BofA Loses Bid for Dismissal of AIG Securities Suit
American International Group Inc. (AIG) can proceed with a lawsuit against Bank of America Corp. over residential mortgage-backed securities purchased from the bank’s Countrywide Financial unit, a judge ruled.
U.S. District Judge Mariana Pfaelzer in Los Angeles yesterday partly denied a defense request she throw out the case, ruling that New York-based AIG can pursue claims of fraudulent inducement.
AIG sued Charlotte, North Carolina-based Bank of America and Countrywide for $10 billion in damages in 2011, alleging it was misled into thinking that loans underlying its investment were issued according to underwriting guidelines that had been “long abandoned.”
AIG “plausibly alleges that the underwriting guidelines stated in the offering documents were false,” Pfaelzer said in her 40-page ruling.
Lawrence Grayson, a Bank of America spokesman, didn’t immediately reply to a voice-mail message seeking comment.
The judge rejected claims that the defendants orally misrepresented underwriting practices and gave false assurances to investors about the quality of guidelines. She gave AIG permission to amend the claims.
She also threw out allegations that underwriters Merrill Lynch and Banc of America Securities knew of malfeasance at Countrywide, while again giving the insurer permission to re- plead them. Bank of America bought Countrywide in 2008.
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