JP Morgan Chase 2015 Annual Report Download - page 310

Notes to consolidated financial statements
300 JPMorgan Chase & Co./2015 Annual Report
These actions seek to recover payments made by the funds
to defendants totaling approximately $155 million. All but
two of these actions have been dismissed.
In addition, a putative class action was brought by investors
in certain feeder funds against JPMorgan Chase in the
United States District Court for the Southern District of New
York, as was a motion by separate potential class plaintiffs
to add claims against the Firm and certain subsidiaries to an
already pending putative class action in the same court. The
allegations in these complaints largely track those
previously raised -- and resolved as to the Firm -- by the
court-appointed trustee for Bernard L. Madoff Investment
Securities LLC. The District Court dismissed these
complaints and the United States Court of Appeals for the
Second Circuit affirmed the District Court’s decision. The
United States Supreme Court denied plaintiffs’ petition for a
writ of certiorari in March 2015. Plaintiffs subsequently
served a motion in the Court of Appeals seeking to have the
Court reconsider its prior decision in light of another recent
appellate decision. That motion was denied in June 2015.
The Firm is a defendant in five other Madoff-related
individual investor actions pending in New York state court.
The allegations in all of these actions are essentially
identical, and involve claims against the Firm for, among
other things, aiding and abetting breach of fiduciary duty,
conversion and unjust enrichment. In August 2014, the
Court dismissed all claims against the Firm. In January
2016, the Appellate Court affirmed the dismissal.
A putative class action was filed in the United States District
Court for the District of New Jersey by investors who were
net winners (i.e., Madoff customers who had taken more
money out of their accounts than had been invested) in
Madoff’s Ponzi scheme and were not included in a prior
class action settlement. These plaintiffs allege violations of
the federal securities law, federal and state racketeering
statutes and multiple common law and statutory claims
including breach of trust, aiding and abetting
embezzlement, unjust enrichment, conversion and
commercial bad faith. A similar action was filed in the
United States District Court for the Middle District of
Florida, although it was not styled as a class action, and
included claims pursuant to Florida statutes. The Firm
moved to transfer both the Florida and New Jersey actions
to the United States District Court for the Southern District
of New York. The Florida court denied the transfer motion,
but subsequently granted the Firm’s motion to dismiss the
case in September 2015. Plaintiffs have filed a notice of
appeal, which is pending. In addition, the same plaintiffs
have re-filed their dismissed state claims in Florida state
court. The New Jersey court granted the transfer motion to
the Southern District of New York, and the Firm has moved
to dismiss the case pending in New York.
Three shareholder derivative actions have also been filed in
New York federal and state court against the Firm, as
nominal defendant, and certain of its current and former
Board members, alleging breach of fiduciary duty in
connection with the Firm’s relationship with Bernard Madoff
and the alleged failure to maintain effective internal
controls to detect fraudulent transactions. The actions seek
declaratory relief and damages. All three actions have been
dismissed. The plaintiff in one action did not appeal, the
dismissal has been affirmed on appeal in another action,
and one appeal remains pending.
Mortgage-Backed Securities and Repurchase Litigation and
Related Regulatory Investigations. The Firm and affiliates
(together, “JPMC”), Bear Stearns and affiliates (together,
“Bear Stearns”) and certain Washington Mutual affiliates
(together, “Washington Mutual”) have been named as
defendants in a number of cases in their various roles in
offerings of mortgage-backed securities (“MBS”). These
cases include actions by individual MBS purchasers and
actions by monoline insurance companies that guaranteed
payments of principal and interest for particular tranches of
MBS offerings. Following the settlements referred to below,
there are currently pending and tolled investor claims
involving MBS with an original principal balance of
approximately $4.2 billion, of which $2.6 billion involves
JPMC, Bear Stearns or Washington Mutual as issuer and
$1.6 billion involves JPMC, Bear Stearns or Washington
Mutual solely as underwriter. The Firm and certain of its
current and former officers and Board members have also
been sued in shareholder derivative actions relating to the
Firm’s MBS activities, and trustees have asserted or have
threatened to assert claims that loans in securitization
trusts should be repurchased.
Issuer Litigation – Class Actions. JPMC has fully resolved all
pending putative class actions on behalf of purchasers of
MBS.
Issuer Litigation – Individual Purchaser Actions. The Firm is
defending individual actions brought against JPMC, Bear
Stearns and Washington Mutual as MBS issuers (and, in
some cases, also as underwriters of their own MBS
offerings). The Firm has settled a number of these actions.
Several actions remain pending in federal and state courts
across the U.S. and are in various stages of litigation.
Monoline Insurer Litigation. The Firm has settled two
pending actions relating to a monoline insurer’s guarantees
of principal and interest on certain classes of 11 different
Bear Stearns MBS offerings. This settlement fully resolves
all pending actions by monoline insurers against the Firm
relating to RMBS issued and/or sponsored by the Firm.
Underwriter Actions. In actions against the Firm involving
offerings where the Firm was solely an underwriter of other
issuers’ MBS offerings, the Firm has contractual rights to
indemnification from the issuers. However, those indemnity
rights may prove effectively unenforceable in various
situations, such as where the issuers are now defunct.
Currently there is one such action pending against the Firm
relating to a single offering of another issuer.
Repurchase Litigation. The Firm is defending a number of
actions brought by trustees, securities administrators or