* JPMorgan protected from some claims by safe harbor
* Lehman can pursue claims involving intentional misconduct
By Jonathan Stempel
April 19 A federal judge has narrowed Lehman
Brothers Holdings Inc's $8.6 billion lawsuit against JPMorgan
Chase & Co, potentially reducing how much creditors of
what was once the fourth-largest U.S. investment bank may
U.S. Bankruptcy Judge James Peck in Manhattan said Lehman
may not recover various sums transferred to JPMorgan, once its
main "clearing" bank handling third-party dealings, in August
and September 2008.
Peck cited "safe harbor" rules designed to protect healthier
banks such as JPMorgan in their dealings with weaker banks.
"These are systemically significant transactions between
sophisticated financial players at a time of financial distress
in the markets -- in other words, the precise setting for which
the safe harbors were intended," Peck wrote on Thursday in a
Peck let stand other Lehman claims, saying safe harbors do
not let "systemically important" banks such as JPMorgan, the
largest U.S. bank, act in a "commercially unreasonable" manner.
He said Lehman may pursue claims involving intentional
misconduct or which are not otherwise covered by safe harbors.
Lehman filed for Chapter 11 protection on Sept. 15, 2008, in
what was a primary driver of the global financial crisis and
remains by far the largest U.S. bankruptcy.
"JPMorgan grabbed assets for itself at a critical time in
its banking relationship with Lehman," Peck wrote. "The issues
presented are especially difficult ones that one day may help to
define what constitutes acceptable conduct by major financial
institutions during times of crisis."
Kimberly MacLeod, a Lehman spokeswoman, declined to comment.
JPMorgan spokeswoman Jennifer Zuccarelli was not immediately
available for comment. Both companies are based in New York.
Lehman accused JPMorgan of taking advantage of inside
details it had learned as a clearing bank to extract desperately
needed assets in the last few days prior to, and thus hastening,
JPMorgan countersued, saying it feared it might never be
repaid after lending Lehman's brokerage more than $70 billion
around the time of the bankruptcy, and getting stuck with
collateral that Lehman's own employees called "toxic waste."
In September 2011, JPMorgan sought to move the Lehman case
to federal district court, saying it involved issues that Peck
lacks jurisdiction to handle. U.S. District Judge Richard
Sullivan in Manhattan has yet to rule on JPMorgan's request.
Lehman emerged from Chapter 11 last month. On April 11, it
said it planned to make an initial $22.5 billion distribution to
creditors this week.
The case is Lehman Brothers Holdings Inc et al v. JPMorgan
Chase Bank NA, U.S. Bankruptcy Court, Southern District of New
York, No. 10-ap-03266.