JPMorgan Unit No Longer Faces Peralta College Bond Suit

A lawsuit against a JPMorgan Chase & Co. (JPM) unit over a $25 million bond-purchase contract was dropped by the Peralta Community College District in Oakland, California, which had claimed the bank would get a windfall.

Peralta sued JPMorgan Securities LLC Aug. 13 claiming the bank was seeking to force it to make good on a 2006 contract requiring it to issue high interest-rate bonds and sell them to the bank, which would resell them at a profit of as much as $4 million, according to the complaint.

Peralta said the contract, which was originally with Bear Stearn Cos., was illegal under a 2009 opinion by the California Attorney General’s office that outlawed so-called cash-out bond refundings. New York-based JPMorgan acquired Bear Stearns in 2008.

JPMorgan agreed to terminate the contract in exchange for Peralta refunding $550,000 that Bear Stearns had paid the college in 2006 and dropping the lawsuit, according to an agreement disclosed by Peralta’s general counsel’s office.

The school has until Sept. 4 to return the money, according to the agreement.

Thuy Thi Nguyen, Peralta’s general counsel, declined to comment on the dismissal. Tasha Pelio, a spokeswoman for JPMorgan, didn’t immediately respond to an e-mail yesterday after regular business hours seeking comment on it.

The case is Peralta Community College District v. JPMorgan Securities LLC, RG12-643254, California Superior Court, Alameda County (Oakland).

To contact the reporter on this story: Karen Gullo in San Francisco at kgullo@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net