By Linda Sandler – Oct 27, 2011 2:25 PM GMT+0100
Lehman Brothers Holdings Inc. said a bankruptcy judge must handle its $8.6 billion lawsuit against JPMorgan Chase & Co. (JPM) because the case involves “classic” bankruptcy claims and related common-law claims that don’t require a higher-court ruling.
Lehman sued New York-based JPMorgan last year, saying the bank extracted assets that fatally weakened the firm before its 2008 collapse. JPMorgan said it took the collateral under a federal law enacted to safeguard banks lending to faltering companies. It asked a district judge to decide the case.
The exit from bankruptcy courts became common after a Supreme Court ruling in the Anna Nicole Smith case described limits to the powers of bankruptcy judges. JPMorgan, HSBC Holdings Plc, UniCredit SpA and hundreds of individuals have asked district judges to handle suits brought by the liquidator of Bernard L. Madoff’s firm.
JPMorgan’s effort to move the Lehman case is based on a “mischaracterization” of the claims and the Supreme Court ruling, the bankrupt firm said in a filing.
The bank’s interpretation “is so overbroad as to require a radical alteration of the division of labor between bankruptcy courts and district courts,” it said yesterday in the filing in U.S. District Court in Manhattan.
Joseph Evangelisti, a spokesman for JPMorgan, the largest U.S. bank, didn’t immediately respond to an e-mail seeking comment on the filing.
JPMorgan, which lent $70 billion to Lehman’s brokerage around the time of the September 2008 bankruptcy, has sued Lehman back, alleging it defrauded its lender into making a loan.
Separately, Lehman is fighting JPMorgan in bankruptcy court over a $6 billion payment demand filed by the bank. JPMorgan wants payment in full, “while other creditors receive cents on the dollar,” Lehman said in yesterday’s filing.
JPMorgan yesterday joined a group of banks including Citigroup Inc. asking a district judge to take a $2 billion lawsuit by the former Thornburg Mortgage Inc. out of bankruptcy court.
The District Court case is Lehman Brothers Holdings Inc. (LEHMQ) v. JPMorgan Chase Bank NA, 11-cv-06760, U.S. District Court, Southern District of New York (Manhattan).