Bond insurer Syncora Guarantee Inc. cannot pursue claims in state court against JPMorgan Chase & Co. over faulty mortgage-backed securities because it already tried to bring similar claims over the same securities in federal court, a unanimous state appeals panel has ruled.

The Appellate Division, First Department, ruling on Tuesday in Syncora Guarantee v. JPMorgan Securities, 651566/11, reversed a May 2012 ruling by Manhattan Supreme Court Justice Charles Ramos (See Profile).

Justice Karla Moskowitz (See Profile) wrote the panel's opinion, joined by Justices David Friedman (See Profile), John Sweeny Jr. (See Profile) and Paul Feinman (See Profile).

The suit involves a residential mortgage-backed securities transaction in which securities backed by nearly 10,000 home equity loans were sold to investors through a trust. Bear, Stearns & Co. Inc., which was bought by JPMorgan in 2008, served as the manager and underwriter. EMC Mortgage Corp., a Bear Stearns subsidiary, acted as sponsor, buying the underlying loans and selling them to a trust, which in turn sold securities to investors.

Syncora agreed to insure the transaction. It relied on warranties from EMC to cure, repurchase or provide adequate substitutes if any of the underlying loans failed.

Soon after the transaction closed in 2007, the loans began to fail as the housing market collapsed, and Syncora began to pay out under the insurance agreement. Syncora claims it has paid out more than $320 million in claims to date without being reimbursed.

After the loans began defaulting, Syncora investigated the loans and found that 85 percent of a random sample did not conform to the warranties. It discovered that many of the defects were related to Bear Stearns' underwriting.

Syncora initially sued EMC in the Southern District of New York for breach of contract. In that case, Syncora Guarantee v EMC Mortgage, 09-cv-3106, Syncora asserted various breach of contract claims related to its agreements with EMC.

In 2010, Syncora moved to amend its federal complaint in light of new information. It said it had learned through discovery that Bear Stearns and EMC were working together in a fraudulent scheme. It also said Bear Stearns was prepared to honor its obligations to Syncora, but reversed course soon after it was bought by JPMorgan.

Judge Paul Crotty (See Profile) denied the motion. He ruled that Syncora did not need discovery to name Bear Stearns as a defendant, and the delay of more than one year rendered the new claims untimely. He also said Syncora apparently chose not to name Bear Stearns as a defendant initially because doing so would have eliminated the federal court's diversity jurisdiction. (Syncora and Bear Stearns are both based in New York; EMC is based in Texas.)

Syncora then sued JPMorgan in Manhattan Supreme Court, asserting claims for fraudulent inducement and tortious interference.

Ramos denied JPMorgan's motion for summary judgment, ruling that the lawsuit was sufficiently different from the federal suit to go forward.

But the First Department disagreed Tuesday, holding that Syncora had to stick with the action it filed first under the so-called "first-in-time rule."

"Having made its own strategic decision, Syncora cannot now be heard to complain that it is being denied its day in court," Moskowitz wrote. "On the contrary, because it chose to proceed initially in federal court, Syncora is bound by the effects of the path it charted."

She said the fact that the defendants in the case were different did not change the fact that the claims were essentially the same.

"Thus, where, as here, a plaintiff seeks the same damages for the same alleged injuries relating to the same transaction from close corporate affiliates, a court may properly make a finding that parties have 'substantially similar' identities for purposes of the first-in-time rule," Moskowitz wrote.

She also rejected Syncora's argument that the state lawsuit was different because it asserted claims of fraudulent inducement and tortious interference rather than breach of contract claims.

"To be sure, in the two actions, Syncora asserts different legal theories, but it seeks to recover for the same alleged harm based on the same underlying events," she wrote.

"It is not necessary that the 'precise legal theories presented in the first action also be presented in the second action,'" she continued, quoting the Second Department's 2009 decision in Cherico, Cherico & Assoc. v. Midollo, 67 AD3d 622, 622.

Sullivan & Cromwell partner Robert Sacks represents JPMorgan.

Patterson Belknap Webb & Tyler partner Philip Forlenza represents Syncora.

Neither attorney could be reached for comment.