JPMorgan Chase & Co (JPM) sued the Federal Deposit Insurance Corporation in federal court on Tuesday, saying the agency owes it more than $1 billion in compensation for not assuming legal claims arising from its acquisition of Washington Mutual's assets after its 2008 implosion.
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JPMorgan bought Washington Mutual's banking operations in an FDIC-arranged deal at the height of the financial crisis, a little more than a week after Merrill Lynch agreed to sell itself to Bank of America Corp <BAC.N> and Lehman Brothers filed for bankruptcy.
Under the terms of the deal, an FDIC receivership "broadly agreed to indemnify JPMC both for liabilities JPMC did not assume and for numerous other matters," the bank claimed in the 24-page lawsuit, filed in U.S. District Court for the District of Columbia.
"They are promises that the FDIC made to JPMC to induce JPMC to enter into the...agreement when WMB failed in September 2008, in the largest bank failure in this nation's history," the lawsuit states.
The bank accused the FDIC of breach of contract and breach of the covenant of good faith and fair dealing, while seeking declaratory judgments that the agency is obligated to compensate the bank.
The lawsuit states that JPMorgan seeks to recover "substantially in excess of a billion dollars of indemnification," and that $2.75 billion of assets it says remain in the Washington Mutual receivership "should be sufficient" to satisfy its claims.
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The bank claims it is entitled to compensation from settlement amounts it paid to Fannie Mae and Freddie Mac stemming from bad loans they bought from Washington Mutual, numerous lawsuits that allege that Washington Mutual misled investors in residential mortgage-backed securities, and claims by various state taxing authorities seeking to recover Washington Mutual tax obligations, among others.
JPMorgan, which had agreed to maintain Washington Mutual's documents, is also seeking compensation for costs incurred producing "many millions of pages" of documents in these and other cases, the lawsuit said.
Spokesmen for the FDIC and JPMorgan declined to comment Tuesday.
The cases is JPMorgan Chase Bank National Association v. Federal Deposit Insurance Corporation, U.S. District Court for the District of Columbia, No. 13-cv-01997.