transactions were setoffs, they were subject to a safe harbor provision in the Bankruptcy Code.
   
   Lehman then requested a final judgment on the dismissed claims, and asked the judge to send the remaining claims back to bankruptcy court, arguing that the surviving claims are “core” claims which the bankruptcy court has constitutional authority to preside over.
   
   On Friday, JPMorgan argued that, in lieu of both parties' consent, the high court's ruling in Stern only allows a bankruptcy court to take over jurisdiction from a district court when “the claim is a matter of 'public right'” or would “necessarily be resolved in ruling on a creditor’s proof of claim.”
   
   Neither of those is true in this case, JPMorgan argued.
   
   Judges in the Southern District of New York have found that avoidance claims seeking to recover transfers under the Bankruptcy Code are private, not public, rights of action on which a bankruptcy court doesn't have authority to issue final judgment, JPMorgan said, citing case law...

   For full story: http://www.law360.com/articles/721322/jpmorgan-fights-to-keep-8-6b-lehman-suit-in-federal-court
   

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