JPMorgan Chase, accused of aiding and abetting Bernie Madoff's Ponzi scheme, says trustee Irving Picard is "trying to pursue an enormous back-door class action" and is exceeding his power by suing in bankruptcy court - where a judge, rather than a jury, would decide the $6.4 billion case.  JPMorgan lawyers want the case switched to U.S. district court.

Madoff trustee Irving Picard claims JPMorgan ignored or dismissed warning signs about Madoff, while collecting hundreds of millions of dollars in fees.  He’s seeking the return of $1bn in fees and profits, as well as $5.4bn in damages.  A central theory of the trustee’s case is that JPMorgan failed to comply with federal banking laws, including the Bank Secrecy Act, the Patriot Act and other related regulations, JPMorgan's lawyers said.  They add that Mr. Picard also alleges the bank failed to comply with requirements that banks “closely observe” their customers’ transactions and conduct extensive investigations of customers in order to detect potential money laundering.

    JPMorgan Court Filing.   Bank lawyers said the trustee’s lawsuit goes well beyond the normal purview of a bankruptcy court and raises “novel and unsettled” questions of law, including federal securities and banking laws.  They also say bank has the right to have the case potentially heard by a jury. 

"The trustee has proclaimed that he is pursuing non-bankruptcy claims on behalf of thousands of Madoff’s customers to recover losses that they suffered as a result of Madoff’s scheme.  In substance, the trustee is trying to pursue an enormous backdoor class action to recoup damages incurred by individuals and entities other than the firm to which he is the appointed successor."  -- John Savarese, of Wachtell, Lipton, Rosen & Katz, which is representing the bank.

[CNBC.com, WSJ Law Blog, 2/9]