Sept 26 (Reuters) - JPMorgan Chase & Co is asking to move
to federal court a lawsuit from Lehman Brothers Holdings Inc
accusing it of siphoning $8.6 billion from Lehman's estate in
the days leading up to its record bankruptcy.
In court papers filed late Monday, JPMorgan said the case,
filed in U.S. Bankruptcy Court, should be moved to federal
court in light of the U.S. Supreme Court's contentious June
ruling in former Playboy model Anna Nicole Smith's inheritance
The case, Stern v. Marshall, pitted the late Smith against
the estate of her deceased former husband J. Howard Marshall.
The court ruled against Smith's estate, saying bankruptcy
courts lack authority to decide claims brought by a bankruptcy
debtor against a creditor, unless the claims are fully rooted
in bankruptcy law.
JPMorgan said in court papers Monday that Lehman's 49-count
complaint goes "above and beyond" bankruptcy law, including
accusations of fraud, coercion and breach of contract.
Lehman defended the bankruptcy court's jurisdiction, saying
in a Monday court filing that the lawsuit's allegations carry a
bankruptcy context because they challenge JPMorgan's original
proofs of claim against Lehman.
The suit, filed in May 2010, accuses JPMorgan of illegally
siphoning about $8.6 billion of desperately-needed assets in
the days leading up to Lehman's bankruptcy.
Lehman said JPMorgan, its main clearing bank, used
"unparalleled access" to the details of its financial distress
to extract the collateral, hastening its $639 billion
bankruptcy, which remains the largest ever and was a major
catalyst of the financial crisis.
JPMorgan countersued in December, saying Lehman stuck it
with more than $25 billion in toxic loans that might never be
A spokeswoman and lawyer for Lehman did not respond to
requests for comment Monday. An attorney and spokeswoman for
JPMorgan were also not immediately available Monday night.
The scope of the Supreme Court's ruling in the Smith case
has engendered frustration among bankruptcy judges, some of
whom have expressed uncertainty as to whether the ruling could
stunt their authority.
Judge Robert Drain, of U.S. Bankruptcy Court in Manhattan,
said at the American Bankruptcy Institute's Views from the
Bench conference earlier this month that the ruling causes
bankruptcy judges to "doubt their reason for being."
Judge James Peck, who oversees Lehman's dispute with
JPMorgan, said at the conference that he believes the ruling
will ultimately have "relatively limited" application in the
day-to-day role of a bankruptcy judge.
But Peck added that the ruling has been "weaponized ... on
the theory that that which is not nailed down gets picked up."
"This is an argument that is thrown at me in settings that
I am confident that (Supreme Court Chief) Justice (John)
Roberts never contemplated and would be horrified if he knew
about," Peck said at the conference.
Lehman's case against JPMorgan is slated for trial in 2012.
The case is Lehman Brothers Holdings Inc. v. JPMorgan Chase
Bank NA, U.S. Bankruptcy Court, Southern District of New York,
No. 10-ap-03266. The main bankruptcy case is In re: Lehman
Brothers Holdings Inc in the same court, No. 08-13555.
For Lehman Brothers: Curtis, Mallet-Prevost, Colt & Mosle.
For the Official Committee of Unsecured Creditors of Lehman
Brothers: Quinn Emanuel Urquhart & Sullivan.
For JPMorgan: Wachtell, Lipton, Rosen & Katz; Kelley Drye &
(Reporting by Nick Brown)
Follow us on Twitter: @ReutersLegal