Bloomberg the Company & Products

Bloomberg Anywhere Login

Bloomberg

Connecting decision makers to a dynamic network of information, people and ideas, Bloomberg quickly and accurately delivers business and financial information, news and insight around the world.

Company

Financial Products

Enterprise Products

Media

Customer Support

  • Americas

    +1 212 318 2000

  • Europe, Middle East, & Africa

    +44 20 7330 7500

  • Asia Pacific

    +65 6212 1000

Communications

Industry Products

Media Services

Follow Us

JPMorgan, Citigroup Lose Bid to Move $2 Billion TMST Suit

Don't Miss Out —
Follow us on:

July 24 (Bloomberg) -- Banks including JPMorgan Chase & Co. and Citigroup Inc., sued for $2 billion by Thornburg Mortgage Inc. for allegedly helping it fail, lost a bid to move the case from bankruptcy court to district court as a Maryland judge said almost all the issues could be decided in bankruptcy court.

The trustee for what is now TMST Inc. accused the banks last year of extracting more than $700 million of margin and interest payments from the former Thornburg by making “unjustified” margin calls. The banks, including Credit Suisse Group AG, Royal Bank of Scotland Plc and UBS AG, or their affiliates, said three of the 31 counts involved allegations of breach of contract and fraudulent conveyance, which a bankruptcy judge can’t rule on.

U.S. District Judge Benson Everett Legg told them yesterday in a written order that the bankruptcy judge can still uncover the facts and send his findings to a district judge, even if the banks are right in arguing that “that the bankruptcy court lacks final adjudicatory authority.”

JPMorgan was named in the TMST suit because it bought assets from Bear Stearns Cos., a lender to Thornburg. Thornburg was organized as a real-estate investment trust and mainly invested in residential mortgage-backed securities

The bankruptcy case is Thornburg Mortgage Inc., 09-17787, U.S. Bankruptcy Court, District of Maryland (Baltimore). The lawsuit in bankruptcy court is Joel Sher v. JP Morgan, 11-ap-00340, and the district court case is, 12-cv-00157.

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.

Please upgrade your Browser

Your browser is out-of-date. Please download one of these excellent browsers:

Chrome, Firefox, Safari, Opera or Internet Explorer.