Secret Bear Stearns Deal Averts Legal Challenge

WASHINGTON (CN) - An advocate of financial-regulatory reform does not have standing to contest JPMorgan Chase's $13 billion settlement with the U.S. government, a federal judge ruled.

The Justice Department's $13 billion agreement with the bank resolved claims made in 19 separate lawsuits brought after the collapse of Bear Stearns triggered the 2008 financial crisis.

Better Markets complained in its 2014 lawsuit, however, that the negotiations behind the "largest settlement with a single entity in American history," a deal that gave JPMorgan Chase "complete civil immunity" in connection to the packaging of "toxic subprime mortgages," were done in secret.

"No one other than those involved in those secret negotiations has any idea what JP Morgan Chase really did or got for its $13 billion because there was no judicial review or proceeding at all regarding this historic and unprecedented settlement," the complaint alleged.

U.S. District Judge Beryl Howell emphasized in dismissing the case last week that "the vast majority of" the plaintiff's allegations were immaterial to determining its lack of standing.

In attempting to show that the settlement caused it injury, the bedrock of legal standing, Better Markets told the court that the settlement undermined its mission objectives.

Howell said precedent forecloses such "abstract concerns" as a ground for organizational standing, and that the group's other grounds for standing fared no better.

Though Better Markets has purportedly expended money to counteract "the harmful effects of the DOJ's unlawful settlement process," Howell said the group "has utterly failed to point to a single programmatic concern impacted by the defendants' actions."

"The plaintiff's third and fourth grounds for standing - deprivation of information and a judicial forum - are also insufficient," the ruling continues.

Over half of the $13 billion settlement JPMorgan reached was distributed among the plaintiffs behind the lawsuits: the FDIC, Federal Finance Housing Agency, National Credit Union Administration and the attorneys general for California, Delaware, Illinois, Massachusetts and New York.

The Justice Department meanwhile took $2 billion as a civil monetary penalty, while another $4 billion was dedicated to consumer relief.

"As part of the settlement, JPMorgan acknowledged it made serious misrepresentations to the public - including the investing public - about numerous (residential mortgage-backed securities) transactions," Justice Department officials said in a statement following the agreement. "The resolution also requires JPMorgan to provide much needed relief to underwater homeowners and potential homebuyers, including those in distressed areas of the country."

JPMorgan has until Dec. 31, 2017, to meet its obligations, under the oversight of an independent monitor, or pay liquidated damages to a nonprofit.

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