JPMorgan Chase wants Allstate case heard in federal court
Defense attorneys for JPMorgan Chase Bank want to fight a subprime securities-related lawsuit filed by Allstate in federal court. Allstate sued JPMorgan Chase (JPM) and its subsidiaries Bear Stearns and Washington Mutual in February accusing them of fraudulently selling Allstate more than $750 million in residential mortgage-backed securities supported by underlying toxic loans. Attorneys for JPMorgan filed a motion to move the suit out of state court and into the U.S. District Court for the Southern District of New York. The bank's attorneys argued the Federal Deposit Insurance Corp., which offloaded Washington Mutual's troubled assets to JPMorgan three years ago, is governed by federal law not state law. The defense attorneys also believe some of the underlying businesses that originated the troubled assets could be forced to indemnify JPMorgan for losses related to the case later on. And, since some of those entities are in bankruptcy, which is handled in federal courts, attorneys for JPMorgan believe this makes another case for federal jurisdiction. Debbie McComas, a partner for Haynes and Boone in Dallas, said there are many benefits to obtaining federal jurisdiction in this type of suit. "I could see a defendant -- particularly a banking defendant -- seeing the Federal District Court in New York as a forum that is well versed on these issues," she said. "What they see is an educated forum that can handle these issues and is more well versed on them." She also thinks the choice of venue could becoming a recurring theme in other RMBS lawsuits. "It seems that from this new round of litigation related to mortgage-backed securities, there will be new procedural issues popping up that deal with venue jurisdiction and who are the proper parties to the suit," she said. Write to Kerri Panchuk.