JPMorgan Asks Bankruptcy Judge to Toss Lehman Brothers Suit Over Collapse
JPMorgan Chase & Co. asked a federal judge to throw out a lawsuit by bankrupt Lehman Brothers Holdings Inc., accusing the bank of helping cause its collapse.
The New York-based lender, in papers filed with U.S. Bankruptcy Judge James M. Peck in Manhattan on Aug. 25, said that when the securities firm teetered on the brink of collapse in 2008, it was the only major bank that continued to extend credit to it.
“JPMorgan typically extended more than $100 billion in credit each day to LBI for the settlement and clearance of its securities transactions,” the bank’s attorneys said in the filing.
The case is scheduled to be tried in 2012 in U.S. bankruptcy court in Manhattan.
Lehman Brothers, with $639 billion in assets, filed the biggest bankruptcy in U.S. history in September 2008. In May, the New York-based firm sued the bank, alleging that JPMorgan took advantage of the stricken firm.
“On the brink of LBHI’s bankruptcy, JPMorgan leveraged its life and death power as the brokerage firm’s primary clearing bank to force LBHI into a series of one-sided agreements and to siphon billions of dollars in critically needed assets,” Lehman said in the complaint.
Securities, Real Estate
Peck in March approved the bank’s return of $9 billion in illiquid securities and difficult-to-value real estate to Lehman, and its taking back cash and collateral from the firm. The combatants reserved the right to later challenge and defend the legitimacy of their claims.
Lehman, in its May complaint, alleged JPMorgan -- which was its main short-term lender before the bankruptcy -- helped cause its collapse by demanding $8.6 billion in collateral as credit markets contracted in 2008.
JPMorgan “could have avoided the vast bulk of its exposure by declining to extend credit to LBI on any morning,” the lender’s lawyers said in their request.
The bankruptcy case is In Re: Lehman Brothers Holdings Inc., 08-13555, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
The adversarial proceeding is Lehman Brothers Holdings Inc. v. JPMorgan Chase Bank NA, 10-03266, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
To contact the reporter on this story: Andrew M. Harris in Chicago at aharris16@bloomberg.net
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