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Bank of America Dismissed From Countrywide Securities Suit

Bank of America
A Bank of America Corp. sign is illuminated outside a branch in Charlotte, North Carolina, U.S., on Friday, April 15, 2011. Photographer: Chris Keane/Bloomberg

Bank of America Corp. was dismissed from a lawsuit brought by investors who bought mortgage-backed securities sold by Countrywide Financial Corp., the home lender Bank of America acquired in 2008.

U.S. District Judge Mariana Pfaelzer granted Bank of America’s request to dismiss the claim against it on grounds that it can’t be held liable for actions of a unit, according to an April 20 order filed in Los Angeles.

The investors failed to show that two separate transactions in 2008, whereby Bank of America, through a subsidiary, acquired and transferred the Countrywide assets, were a “de facto” merger, Pfaelzer said.

The judge had dismissed the lawsuit in November, saying the investors didn’t sufficiently demonstrate they suffered an injury for the securities they bought, and that the statute of limitations had expired for some claims. The judge allowed the plaintiffs to file an amended complaint to address these failings before she would rule on Bank of America’s Aug. 20 request to dismiss it from the complaint.

Bank of America said in its Augu. 20 filing that Countrywide remained a separate, wholly owned subsidiary of the bank and that, as a parent company, it can’t be held liable for the mortgage lender’s alleged wrongdoing.

Systematically Disregarded

The investors claim Countrywide systematically disregarded lending guidelines for the loans it originated and sold as mortgage-backed securities. The other defendants in the case include Countrywide entities, the underwriters that sold the securities, and some of the mortgage lender’s former executives.

Joel Laitman, a lawyer representing the investors, didn’t immediately return a call to his office after regular business hours.

Shirley Norton, a spokeswoman for Charlotte, North Carolina-based Bank of America, said in an e-mailed statement that the bank was gratified by the judge’s decision after determining the bank and “NB Holdings should not be required to answer claims that it succeeded to the legacy Countrywide entities’ liabilities by virtue of allegations involving, among other things, the merger transaction with Countrywide Financial” and the bank’s purchase of some “legacy Countrywide assets for value.”

Pfaelzer held a hearing on March 23 on motions to dismiss the other claims in the amended complaint and has yet to issue a ruling on those requests.

The case is Maine State Retirement System v. Countrywide Financial Corp., 10-cv-00302, U.S. District Court, Central District of California (Los Angeles).

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