Based on the evidence in the bond insurer MBIA's redacted brief on Bank of America's successor liability for Countrywide's deficient mortgage underwriting, the bank's CEO, Brian Moynihan, remembers his legal training very well. MBIA and its lawyers at Quinn Emanuel Urquhart & Sullivan fought hard for the right to depose Moynihan, who was previously BofA's general counsel. They took two runs at the CEO, who sat for deposition on two different days. But unless MBIA is (inexplicably) holding back revelations from his testimony, Moynihan did himself and the bank no harm.

The most substantive Moynihan testimony that MBIA cited came in the CEO's response to questions about comments he made to Bloomberg and The New York Times in November and December of 2010. ("There's a lot of people out there with a lot of thoughts about how we should solve this, but at the end of the day, we will pay for the things that Countrywide did," Moynihan told Bloomberg. In the Times he said: "Our company bought (Countrywide) and we'll stand up; we'll clean it up.") At his deposition in the MBIA case, Moynihan made the earth-shattering concessions that "it is important for public disclosures to be accurate," and that he takes care to "speak carefully and make sure I say what I mean." According to MBIA, Moynihan "reaffirmed that the statement (to The New York Times) was truthful and accurate when he made it (and) that 'we want to clean (Countrywide) up, absolutely.... (That) was our intention then and that is our intention now.'"

Not exactly a smoking gun. The closest thing to Perry Mason-type evidence that MBIA cites in its brief is BofA's history of providing the capital to pay off Countrywide's liabilities, beginning with the bank's indemnification of Countrywide in pre-merger talks with state attorneys general that resulted in the AGs' broad loan modification agreement with Countrywide. After that, according to MBIA, the bank funded Countrywide's $2.8 billion put-back deal with Fannie Mae and Freddie Mac through a series of transactions between BofA and Countrywide; shared the cost of the $1.1 billion settlement with the bond insurer Assured Guaranty; committed to cover Countrywide's portion of the proposed $8.5 billion settlement with private investors in Countrywide mortgage-backed investors; and funded the $375 million settlement with Syncora earlier this year. "(The bank's) statements and payments of (Countrywide's) contingent liabilities demonstrate an intent by BAC to pay all those liabilities, thereby blurring the line between the companies in the eyes of creditors and even BAC's own senior business executives," MBIA asserted. By assuming responsibility for Countrywide's alleged wrongs, the bond insurer said, BofA has made itself liable as Countrywide's successor.

But interestingly, Bank of America's lawyers at O'Melveny & Myers used the same evidence to support the argument in their summary judgment brief that BofA's acquisition of Countrywide wasn't a sham transaction designed to harm Countrywide's creditors, which they assert is the standard for imposing successor liability. BofA turned MBIA's assumption of liability argument into an argument against any finding that the bank engaged in a de facto merger with Countrywide.

Without bombshell admissions from the bank, the successor liability question is likely to turn on the de facto merger issue, which means (as I predicted in August) that the crucial first question for New York State Supreme Court Justice Eileen Bransten is whether to apply New York or Delaware law. BofA and MBIA both devoted large chunks of their briefs to choice-of-law arguments. Bank of America wants Bransten to use Delaware law, which essentially requires a finding that BofA's acquisition of Countrywide didn't give Countrywide's investors and creditors fair consideration. "No Delaware court applying Delaware law has found a de facto merger absent proof that the transaction at issue violated the applicable asset-sale statute," the bank argued. "Because the undisputed value that (BofA) provided ... cannot be reconciled with an intent to harm CFC's creditors, MBIA cannot establish that (Countrywide) and (Bank of America) de facto merged."

MBIA argued for New York law, which uses a four-prong test to decide whether a de facto merger that would impose successor liability has taken place. According to the insurer's analysis, BofA's deal with Countrywide satisfies all of the conditions in New York's test, which does not require a showing of intent to deceive investors or creditors. The bank, MBIA asserted, "set out to acquire control over (Countrywide) and its subsidiaries, strip those companies of all their valuable assets and business operations, and merge those assets and business operations into (BofA's) same lines of business, while leaving shell entities behind to act as protective filters for Countrywide's mounting contingent liabilities and its most toxic assets. ... New York law does not countenance such tactics to frustrate the rights of third-party victims of a predecessor company's wrongdoing."

Both MBIA and BofA also argued that they deserve summary judgment regardless of which state law Bransten uses, but that's a diversion. BofA well knows that U.S. District Judge Mariana Pfaelzer in Los Angeles has twice ruled that the bank has no successor liability for Countrywide applying Delaware law. Bransten, however, has warned that she's not interested in what a California judge has to say -- and has applied New York law in preliminary consideration of BofA's successor liability.

And, of course, we don't yet know what other nuggets of interest may be in Moynihan's deposition testimony, excerpts of which may be released under procedures Bransten established earlier this month. But from what we've seen so far, I'd say BofA's successor liability to MBIA rests on Bransten, not its CEO.

(Reporting by Alison Frankel)

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