JPMorgan Sued by Lehman Over $2.2 Billion Derivatives Claims

JPMorgan Chase & Co. (JPM), fighting over $6.3 billion it says Lehman Brothers Holdings Inc. owes it, was sued by the defunct investment bank as it seeks to reject $2.2 billion in derivatives obligations.

A U.S. bankruptcy judge should rule on the “overstated” demands by the bank, which never supplied supporting documents for its claims, Lehman said in a filing in federal court in Manhattan. Lehman is seeking unspecified damages from the biggest U.S. bank, as well as money due from JPMorgan under the derivatives contracts.

“The JPMorgan entities’ derivatives claims should be reduced or disallowed,” Lehman said in the Sept. 14 filing.

The derivatives claims also feature in Lehman’s $8.6 billion suit against JPMorgan, which was the main short-term lender to Lehman around the time of its 2008 collapse during the credit crisis. Now out of bankruptcy, Lehman is gathering money for its second payment to creditors on Oct. 1. It has said it expects to pay creditors 18 cents on the dollar by 2016 or so.

Last month, Lehman lost a bid to persuade a judge to revise his ruling on the $8.6 billion suit against JPMorgan, which alleges that the New York-based lender helped cause its collapse by taking collateral for its loans.

Payment Demands

U.S. Bankruptcy Judge James Peck dismissed some of the investment bank’s claims that might have brought creditors hundreds of millions of dollars, according to Lehman. Peck told Lehman it has other ways of obtaining money from JPMorgan, such as fighting the bank’s payment demands.

Jennifer Zuccarelli, a spokeswoman for New York-based JPMorgan, didn’t immediately respond to a phone call and e-mail seeking comment on the suit.

The bank, which loaned Lehman’s brokerage $70 billion around the time of the bankruptcy, has denied causing the firm’s collapse. After giving Lehman almost $700 million to settle part of the $8.6 billion suit, it continues to fight most of Lehman’s allegations.

Peck ruled in April that Lehman cannot claim money from JPMorgan for securities transactions governed by so-called safe harbor law, devised to protect banks dealing with weak companies. Lehman is entitled to pursue the remaining “complex, fact driven causes of action,” he said.

Lehman filed the biggest bankruptcy in U.S. history in September 2008, listing $613 billion in debt.

The case is Lehman Brothers Holdings Inc. v. JPMorgan Chase Bank NA, 12-01874, U.S. Bankruptcy Court, Southern District of New York (Manhattan). The earlier case 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: Linda Sandler in New York at lsandler@bloomberg.net.

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

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