JPMorgan Chase & Co agreed to pay $23 million to settle a lawsuit accusing it of mishandling money of pension funds and other clients by investing it in notes from Lehman Brothers Holdings Inc, which later went bankrupt.
The largest U.S. bank denied wrongdoing in agreeing to settle, and entered the settlement solely to eliminate the burden and cost of litigation, according to papers filed on Friday with the U.S. District Court in Manhattan.
Lawyers for the plaintiffs called the settlement terms fair, reasonable and adequate, according to Friday's filing. The settlement requires approval by U.S. District Judge Katherine Forrest in Manhattan.
The case over the Lehman notes had been bought on behalf of participants in JPMorgan's securities lending program, led by the Operating Engineers Pension Trust of Pasadena, California, and had sought class action status.
Paul Geller, a partner at Robbins Geller Rudman & Dowd representing the plaintiffs, did not immediately respond to a request for comment. JPMorgan spokesman Brian Marchiony did not immediately respond to a similar request.
The settlement is one of two disclosed on Friday over claims against JPMorgan tied to the recent credit and financial crises.
Liquidators for two Bear Stearns hedge funds that collapsed in 2007 because of problems with subprime mortgages agreed to drop their lawsuit against JPMorgan, which bought Bear in 2008, to recoup at least $1.1 billion of losses.
Terms of that settlement were not disclosed.
In the Lehman case, the plaintiffs said JPMorgan wrongly put their money in Lehman notes despite being "uniquely positioned," as Lehman's main clearing bank, to know that Lehman's survival was in question, and while reducing its own exposure.
The Operating Engineers trust said JPMorgan in 2006 bought $446,000 of Lehman notes on its behalf with collateral it had posted, and refused to sell as Lehman's troubles mounted.
It said these notes lost 85 percent of their value when Lehman went bankrupt on September 15, 2008.
In March, Forrest rejected JPMorgan's motion to dismiss the case. A different federal judge had dismissed an earlier version of the lawsuit, but allowed the case to be brought again.
The plaintiffs' lawyers plan to apply for attorneys' fees not to exceed 30 percent of the settlement fund, court papers show.
Lehman's bankruptcy is by far the largest in U.S. history. It emerged from Chapter 11 protection in March 2012 and is winding down, a process expected to take a few years.
The case is Board of Trustees of the Operating Engineers Pension Trust v. JPMorgan Chase Bank NA, U.S. District Court, Southern District of New York, No. 09-09333.