In a breach of contract action, Plaintiff Ambac Assurance sought to recover damages for the loss of more than $1 billion from investment accounts created to fund notes it guaranteed issued by a special purpose vehicle established to reinsure term life insurance policies. Ambac alleges that plaintiff J.P. Morgan Investment Management (“JPMIM”) failed to manage the accounts, and instead continued to hold toxic subprime securities in the accounts while its corporate parent (J.P. Morgan Chase) reduced its exposure to the same type of securities because they “could go up in smoke.” JPMIM moved to dismiss based on Ambac’s concession that JPMIM adhered to the contractual limitations on purchasing subprime securities. The New York Appellate Division reversed a New York Supreme Court ruling dismissing the action, and held that, at this stage of the proceedings, the court should have accepted the plaintiff’s allegations as true, given the plaintiff every possible inference, and simply ascertained whether the plaintiff’s allegations evidenced a cognizable cause of action (which the Appellate Division concluded Ambac had done). The case was remanded to the Supreme Court for further proceedings. Ambac Assurance UK Limited v. J.P. Morgan Investment Mgmt., Inc., No. 09-650259 (N.Y. App. Div. July 14, 2011).