JPMorgan is in a little bit of trouble right now. The company and the law offices of Simpson Thacher & Bartlett LLP are being sued by one of its participants in a $1.5 billion term loan that was made to General Motors Corp. before it went bankrupt. The plaintiffs state that a mistake in the contract eliminated the security interest that would have paid the loan completely, regardless of GM’s bankruptcy in 2009. This mistake left the participants liable to pay off the loan after GM collapsed. The mistake was made by an associate at Mayer Brown LLP, but was never caught by associates at either JPMorgan or Simpson Thacher.
Among the complainants is the Employees’ Retirement System of the City of Montgomery, Alabama. On July 30, they filed a class action in federal court in Manhattan against Simpson Thacher and JPMorgan. The organization will represent at least 400 participants in the term loan. The plaintiffs claim that the bank never notified them about any contract errors. The retirement center states that is was not made aware of the mistake until May after it was sued to recover payments for the loan.
The retirement system is claiming a breach of contract and is suing Simpson Thacher for malpractice. JPMorgan is refusing to comment on the lawsuit at this time. Simpson Thacher is also declining to comment at this time.
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