JP Morgan Chase 2015 Annual Report Download - page 308

Notes to consolidated financial statements
298 JPMorgan Chase & Co./2015 Annual Report
actions into the U.S. class action. The Firm has entered into
a revised settlement agreement to resolve the consolidated
U.S. class action, including the exchange-based actions, and
that agreement is subject to Court approval. The consumer
actions and ERISA actions remain pending.
In September 2015, two class actions were filed in Canada
against the Firm as well as a number of other FX dealers,
principally for alleged violations of the Canadian
Competition Act based on an alleged conspiracy to fix the
prices of currency purchased in the FX market. The first
action was filed in the province of Ontario, and seeks to
represent all persons in Canada who transacted any FX
instrument. The second action seeks to represent only those
persons in Quebec who engaged in FX transactions.
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 based on the filing of a UCC-3 termination
statement relating to the Term Loan. 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. The
proceedings in the Bankruptcy Court continue 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 that was unaffected by the filing
of the termination statement at issue. In addition, certain
Term Loan lenders filed cross-claims against JPMorgan
Chase Bank, N.A. in the Bankruptcy Court seeking
indemnification and asserting various claims.
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 appealed, and oral
argument was held in September 2015. Certain merchants
and trade associations have also filed a motion with the
District Court seeking to set aside the approval of the class
settlement on the basis of alleged improper
communications between one of MasterCard’s former
outside counsel and one of plaintiffs’ outside counsel. That
motion remains pending. 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 those actions was denied in
July 2014.
Investment Management Litigation. The Firm is defending
two pending cases that are being coordinated for pre-trial
purposes, alleging 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
total losses of more than $1 billion in market value of these
securities. Discovery has been completed. In January 2016,
plaintiffs filed a joint partial motion for summary judgment
in the coordinated actions.
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 asserted
both federal bankruptcy law and state common law claims,
and sought, among other relief, to recover $7.9 billion in
collateral (after deducting $700 million of returned
collateral) that was transferred to JPMorgan Chase Bank,
N.A. in the weeks preceding LBHI’s bankruptcy. The
amended complaint also sought unspecified damages on
the grounds that JPMorgan Chase Bank, N.A.’s collateral
requests hastened LBHI’s bankruptcy. The Bankruptcy Court
dismissed the claims in the amended complaint that sought
to void the allegedly constructively fraudulent and
preferential transfers made to the Firm during September
2008, but did not dismiss the other claims, including claims
for duress and fraud. The Firm filed counterclaims against
LBHI, including 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, which was repaid principally through
collateral posted by LBHI and LBI. In September 2015, the
District Court, to which the case had been transferred from
the Bankruptcy Court, granted summary judgment in favor