JPMorgan Chase & Co. was ordered to identify the person with the most knowledge of possible regulatory probes of its J.P. Morgan Investment Management and Chase units related to the labeling of residential real estate-backed securities as part of a lawsuit by billionaire Len Blavatnik, according to a court filing.
Blavatnik, 55, sued New York-based JPMorgan, the biggest U.S. bank by assets, in 2009, claiming it put twice as much money into risky mortgages as his investment guidelines allowed while Chief Executive Officer Jamie Dimon was unloading such securities from the bank’s books. Blavatnik says the bank lost $98 million of his funds.
New York state Supreme Court Justice Melvin L. Schweitzer yesterday ordered JPMorgan to identify the person or provide a sworn affidavit that there is no such investigation after a “thorough and appropriate inquiry” within 30 days.
Blavatnik’s lawyers had served JPMorgan with a notice to name witnesses on a variety of topics, including one related to U.S. Securities and Exchange Commission and regulatory probes of the units, under an agreement to identify witnesses for the purpose of taking depositions in the case, according to Schweitzer’s order.
“There have been a number of discovery disputes in this case and we’re gratified that the court sees this our way,” David Elsberg, a lawyer for Blavatnik at Quinn Emanuel Urquhart & Sullivan in New York, said in a phone interview.
The case is scheduled to go to trial in December, according to court records.
Jennifer Zuccarelli, a spokeswoman for JPMorgan, declined to comment on the ruling in a telephone interview.
JPMorgan objected to the request and refused to identify the person, saying Blavatnik’s lawyers hadn’t shown that any such investigation exists or is likely to exist and that it would be “overly burdensome” to determine, and that any such probe would be “irrelevant,” according to Schweitzer’s ruling.
“The court finds none of these arguments to be persuasive,” Schweitzer wrote. “It is not up to” the plaintiff “to first show the likelihood of an SEC investigation before it can ask” JPMorgan “to identify any person most knowledgeable about it,” according to the judge.
JPMorgan had also said that any such probe would be irrelevant because it has shown that the way it classified the investments followed industry practice, an argument that Schweitzer also rejected.
“‘Industry practice’ in worldwide banking is not always necessarily synonymous with acceptable or sometimes even lawful banking practice,” Schweitzer said. So even if J.P. Morgan Investment Management’s “practice of classifying securities collateralized by subprime mortgages as asset-backed securities complied with industry practice, any SEC investigation relating to that practice would be relevant,” he said.
The case is CMMF LLC v. J.P. Morgan Investment Management Inc., 601924-09, New York State Supreme Court (Manhattan).