U.S. Bankruptcy Judge Allan L. Gropper has ruled against CIT in a tax dispute with its former parent company Tyco International.

Judge Gropper issued an opinion Wednesday denying CIT’s motion for summary judgment in the matter, ruling the lender can’t subordinate an unsecured claim that Tyco filed as part of CIT’s 2009 bankruptcy. The claim related to a tax agreement the companies entered when Tyco spun off CIT in 2002.

Under the tax agreement, CIT was to pay Tyco for any savings the lender gained under “tax attributes” Tyco created while it owned CIT, according to the lender’s regulatory filings

CIT filed for Chapter 11 bankruptcy in November 2009 as it struggled under a heavy debt load and a souring economy. As part of the bankruptcy, CIT rejected the tax agreement with Tyco, which later filed a claim for
Through arbitration proceedings, Tyco has alleged CIT is liable for about $90 million in damages from the tax benefits it allegedly used and at least $100 million in damages from breaching other provisions of the agreement, according to Gropper’s opinion.

Previously on monitordaily:

CIT Group Sues to Halt Tyco’s Bankruptcy Claim Assertion June 23, 2011