JPMorgan Seeks Liability Shield in WaMu Bondholder SuitTom Schoenberg
JPMorgan Chase & Co. asked a federal judge to order the Federal Deposit Insurance Corp. to cover any costs or liabilities in a bondholder case stemming from the bank’s takeover of Washington Mutual Bank.
JPMorgan, in a filing today in Washington, said that under the terms of a 2008 agreement with the FDIC it shouldn’t be on the hook for any damages, attorneys’ fees or court costs in a lawsuit filed by Washington Mutual bondholders accusing the bank of being involved in a scheme to deprive them of their investments.
When it picked up Washington Mutual banking operations in September 2008, JPMorgan “assumed only certain defined liabilities,” which didn’t include WaMu’s bond obligations, according to the filing. WaMu’s debt obligations -- including the bonds at issue in the case -- were liabilities that remained with the FDIC, the bank said.
“As a result of this action, the JPMC defendants have suffered significant harm,” attorney Brent McIntosh of Sullivan & Cromwell LLP wrote in the filing, referring to the suit. New York-based JPMorgan has “been forced to litigate this action for close to four years and incurred substantial costs and expenses,” he said.
A federal judge dismissed the suit in 2010 after finding that the bondholders hadn’t sought recovery through the FDIC’s administrative claims process.
The case was revived on appeal in 2011 by a three-judge panel, which ruled that the court had jurisdiction because the bondholders’ allegations of wrongdoing were made against JPMorgan.
“If JPMorgan thinks the FDIC is responsible for the damages my client suffered, that is between them,” Andrew J. Mytelka, a lawyer for the bondholders, said in an e-mail.
David Barr, an FDIC spokesman, said the agency doesn’t comment on active litigation.
The case is American National Insurance Co. v. Federal Deposit Insurance Corp., 09-cv-01743, U.S. District Court, District of Columbia (Washington).