Dexia SA’s lawsuit against JPMorgan Chase & Co. over about $1.6 billion in mortgage-backed securities was revived by a federal judge who found that he had lacked the jurisdiction to dismiss it.
U.S. District Judge Jed Rakoff in Manhattan issued an order today vacating his April decision and sending the case to New York state court.
“Those who don’t believe in ghosts have never been in court, where legal claims are regularly seen rising from the grave,” Rakoff wrote in his order. “This is a case in point.”
Rakoff last month dismissed most of the suit, in which Dexia accused JPMorgan, Bear Stearns Cos. and Washington Mutual Inc. of “egregious fraud” in the sale of mortgage bonds. Dexia, based in Brussels, sued the lenders in 2012, claiming that loans backing securities purchased between 2005 and 2007 were riskier than promised.
JPMorgan purchased assets of Washington Mutual and Bear Stearns after they collapsed in 2008.
After Rakoff’s April ruling, a federal appeals court in Manhattan found that the Edge Act, a law that regulates international banking, didn’t give a federal court jurisdiction over a similar lawsuit filed by American International Group Inc. against Bank of America Corp.
In light of that decision, Rakoff concluded that he didn’t have jurisdiction over Dexia’s case and that it belonged in state court.
Justin Perras, a spokesman for New York-based JPMorgan, declined to comment on Rakoff’s ruling.
The case is Dexia SA v. Bear Stearns & Co., 12-cv-04761. U.S. District Court, Southern District of New York (Manhattan).