NEW YORK, June 28 (Reuters) - A state appeals court on
Thursday upheld the dismissal of a lawsuit brought against Bank
of America Corp by investors who wanted the bank to buy back
mortgage loans issued during the financial crisis.
The case was filed by entities known as Walnut Place, who
had invested in more than $1 billion in securities backed by the
mortgages. Walnut Place is a name used by the Baupost Group, a
Boston-based hedge fund run by money manager Seth Klarman.
The investors claimed Countrywide Financial Corp made false
representations about the characteristics and credit quality of
loans underlying the securities in pooling and servicing
agreements. Countrywide was bought by Bank of America in 2008.
Bank of America refused its demand that it buy back the
loans and Bank of New York Mellon, the trustee for the
securities, "unreasonably failed" to sue the bank to repurchase
the loan, Walnut Place said.
Supreme Court Justice Barbara Kapnick dismissed the lawsuit
on March 29. She said the investors were covered by a proposed
$8.5 billion settlement between Bank of America and all
investors who lost money on Countrywide mortgage-backed
The Appellate Division, First Department, on Thursday
unanimously affirmed Kapnick's decision.
The appeals court said Kapnick correctly decided that the
case was barred by a "no-action" clause in the pooling and
servicing agreements, which limit the right to sue to an "event
of default," which doesn't apply.
"The court correctly held that plaintiff certificate
holders' action is barred" by agreements that limit the right to
sue, the appeals court wrote.
The $8.5 billion settlement was reached in June 2011 with 22
institutional investors, including BlackRock Inc and MetLife, to
resolve liabilities from Bank of America's $2.5 billion purchase
of Countrywide in July 2008.
Walnut Place, which was not part of talks but would be bound
by the terms of the agreement, is among investors who have
objected to the settlement, complaining that the $8.5 billion
payout is too low.
New York attorney David Grais, who represents Walnut Place,
did not immediately respond to a request for a comment.
Lawrence Grayson, a spokesman for Bank of America, declined
to comment. Kevin Heine, a spokesman for Bank of New York
Mellon, did not immediately respond to a request for comment.
The case is Walnut Place LLC et al v Countrywide Home Loans
Inc et al, New York State Supreme Court, New York County, No.
(Reporting by Karen Freifeld)
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