March 29 (Bloomberg) -- Bank of America Corp. won dismissal of a lawsuit by investors in mortgage-backed bonds that said the bank should buy back defective loans underlying more than $1 billion in securities.
New York State Supreme Court Justice Barbara Kapnick dismissed the complaint filed last year by Walnut Place LLC and related entities, saying the lawsuit was “premature,” according to a decision dated yesterday.
Bank of America’s Countrywide Financial unit was accused of making false representations and warranties about the loans backing the bonds, according to the complaint. Walnut Place owns about $1.4 billion in face value of the securities at issue, it said in court papers.
Walnut Place is a pseudonym used by hedge fund Baupost Group LLC, according to Theodore Mirvis, a Bank of America attorney. Boston-based Baupost, founded by Seth Klarman, is the “real plaintiff” in the case, Mirvis said at a court hearing, according to a transcript.
Elaine Mann, a spokeswoman for Baupost, said the firm’s general policy is not to comment on specific investments, whether the fund holds them or not.
Walnut Place had said in court papers that it was suing because Bank of New York Mellon Corp., as trustee for bondholders, “unreasonably failed” to sue Bank of America to enforce the obligation to repurchase loans.
Bank of America spokesman Lawrence Grayson said the Charlotte, North Carolina-based lender was pleased with the decision. David Grais, a lawyer for Walnut Place, didn’t return a phone message seeking comment.
In her decision, Kapnick said the filing after of lawsuit was “premature under the circumstances” because it came just days after BNY Mellon said it needed more time to evaluate the matter. Walnut Place had directed BNY Mellon to sue Countrywide over the loans.
In addition, BNY Mellon “did, in fact, act upon” Walnut Place’s complaints, as demonstrated by an $8.5 billion settlement with Bank of America and a group of institutional investors over Countrywide mortgage bonds, the judge wrote. That settlement, which Walnut Place has challenged, awaits court approval.
“We are pleased the court recognized that BNY Mellon acted properly in this matter,” bank spokesman Kevin Heine said in a statement. “As we’ve said in the past, we believe that at all times we’ve acted in accordance with our duties as trustee.”
The case is Walnut Place LLC v. Countrywide Home Loans Inc., 650497-2011, New York State Supreme Court (Manhattan).
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