New York’s fraud lawsuit against JPMorgan Chase & Co. (JPM) over mortgage securities sold to investors must be dismissed because the time for bringing the claims has expired, the bank said.
New York Attorney General Eric Schneiderman’s complaint is barred by a three-year statute of limitations, JPMorgan said in papers dated Jan. 4 and filed in New York State Supreme Court in Manhattan.
Schneiderman sued New York-based JPMorgan in October, alleging that Bear Stearns, the investment bank it acquired in 2008, deceived investors about mortgage loans backing securities, leading to losses.
Schneiderman, who was named co-chairman of a state-federal group formed to investigate misconduct in the bundling of mortgage loans into securities, has said the JPMorgan case would serve as a template for lawsuits against other issuers. The state has also sued Credit Suisse Group AG (CS) on similar grounds.
New York’s claims stem from Bear Stearns’ role as sponsor and underwriter of subprime and Alt-A mortgage-backed securities before JPMorgan acquired the securities firm. Losses on $87 billion of securities from 2006 and 2007 total about $22.5 billion, according to the state’s complaint.
“We are confident that our office will prevail, and that those responsible for the misconduct that led to the crash of the housing market and the collapse of the American economy will be held accountable,” James Freedland, a spokesman for Schneiderman, said in a statement.
JPMorgan is among 10 mortgage servicers that reached an $8.5 billion settlement that will end reviews of foreclosure- abuse claims, regulators said today.
The lender argued in its court filing that New York can’t take advantage of a six-year statute of limitations and that a three-year period applies. JPMorgan and the state reached a so-called tolling agreement effective April 5, 2012, that stopped the statute of limitations from expiring, according to the filing. Because the conduct at issue occurred before April 2009, the claims must be dismissed, JPMorgan argued.
The attorney general’s office contends a six-year period applies under the state’s securities fraud statute.
JPMorgan also said in its court filing that the case should be dismissed because the state hasn’t outlined its allegations with the “requisite particularity.”
“Even if the attorney general’s claims were not time- barred, they would fail for lack of specificity and must therefore be dismissed,” the bank said.
The case is People of the State of New York v. J.P. Morgan Securities, 451556-2012, New York State Supreme Court (Manhattan).