Banks including JPMorgan Chase & Co. and Citigroup Inc., sued for $2 billion by Thornburg Mortgage Inc. for allegedly helping it fail, lost a bid to move the case from bankruptcy court to district court as a district court judge said that almost all the issues could be decided in bankruptcy court, Bloomberg News reported yesterday. The trustee for what is now TMST Inc. accused the banks last year of extracting more than $700 million of margin and interest payments from the former Thornburg by making “unjustified” margin calls. The banks, including Credit Suisse Group AG, Royal Bank of Scotland Plc and UBS AG, or their affiliates, said that three of the 31 counts involved allegations of breach of contract and fraudulent conveyance, which a bankruptcy judge cannot rule on. U.S. District Judge Benson Everett Legg told them on Monday in a written order that the bankruptcy judge can still uncover the facts and send his findings to a district judge, even if the banks are right in arguing that "that the bankruptcy court lacks final adjudicatory authority."
