JPMorgan Chase & Co. defeated claims that it put its own interests first and mismanaged trust accounts established for an Indianapolis church endowed by the descendants of drug company founder Eli Lilly.
Christ Church Cathedral sued the bank last year, saying it selected unsuitable and poorly performing investments, causing the church trusts to lose $13 million in value from July 2004 to December 2013.
U.S. District Judge Larry McKinney in Indianapolis on Thursday threw out the case against JPMorgan and gave the Episcopal church a month to refile two of those claims. A breach of trust claim lodged against its JPMorgan Chase Bank NA unit, for which dismissal wasn’t sought, remains.
The judge faulted church lawyers for lumping together disparate JPMorgan units in its court papers and said their allegations lacked specificity.
“We will file an amended complaint which will establish that JPMorgan was more interested in its own financial interests to the detriment of Christ Church,” Linda Pence, a lawyer for the church, said in an e-mail.
The church was founded in 1837 and is listed on the National Register of Historic Places, according to its website.
The trusts were created by the will of Eli Lilly Jr., who was baptized there in 1885 and later sang in its youth choir, according to the complaint.
He eventually became president of Eli Lilly & Co., the pharmaceuticals company founded by his grandfather, and died in 1977. JPMorgan Chase became trustee upon its acquisition of Bank One in 2004.
JPMorgan put 68 percent to 85 percent of the church’s assets into its own products, including private equity funds, structured notes and hedge funds, according to the complaint.
The lender denied wrongdoing, saying in an October court filing that Christ Church Cathedral “painted a grossly inaccurate picture” of how its trusts were managed.
“Contrary to the church’s allegations of fraud and mismanagement, the bank achieved positive returns for the trusts through one of the worst financial crises in U.S. history,” the bank said in court papers.
In February, Christ Church Cathedral dropped a federal securities-fraud claim and a claim for breach of fiduciary duty, after the New York-based bank asked the court to strike the latter as redundant.
Pence said the church will eventually appeal McKinney’s rejection of a claim JPMorgan violated Indiana securities laws. The judge barred the church from including that claim in a revised complaint.
“The judge is following precedent by higher courts that we believe was wrong in the first place,” Pence said. “The high courts have never addressed this type of situation when a bank is a trustee buying and selling securities for a trust and it needs to be reviewed in that light.”
The case is Rector, Wardens and Vestrymen of Christ Church Cathedral of Indianapolis v. JPMorgan Chase and Co., 14-cv-01331, U.S. District Court, Southern District of Indiana (Indianapolis).
(An earlier version of this story was corrected to include a remaining claim against JPMorgan Chase Bank NA.)