Dismissal of Madoff Suit Against JPMorgan Affirmed by U.S. Appeals Court

A lawsuit accusing JPMorgan Chase & Co. (JPM) of conspiring with Bernard Madoff to injure an investment company was rightfully dismissed by a U.S. District Court, an appeals court said.

MLSMK Investment Co. accused New York-based JPMorgan of violating U.S. racketeering law in conspiring with the Ponzi scheme operator to harm investors. The plaintiff is barred from making the claim by securities law, the higher court decided. The ruling was filed by the U.S. Court of Appeals for the Second Circuit today.

MLSMK lost its $12.8 million investment with Madoff’s firm when the con man was arrested in December 2008, according to the filing. It sued JPMorgan on grounds that the company was Madoff’s banker, using state and federal law to allege that JPMorgan helped Madoff to “fleece” his victims while benefiting from fees paid by Madoff, according to the filing.

U.S. District Judge Barbara Jones in Manhattan dismissed the case, saying the suit didn’t adequately show any of the facts the plaintiff was alleging. The appeals court last month affirmed the judge’s dismissal of the state law claims, including aiding and abetting the fraud, commercial bad faith, and negligence. The latest ruling affirms dismissal of the outstanding claim brought under federal racketeering law, according to the filing.

Separately, JPMorgan is fighting a $19 billion suit by the trustee liquidating Madoff’s firm, who alleges some similar violations by the second-biggest U.S. bank.

Madoff, 73, is serving a 150-year sentence in a North Carolina federal prison.

The case is MLSMK Investment Co. v. JPMorgan, 10-cv-3040, U.S. District Court, Southern District of New York (Manhattan).

To contact the reporter on this story: {Linda Sandler} in New York at lsandler@bloomberg.net.

To contact the editor responsible for this story: John Pickering at jpickering@bloomberg.net.