JPMorgan Reaches $1.42 Billion Deal in Lehman Clearing Case

  • Settlement follows ruling rejecting claims against JPMorgan
  • Lehman partly blamed bank's collateral demands for bankruptcy

A JPMorgan Chase & Co. unit has reached an agreement to pay $1.42 billion to resolve claims it took advantage of its status as Lehman Brothers Holdings Inc.’s primary lender to unfairly extract cash and position itself ahead of other creditors in Lehman’s bankruptcy.

Lehman Brothers said the settlement resolves two of the three major pieces of litigation with JPMorgan left over from its 2008 bankruptcy. The agreement settles Lehman’s $6.3 billion in clearing-related claims and $2.3 billion in derivatives claims, according to a filing Monday in Manhattan federal court. Lehman said in the filing that the settlement will allow it to make additional payments of $1.496 billion to creditors.

In October, a judge threw out most of Lehman’s claims to $8.6 billion taken as collateral by JPMorgan. Lehman has contended that the bank’s demands helped force it into its $613 billion bankruptcy, the largest in U.S. history.

Lawyers for Lehman and a creditors’ committee on Monday asked a federal judge in New York to approve the settlement.

Brian Marchiony, a JPMorgan spokesman, declined to comment on the agreement.

The case is Lehman Brothers Holdings Inc. v. JPMorgan Chase Bank NA (In re Lehman Brothers Holdings Inc.), 11-06760, U.S. District Court, Southern District of New York (Manhattan).

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