| NEW YORK
NEW YORK May 12 U.S. bank regulators filed
court papers this week seeking dismissal of a Texas lawsuit
that claims JPMorgan Chase & Co (JPM.N) tried to gain an unfair
advantage in its $1.9 billion purchase of Washington Mutual
Inc's WAMUQ.PK bank last year.
In documents filed on Monday in federal court in Galveston,
Texas, the Federal Deposit Insurance Corp said the WaMu
stakeholders who brought the lawsuit are trying to circumvent
the FDIC claims process, and that the suit should be dismissed
or moved to a court in Washington D.C.
WaMu collapsed last year, in the largest U.S. bank failure
in history. The bank was seized by U.S. bank regulators on
Sept. 25 and the FDIC immediately sold its deposits to
JPMorgan. The surviving holding company filed for bankruptcy
protection a day later.
However, the stakeholders' lawsuit filed in February claims
that Washington Mutual's crown jewels were sold to JPMorgan at
a fire-sale price that did not properly compensate WaMu's
investors. They also claim that JPMorgan acted improperly ahead
of the sale by leaking false and harmful information from
WaMu's financial records, in an attempt to deflate its value
and purchase WaMu's assets on the cheap, according to court
The bankrupt holding company filed a request last week,
asking for permission to investigate JPMorgan over the claims
in the Texas lawsuit.
JPMorgan also filed court papers on Monday, saying it
supported the FDIC's request, and that the stakeholders' claims
in the Texas suit "lack merit."
The FDIC, which was not originally named in the investors'
complaint, said it has sought to intervene in the case because
it could be held liable for JPMorgan's costs in the litigation
and that it needed to protect the FDIC receivership process
used to take control of failed banks.
While the stakeholders have said their lawsuit is
independent of the receivership process, the FDIC said in its
court filing this week that the suit should be dismissed
because it is "especially important here to prevent the
chilling effect that impermissible suits such as this one could
have in deterring potential buyers of failed bank assets in the
When the FDIC became the receiver for Washington Mutual
Bank it said it agreed to protect JPMorgan Chase Bank from
costs, losses, liabilities and expenses brought by WaMu's
The FDIC also said that JPMorgan Chase Bank sent a letter
in March notifying the FDIC-Receiver "of its intention to seek
indemnification" in this case.
The case is American National Insurance Co v. JP Morgan
Chase & Co, U.S. District Court, Southern District of Texas
(Galveston), No. 09-00044.
(Reporting by Emily Chasan; Editing by Richard Chang)