[1]A New York Supreme Court Judge dismissed a suit filed by Bank of New York Mellon [2] against JPMorgan Chase [3] and a unit of General Electric Capital [4] over $1.275 billion worth of toxic residential mortgage-backed securities, according to media reports [5].
Judge Shirley Werner Kornreich ruled that the case was time-barred, citing a ruling by the New York Court of Appeals earlier this year in the case of ACE Securities Corp. v. DB Structured Products [6]. In that ruling, the highest court in New York sated that the clock began ticking for the six-year statute of limitations when the contract was signed rather than when problems with the securities were discovered.
In filing the suit in December 2013, BNY Mellon accused JPMorgan of misrepresenting the quality of loans packaged in an RMBS trust for which BNY acted as securities administrator. BNY also claimed that JPMorgan refused to repurchase the debt (which was originated by WMC Mortgage, a now-defunct subsidiary of GE Capital) even though it was contractually obligated to do so. BNY Mellon alleged in its complaint that it notified the defendants that more than 1,500 underlying mortgage loans contained one or more breaches from either WMC's or JPMorgan's representations of the quality of the loans and that neither party would repurchase the soured debt. BNY Mellon was seeking $600 million in damages in the lawsuit against JPMorgan Chase.
BNY Mellon contended that the clock for the six-year statute of limitations began ticking when it made the repurchase demand. JPMorgan countered that the statute of limitations began running on the date the transaction closed, which was June 28, 2006—more than seven years before BNY Mellon filed the lawsuit.
Representatives from both BNY Mellon and JPMorgan Chase declined to comment on the case.
In a different case involving the same parties over similar claims in November 2013, Kornreich in BNY Mellon's favor, allowing the bank to pursue claims that WMC and JPMorgan Chase misrepresented the quality of $1.9 billion worth of mortgage-backed securities. The judge's ruling applied only to loans that didn't meet underwriting standards, however.