Legal Beagles Bite JPMorgan

Some are suggesting that JPMorgan is in a no-lose situation since it already has set aside a legal reserve for the $425 million payout. If the bank can somehow void the settlement, it will get an unexpected half-billion windfall in some future quarter.

Still, that may be wishful thinking on the part of the bank, and it doesn't negate the questions about the bank's legal strategy in handling litigation.

It's worth noting that JPMorgan opted to settle the case at a time the other Wall Street defendants already had filed an appeal in the case. Legal experts say Judge Shira Scheindlin went a bit out on a limb when she certified the lawsuit as a class action.

Donald Langevoort, a professor at Georgetown University's law school, says the judge, at the time, conceded Scheindlin was "stretching" the law a bit. But she argued that doing so was within her discretion in order to allow the investors to proceed with their claims.

The appellate court, however, disagreed. In the ruling, the court says the judge moved prematurely in certifying the lawsuit as a class action and had not dealt fully with some factual disputes and differences between the various claims first.

In the WorldCom litigation, JPMorgan similarly misread the legal crosswinds. In that case, JPMorgan was the last large bank to reach a settlement with WorldCom shareholders. The bank could have gotten out of the lawsuit for just $1.4 billion if it had accepted an earlier settlement overture.