CIBC to pay $770 million to Cerberus to end lawsuit tied to financial crisis
By Jonathan Stempel
NEW YORK (Reuters) -Canadian Imperial Bank of Commerce said on Friday it will pay $770 million to a vehicle controlled by private equity firm Cerberus Capital Management to resolve a lawsuit tied to the 2008 global financial crisis.
The Toronto-based bank announced the settlement after a New York state judge in Manhattan had awarded Cerberus $848 million in damages and interest in the contract dispute.
CIBC agreed to end its appeal from the award, and both sides agreed that all claims and counterclaims will be dismissed.
Cerberus did not immediately respond to requests for comment.
The dispute stemmed from a complex 2008 transaction in which CIBC made payments to a Cerberus entity in exchange for a loan to reduce the bank's exposure to U.S. residential real estate.
Cerberus sued CIBC in November 2015, claiming that the bank improperly underpaid what it owed and eventually stopped paying altogether. CIBC countered that Cerberus had long accepted the alleged underpayments, and misunderstood their agreements.
After a 13-day non-jury trial, Justice Joel Cohen found CIBC liable for breach of contract.
He said that while Cerberus "acted aggressively in its economic self-interest" and benefited from its understanding of "exceedingly complex financial instruments," CIBC simply interpreted the contracts incorrectly and had not been a "hapless rube led astray."
In Friday's announcement, CIBC said it has recorded a C$1.17 billion pretax charge in its forthcoming fiscal first-quarter results, representing $855 million of damages and interest through Jan. 31.
CIBC said the $85 million difference between that amount and the settlement will be reflected in second-quarter results.
(Reporting by Jonathan Stempel in New York; Editing by Diane Craft and Bill Berkrot)
