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In a bit of welcome good news for embattled JPMorgan Chase & Co., an appeals court has blocked Syncora Guarantee Inc. from claiming in state court that it was duped into insuring a residential mortgage-backed security sponsored by Bear Stearns & Co., which JPMorgan acquired in 2008.

In a decision issued on Tuesday, New York's Appellate Division, First Department dismissed Syncora's claims based on the doctrine of res judicata. Siding with JPMorgan's lawyers at Sullivan & Cromwell and Greenberg Traurig, the court ruled that the lawsuit is barred by a similar case Syncora is pursuing in U.S. district court.

Before the financial crisis, Syncora agreed to insure an RMBS transaction known as GreenPoint Mortgage Funding Trust 2007-HE1. A Bear Stearns subsidiary called EMC Mortgage Corp. sponsored the Greenpoint transaction. Essentially, Syncora agreed to cover investor losses if the 9,871 home loans backing the transaction went bust. According to Syncora, 1,315 of the home loans have gone into default, and it has had to pay out $320 million to cover claims by investors.

Syncora initially sued EMC in federal court in Manhattan in 2009. The bond insurer alleged that the bank breached representations and warranties about the quality of the underlying home loans backing the GreenPoint securities. That case is still pending before U.S. District Judge Paul Crotty.

In 2011, Syncora's lawyers at Patterson Belknap Webb & Tyler sought Crotty's permission to beef up their complaint with additional claims, stating that new evidence had come to light during discovery. Crotty denied the request in March 2011, ruling that Syncora had waited too long to seek leave to amend.

Undeterred, Patterson Belknap brought its claims through a state court action in June 2011. That suit named Bear Stearns/JPMorgan as the defendant, rather than EMC.

The judge assigned to the state court case, New York Supreme Court justice Charles Ramos, allowed it to proceed in a May 2012 decision. He ruled that Crotty doesn't have jurisdiction over the state law claims, so res judicata shouldn't apply.

The First Department has now reversed. "Here, both actions arise out of the same transaction, involve the same allegations concerning Bear Stearns's and EMC's concerted actions in the 'mortgage-loan-securitization chain' and seek the same recovery for the same alleged injuries," Justice Karla Moskowitz wrote on behalf of a four-judge panel.

JPMorgan counsel Robert Sacks at Sullivan & Cromwell wasn't immediately available to comment. Along with Sacks, the bank is represented by S&C's Sharon Nelles and Darrell Cafasso, as well as Richard Edlin and Eric Whitney of Greenberg Traurig. Syncora has a Patterson Belknap team including Philip Forlenza and Harry Sandick. Forlenza also couldn't immediately be reached for comment.

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