JP Morgan Hit With $42 Million Award for Breaching Investor's Contract
In a story that was reported on August 26, following a three-week trial, NY State Supreme Court Justice Melvin Schweitzer awarded billionaire Leonard Blavatnik more than $42 million, concluding that JP Morgan had breached its agreement with Blavatnik, filling his investment portfolio with the now infamous subprime mortgages, in direct contravention of their agreement.
Although JP Morgan contended that it had invested Blavatnik's money in the agreed-upon mortgage-backed securities and in accordance with "industry-accepted practice," Schweitzer sided with Blavatnik, who asserted that JP Morgan had deliberately misclassified the misclassifying the securities, as they were backed by a pool of subprime loans.
Schweitzer summarized his reasoning as follows:
"Not only was the ostensible 'industry practice' to which JPMIM repeatedly refers unknown to [Blavatnik], JPMIM itself frequently defined securities backed by subprime mortgages as 'mortgage securities' and not as asset-backed securities - and did so in some of its most important documents used with regulators, ... clients, ... shareholders ... and internally."
Given the size of this verdict, I fully expect JP Morgan to appeal.