Bloomberg News

JPMorgan, Goldman Ask Judge to Dismiss Mortgage Lawsuit

December 17, 2012

JPMorgan Chase & Co. (JPM:US), Goldman Sachs Group Inc. (GS:US) and other banks asked a New York state judge to dismiss a $1.8 billion lawsuit brought by residential mortgage- backed securities investors.

The investors, which included Phoenix Light SF Ltd., sued New York-based JPMorgan, Goldman Sachs and the other lenders in New York state Supreme Court in Manhattan in May, accusing them of making misrepresentations about the loans backing the securities.

The defendants in documents filed on Dec. 14 asked Justice Charles E. Ramos to dismiss the suit, saying the investors failed to show they’re entitled to the requested relief and that their claims are barred by a three-year statute of limitations under German law. The defendants also say the investors have failed to identify “any actionable misrepresentation” that they relied upon.

“Plaintiffs made their purchases before the bulk of the prospectus supplements containing the alleged misrepresentations were even created or filed, and, as some of the most sophisticated investors in the world, plaintiffs had an affirmative duty to conduct an independent investigation into the risks associated with their investments,” the banks said in the court documents.

Legal Claims

Phoenix is a limited liability company based in Dublin that inherited legal claims from six separate legal entities “that collapsed or nearly collapsed,” according to the complaint.

The entities include Dusseldorf, Germany-based WestLB, the 180-year-old German state-owned lender that ceased operations on June 29 as part of European Union conditions tied to a 17 billion-euro ($22.4 billion) bailout following the 2008 financial crisis, according to the complaint.

Investors including Phoenix Light have filed similar suits in the same court over the past year, including a complaint filed against Deutsche Bank AG in February and actions against Bank of America filed in September and November.

Pools of home loans securitized into bonds were a central part of the housing bubble that helped send the U.S. into the biggest recession since the 1930s. The housing market collapsed, and the crisis swept up lenders and investment banks as the market for the securities evaporated.

The case is Phoenix Light SF Ltd. v. JPMorgan Securities LLC, 651755-2012, New York state Supreme Court (Manhattan).

To contact the reporter on this story: Chris Dolmetsch in New York at cdolmetsch@bloomberg.net

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


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Companies Mentioned

  • JPM
    (JPMorgan Chase & Co)
    • $59.0 USD
    • 0.33
    • 0.56%
  • GS
    (Goldman Sachs Group Inc/The)
    • $176.82 USD
    • 1.80
    • 1.02%
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