Federal Bankruptcy Judge Thomas Bennett has scheduled a hearing for March 23 to hear Assured Guaranty Municipal Corp.’s legal motion for relief from Jefferson County, Ala.’s bankruptcy.
Attorneys for the bond insurer want the judge to clarify that the bankruptcy case should not hinder its lawsuit against JPMorgan.
That suit, filed in the New York State Supreme Court in 2010, claims that the investment bank fraudulently induced Assured Guaranty to provide coverage for the county’s failed variable-rate and auction-rate sewer warrants by concealing bribes that JPMorgan paid to county officials to obtain underwriting and swap business.
Though Jefferson County is not a named defendant in Assured Guaranty’s suit, the county was brought into the case through a third-party claim by JPMorgan.
Jefferson County and JPMorgan have contended in New York State Supreme Court that the automatic stay accompanying the county’s bankruptcy filing applies to Assured Guaranty’s case, and that the suit should not move forward at this time.
Syncora Guarantee Inc. has a similar lawsuit against JPMorgan pending in New York, and its case named Jefferson County as a defendant.
Both Assured and Syncora believe their fraud claims against JPMorgan should go forward despite the county’s bankruptcy case, according to a filing by their attorneys at Quinn Emanuel Urquhart & Sullivan LLP.
In November, Jefferson County filed the largest municipal bankruptcy in the country after failing to negotiate a restructuring of $3.14 billion of sewer debt. In total, the county has $4.2 billion of debt outstanding.
