A U.K. unit of Ambac Assurance can go ahead with a $1.65 million lawsuit accusing a JPMorgan Chase & Co. subsidiary of investing funds insured by Ambac in mortgage-backed securities, a unanimous panel of the Appellate Division, First Department, ruled yesterday. The opinion in Ambac Assurance v. J.P. Morgan Investment Management, 650259/09, written by Justice James M. Catterson (See Profile), overturned a decision by Supreme Court Justice Barbara R. Kapnick dismissing the case.
Ambac filed the lawsuit on behalf of reinsurer Ballantyne Re PLC, which issued more than $2 billion in notes to finance itself and invested the proceeds with JPMorgan as investment manager. JPMorgan put much of the money into securities backed by home equity loans and mortgages. The investments lost most of their value with the collapse of the market, leaving Ambac on the hook for Ballantyne’s losses.
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