J.P. Morgan Securities v. Vigilant Insurance Co.

992 N.E.2d 1076 (2013)

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J.P. Morgan Securities v. Vigilant Insurance Co.

New York Court of Appeals
992 N.E.2d 1076 (2013)

RW

Facts

The Securities and Exchange Commission (SEC) charged Bear Stearns & Company, Inc. (Bear Stearns) (plaintiff) with numerous securities-law violations. Bear Stearns admitted no wrongdoing but agreed to settle the case by paying a $90 million civil penalty and a $160 million so-called disgorgement. The settlement order recited the SEC’s finding that Bear Stearns had willfully engaged in deceptive brokerage practices. Although the settlement order did not explain the basis for the disgorgement payment, Bear Stearns contended that only $20 million of that payment represented Bear Stearns’s own profits and that the rest represented profits that third-party customers reaped from Bear Stearns’s brokerage practices. Vigilant Insurance Company and Bear Stearns’s other professional-liability insurers (defendants) refused to cover any portion of Bear Stearns’s settlement payments. Bear Stearns and J.P. Morgan Securities Inc. (J.P. Morgan) (plaintiff), with whom Bear Sterns merged in 2008, sued for indemnification. The trial court denied the insurers’ motion to dismiss the case but was reversed on appeal by an intermediate court. Bear Stearns and J.P. Morgan appealed to the New York Court of Appeals.

Rule of Law

Issue

Holding and Reasoning (Graffeo, J.)

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