JPMorgan Escapes Shareholder Subprime Mortgage Suit

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By Evan Weinberger

JPMorgan Chase & Co. and its board of directors appear to have escaped litigation over its pre-financial crisis subprime mortgage activities after a federal judge in New York on May 21 dismissed long-running shareholder derivative litigation.

U.S. District Judge John F. Keenan rejected claims brought by investors alleging that the New York-based financial giant and its board of directors, including Chairman and CEO Jamie Dimon, knowingly made false statements about the quality of JPMorgan’s subprime mortgage lending and securitization practices in securities filings.

JPMorgan ultimately agreed to a pair of November 2017 settlements with institutional investors and the Justice Department and other regulators totaling $17.5 billion.

The shareholders allege in litigation first filed in the Eastern District of California on Nov. 20, 2013, that JPMorgan and its directors did not disclose the practices that led to those settlements. That litigation, which claimed three separate violations of California state laws, as well as Section 14(a) of the Securities Exchange Act, was subsequently removed to federal court in Manhattan.

Similar Case Sealed Shareholders’ Fate

Keenan found that the claims brought against JPMorgan and its board of directors were similar enough to those in Steinberg v. Dimon, which was dismissed in 2014, that they could not survive.

Because of that, Keenan dismissed the case with prejudice and did not give the shareholder plaintiffs the option to file an amended complaint.

JPMorgan spokesman Andrew Gray declined to comment. Counsel for the plaintiffs did not respond to a request for comment.

The shareholder plaintiffs are represented by Cotchett Pitre & McCarthy LLP; the Law Offices of George Donaldson; Hagens Berman Sobol Shapiro LLP; Bottini & Bottini Inc.; Dreyer Babich Buccola Wood Campora LLP; Kabateck Brown Kellner LLP; and Haralson Miller Pitt Feldman & McAnally LLP.

JPMorgan’s independent directors are represented by Shearman & Sterling LLP. JPMorgan Chase and Dimon are represented by Debevoise & Plimpton LLP.

The case is In Re: JPMorgan Chase Derivative Litigation , S.D.N.Y., No 17-5066, 5/21/18 .

To contact the reporter on this story: Evan Weinberger at eweinberger@bloomberglaw.com

To contact the editor responsible for this story: Michael Ferullo at mferullo@bloomberglaw.com

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