A federal judge in Washington, DC, has dismissed with prejudice a tortious interference claim brought by Washington Mutual bondholders against JPMorgan Chase & Co. for allegedly hatching a scheme to drive down WaMu’s value and force it into receivership. The FDIC took over WaMu in 2008 and sold certain of its assets and liabilities to JPMorgan in 2009 for $1.9 billion. WaMu’s liabilities to its bondholders were not transferred to JPMorgan, and after the sale to JPMorgan, the bonds were rendered worthless.
The bondholders alleged that both JPMorgan and federal regulators conspired to drive down WaMu’s value and push it into receivership after JPMorgan’s initial attempts to acquire WaMu were unsuccessful. The suit further alleged that JPMorgan succeeded in pushing the FDIC to sell WaMu’s best assets to JPMorgan at a bargain-basement price without transferring WaMu’s liabilities to its bondholders. By forcing WaMu into receivership and engineering a fire sale of its assets, the bondholders alleged, JPMorgan interfered with WaMu’s obligations to repay its bondholders under the bond contracts.
U.S. District Court Judge Rosemary M. Collyer threw out the bondholders’ claims for tortious interference with the bond contracts because JPMorgan’s pre-receivership conduct as alleged by the bondholders did not involve an actual breach of the bond contracts. Since the tortious conduct did not cause a breach, the bondholders had no claim under New York law.
Judge Collyer had dismissed the bondholders’ claims previously, in 2010, on different grounds, but the dismissal was reversed and remanded by the D.C. Circuit Court of Appeals in 2011. Following the remand, Judge Collyer dismissed several contract-based claims in 2012, leaving only the tortious interference claim intact.
The case is American National Insurance Co. et al. v. JPMorgan Chase & Co. et al., Case No. 1:09-cv-01743, in the U.S. District Court for the District of Columbia.