A federal judge has issued a new decision on a lawsuit accusing JPMorgan Chase & Co. of misrepresenting risky residential mortgage-backed securities (RMBS) that it sold to European bank Dexia.
Reuters reports that U.S. District Judge Jed Rakoff will send the suit, which was largely dismissed last month, back to the New York court system. In his shift, Rakoff cited the Edge Act, a federal banking law governing how and where banking disputes can be resolved.
According to Dexia's claims, the company was misled about the quality of more than $1.6 billion in RMBS purchased from JPMorgan, as well as Bear Stearns and Washington Mutual – which were later acquired by JPMorgan – between 2005 and 2007. JPMorgan has maintained that its investment prospectus materials addressed all of the alleged misstatements.