The U.S. District Judge Jed Rakoff has revoked his earlier
order to dismiss a major portion of the lawsuit filed by Brussels
based Dexia N.V./S.A against
JPMorgan Chase & Co.
). The lawsuit accused JPMorgan of deliberately selling risky
mortgage-backed securities (MBS) worth $1.6 billion to Dexia
during the housing boom prior to the 2008 financial meltdown.
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In justifying the revival of the lawsuit, Rakoff stated that he
lacked any jurisdiction under the Edge Act to dismiss the case.
Further, citing the ruling of 2nd U.S. Circuit Court of Appeals
in New York for
American International Group, Inc.
) lawsuit against
Bank of America Corporation
), Rakoff decided to reverse his decision for the above-mentioned
Now, the trial will resurface in the New York state court, where
it began in Jan 2012, when Dexia sued JPMorgan along with its
affiliates - The Bear Stearns Companies, Inc and Washington
Mutual, Inc. According to the subsidiary of Dexia - FSA Asset
Management LLC - the accused clearly knew of the risks associated
with the mortgage securities. However, JPMorgan allegedly sold
massive quantities of these securities to Dexia to reduce its own
The Dexia lawsuit attracted media attention after a series of
emails were discovered suggesting JPMorgan's sale of massive
quantities of these securities, while being aware of the
In Apr 2013, Rakoff had allowed Dexia to proceed with only 5
claims, while dismissing nearly 60 claims. This significantly
slashed the potential legal settlement to $5.7 million from $774
Apart from JPMorgan, other banks including BofA and
) continue to face lawsuits concerning the sale of MBS prior to
the economic crisis. In addition, JPMorgan faces a number of
other lawsuits alleging legal malfeasance.
Over the last couple of years, JPMorgan has been doling out
millions to settle litigations. However, the company's strong
fundamentals continue to act as a catalyst.
JPMorgan currently carries a Zacks Rank #2 (Buy).