Little more than one month after eviscerating a $774 million suit filed by Dexia S.A. against JPMorgan Chase, Southern District Judge Jed Rakoff (See Profile) has resurrected the case. Dexia alleges JPMorgan or its predecessors duped it into overpaying by $774 million for mortgage-backed securities backed by faulty loans. Last month, Rakoff wiped out all but $5.7 million in potential damages (NYLJ, April 8). On May 17, the judge vacated his earlier decision.
Rakoff’s reversal comes after a ruling by the U.S. Court of Appeals for the Second Circuit. Quinn Emanuel Urquhart & Sullivan, representing American International Group in its multibillion-dollar MBS case against Bank of America, persuaded the circuit to reject the notion that an obscure 1919 law called the Edge Act gives the federal courts jurisdiction over AIG’s claims. The statute gives federal courts original jurisdiction over cases against U.S. banks arising out of foreign banking transactions. BofA had argued that the act applied because a handful of the mortgages at issue were secured to overseas properties. The circuit disagreed, and remanded the case back to state court (NYLJ, April 22).
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