JP Morgan Chase 2014 Annual Report Download - page 298

Notes to consolidated financial statements
296 JPMorgan Chase & Co./2014 Annual Report
Since November 2013, a number of class actions have been
filed in the United States District Court for the Southern
District of New York against a number of foreign exchange
dealers, including the Firm, for alleged violations of federal
and state antitrust laws and unjust enrichment based on an
alleged conspiracy to manipulate foreign exchange rates
reported on the WM/Reuters service. In March 2014,
plaintiffs filed a consolidated amended U.S. class action
complaint; two other class actions were brought by non-
U.S.-based plaintiffs. The Court denied defendants’ motion
to dismiss the U.S. class action and granted the motion to
dismiss the two non-U.S. class actions. In January 2015, the
Firm settled the U.S. class action, and this settlement is
subject to court approval.
General Motors Litigation. JPMorgan Chase Bank, N.A.
participated in, and was the Administrative Agent on behalf
of a syndicate of lenders on, a $1.5 billion syndicated Term
Loan facility (“Term Loan”) for General Motors Corporation
(“GM”). In July 2009, in connection with the GM bankruptcy
proceedings, the Official Committee of Unsecured Creditors
of Motors Liquidation Company (“Creditors Committee”)
filed a lawsuit against JPMorgan Chase Bank, N.A., in its
individual capacity and as Administrative Agent for other
lenders on the Term Loan, seeking to hold the underlying
lien invalid. In March 2013, the Bankruptcy Court granted
JPMorgan Chase Bank, N.A.’s motion for summary judgment
and dismissed the Creditors Committee’s complaint on the
grounds that JPMorgan Chase Bank, N.A. did not authorize
the filing of the UCC-3 termination statement at issue. The
Creditors Committee appealed the Bankruptcy Court’s
dismissal of its claim to the United States Court of Appeals
for the Second Circuit. In January 2015, the Court of
Appeals reversed the Bankruptcy Court’s dismissal of the
Creditors Committee’s claim and remanded the case to the
Bankruptcy Court with instructions to enter partial
summary judgment for the Creditors Committee as to the
termination statement. JPMorgan Chase Bank, N.A. has filed
a petition requesting that the full Court of Appeals rehear
the case en banc. In the event that the request for rehearing
is denied, continued proceedings in the Bankruptcy Court
are anticipated with respect to, among other things,
additional defenses asserted by JPMorgan Chase Bank, N.A.
and the value of additional collateral on the Term Loan,
which was not the subject of the termination statement.
Interchange Litigation. A group of merchants and retail
associations filed a series of class action complaints alleging
that Visa and MasterCard, as well as certain banks,
conspired to set the price of credit and debit card
interchange fees, enacted respective rules in violation of
antitrust laws, and engaged in tying/bundling and exclusive
dealing. The parties have entered into an agreement to
settle the cases for a cash payment of $6.1 billion to the
class plaintiffs (of which the Firm’s share is approximately
20%) and an amount equal to ten basis points of credit
card interchange for a period of eight months to be
measured from a date within 60 days of the end of the opt-
out period. The agreement also provides for modifications
to each credit card network’s rules, including those that
prohibit surcharging credit card transactions. In December
2013, the Court issued a decision granting final approval of
the settlement. A number of merchants have appealed.
Certain merchants that opted out of the class settlement
have filed actions against Visa and MasterCard, as well as
against the Firm and other banks. Defendants’ motion to
dismiss the actions was denied in July 2014.
Investment Management Litigation. The Firm is defending
two pending cases that allege that investment portfolios
managed by J.P. Morgan Investment Management (“JPMIM”)
were inappropriately invested in securities backed by
residential real estate collateral. Plaintiffs Assured Guaranty
(U.K.) and Ambac Assurance UK Limited claim that JPMIM is
liable for losses of more than $1 billion in market value of
these securities. Discovery is proceeding.
Lehman Brothers Bankruptcy Proceedings. In May 2010,
Lehman Brothers Holdings Inc. (“LBHI”) and its Official
Committee of Unsecured Creditors (the “Committee”) filed a
complaint (and later an amended complaint) against
JPMorgan Chase Bank, N.A. in the United States Bankruptcy
Court for the Southern District of New York that asserts
both federal bankruptcy law and state common law claims,
and seeks, among other relief, to recover $7.9 billion in
collateral that was transferred to JPMorgan Chase Bank,
N.A. in the weeks preceding LBHI’s bankruptcy. The
amended complaint also seeks unspecified damages on the
grounds that JPMorgan Chase Bank, N.A.’s collateral
requests hastened LBHI’s bankruptcy. The Court dismissed
the counts of the amended complaint that sought to void
the allegedly constructively fraudulent and preferential
transfers made to the Firm during the months of August and
September 2008. The Firm has filed counterclaims against
LBHI alleging that LBHI fraudulently induced the Firm to
make large extensions of credit against inappropriate
collateral in connection with the Firm’s role as the clearing
bank for Lehman Brothers Inc. (“LBI”), LBHI’s broker-dealer
subsidiary. These extensions of credit left the Firm with
more than $25 billion in claims against the estate of LBI.
The case has been transferred from the Bankruptcy Court to
the District Court, and the Firm has moved for summary
judgment seeking the dismissal of all of LBHI’s claims. LBHI
has also moved for summary judgment on certain of its
claims and seeking the dismissal of the Firm’s
counterclaims.
In the Bankruptcy Court proceedings, LBHI and several of its
subsidiaries that had been Chapter 11 debtors have filed a
separate complaint and objection to derivatives claims
asserted by the Firm alleging that the amount of the
derivatives claims had been overstated and challenging
certain set-offs taken by JPMorgan Chase entities to recover
on the claims. The Firm responded to this separate
complaint and objection in February 2013. LBHI and the
Committee have also filed an objection to the claims
asserted by JPMorgan Chase Bank, N.A. against LBHI with
respect to clearing advances made to LBI, principally on the
grounds that the Firm had not conducted the sale of the
securities collateral held for its claims in a commercially
reasonable manner. Discovery regarding both objections is