A church foundation’s lawsuit against former outsourced-CIO (OCIO) JP Morgan may be dismissed, if a judge agrees that the bank had full authority over the portfolio but no liability for losses.
The suit—filed in August by an Indianapolis church and former OCIO client—alleged that JP Morgan had invested its assets in “clearly unsuitable investments” and charged ballooning fees.
The bank filed a 40-page motion on October 7 to have all but one count of the church’s claims dismissed.
JP Morgan argued in court documents that the suitability of investments were not the church’s to judge. “The church was not the party making, or empowered to make, investment decisions,” it said.
Two charges center on anti-fraud law, which JP Morgan said does not apply because the church had no legal say or hand in the investment of its assets.
“A trust beneficiary that has no investment authority cannot pursue a securities fraud claim against a trustee, such as the bank, that has discretionary authority to invest trust assets as the trustee alone deems appropriate,” the bank’s lawyers wrote in court filings. “Put another way, the church cannot sue for securities fraud because it neither purchased nor sold the securities held by the trusts.”
Another claim of fraud by the Indianapolis church was deemed invalid by JP Morgan because the foundation failed to prove it had meaningfully lied or misrepresented information. Furthermore, according the OCIO, the church did not provide evidence to show it would have behaved differently to better ends had JP Morgan disclosed more and/or accurate details.
Finally, the bank sought to have the charge that it breached fiduciary duty dismissed because it was redundant of the breach of trust claim—the only one out of five charges it is not contesting at this point.
“Here, count II and count V do not differ at all because breach of trust and breach of fiduciary duty are synonymous under Indiana law,” the bank’s lawyers noted.
Related Content: Former OCIO Client Sues JP Morgan for Losses; OCIO Buyer’s Guide Review of JP Morgan