JPMorgan Chase & Co. (NYSE:JPM) has been named as a defendant in a suit filed by Ambac. The suit is actually aimed at practices at Bear Stearns. JPMorgan bought Bear Stearns in 2008 and so is now seen as liable for the practices of the company previously. The lawsuit was files in the New York State Supreme Court. The Ambac Financial Group is rebounding from a bankruptcy which it left just last month. This suit could be a boon to the company’s coffers if resolved in their favor in a timely fashion. It is reported that the loss from the securities under scrutiny in this filing was $1.6 billion.

Ambac alleges that it is owed $200 million by JPMorgan after fraudulent dealings by the former Bear Stearns resulted in the company losing that amount on just seven mortgage backed securities transactions from 2006. Its claim is that Bear Stearns fraudulently induced them to enter in those dealings and so is liable for the losses the company incurred. The administrative difficulties in dealing with a now defunct enterprise which has been swallowed by a byzantine one will be potent in the court’s search for fault in the dealings.

The outcome of the trial could be enlightening for many financial institutions still facing suits of this nature, though this trial will likely be informed by another first. Despite the apparent recovery of the US economy many of the country’s biggest company’s, particularly banks and other financial institutions, are still mired in a huge amount of litigation regarding practices during the years leading up to the crash. The continued presence of these suits is a dampner on the system and a cause for uncertainty in the market. Quick resolutions are almost impossible in these situations, the only hope being an out of court settlement.

Ambac Financial Group Inc. emerged from bankruptcy with court permission last month and is seeking to recover what it seen as unfair losses from its bond insurance market during the financial crisis. It was those dealings that made the insurer go bankrupt in the first place and they are now seek recompense. The lawsuit is the second the group has filed against JPMorgan regarding practices at Bear Stearns. The company now faces much work in preparing their case against the bank and if they are deemed the victor shall be rewarded greatly.