JP Morgan Chase (NYSE: JPM), the New York based banking giant, has won a dismissal of a lawsuit brought against the firm stemming from the financial crisis. The nation’s largest bank by assets had been embroiled in a lawsuit with now defunct commodities fund Amaranth Advisors LLC. who alleged the bank’s actions prevented them from securing the bailout investment they were pursuing, but that has now come to an end.
Amaranth collapsed in 2006 after losing $6.6 billion on natural gas trades. Following the collapse, the fund sued JPMorgan in state court in Manhattan in 2007. The commodities fund lost billions on failed trades and taking the wrong sides of positions, but had a chance to redeem itself through a potential bailout it was seeking to structure with the Citadel Investment Group. The bailout hopes eventually fell through, and Amaranth pinned the collapse squarely on JPMorgan Chase. The fund alleged that bank executives helped cause its demise by sabotaging a bailout by Citadel Investment Group LLC. Justice O. Peter Sherwood of New York’s trial-level Supreme court threw out the suit in August 2011, saying Amaranth officials can’t prove the executives’ statements were the reason Citadel officials decided to cancel the bailout.
The original dismissal was quickly appealed, and now the appeals panel in Manhattan upheld the dismissal. Amaranth’s case relied on a statement indicating that JPMorgan had concerns about the impact of any potential bridge loan to the fund, instead of the defamatory statement alleged in its complaint. The statement Amaranth now relies on “is not defamatory, as it simply expresses an opinion based on information available to all potential parties to the potential fund transaction,” the appeals court said in its ruling. “Furthermore, the statement is substantially true.” The appeals court said it found “uncontroverted evidence” that JPMorgan “did consider, if only briefly, making a bridge loan to the fund and concluded that it was ‘less than creditworthy’ and a ‘potential preference risk.’”
JPMorgan and its peers have been embroiled in thousands of lawsuits, since the financial crisis of 2008. Regulators, investors, and counterparties have expressed collective outrage towards the nations largest banks for what they allege are their actions that led to the crisis. Winning dismissals and settling others are a key element to fostering a sustainable rebound, but the firms remain plagued by the litigation fees and public perception of misconduct. Dimon’s firm seems to be righting the ship, but has a lengthy road ahead to overcome the open issues.
