BofA wins on limitations of Countrywide securities lawsuits
THE BANK OF AMERICA CORP. may limit its exposure to claims by Countrywide Financial mortgage-backed securities investors after a federal judge says she should not have allowed some of the claims to proceed two years ago.
BLOOMBERG FILE PHOTO/DANIEL ACKER
By Edvard Pettersson Bloomberg News
LOS ANGELES - Bank of America Corp. may limit its exposure to claims by Countrywide Financial mortgage-backed securities investors after a federal judge said she may have erred two years ago by allowing some claims to proceed.
U.S. District Judge Mariana Pfaelzer in Los Angeles, who presides over the consolidated mortgage-backed securities cases against Bank of America’s Countrywide, said in a Nov. 21 order that she no longer believes that the first investor lawsuits filed in California state court case extended the statute of limitation for claims brought subsequently in federal court.
“The court is no longer convinced that this conclusion was correct,” Pfaelzer said. The reasoning “represents a change in the court’s analysis of existing case law.”
Pfaelzer in two rulings in 2010 and 2011 ruled that investors who had sued over $351 billion in downgraded Countrywide mortgage-backed securities, had only so-called standing to sue over $2.6 billion of the tranches of the securities that they had bought and that had also had been part of the first state court cases filed in 2007 and 2008.
As part of her November 2010 ruling, Pfaelzer agreed with the institutional investors, led by the Iowa Public Retirement System, that the statute of limitations hadn’t run out for their claims. The judge agreed that the state court cases had been brought within the allowed timeframe and that a federal rule extended the statute of limitation for identical claims.
In her new ruling, the judge said that since state lawsuits don’t have to meet the same requirements as class-action lawsuits filed in federal court, the federal rules that would have preserved the plaintiffs’ standing to pursue the claims couldn’t be applied to the state lawsuit.
“The reversal of the district court in this order requires careful consideration for all pending and future cases,” Patrick McManemin, a lawyer with Patton Boggs LLP in Dallas who isn’t involved in the case, said in a telephone interview.
The parties in the class-action case “are likely considering what new options or potential argument this ruling might provide.”
Steve Toll, a lawyer for the plaintiffs in the class-action lawsuit, said he hadn’t seen the ruling yet and couldn’t comment.
“We are pleased with the court’s decision,” Lawrence Grayson, a spokesman for Charlotte, North Carolina-based Bank of America, said in a telephone interview.
Pfaelzer provided her revised analysis as part of an order in a separate lawsuit by the Federal Deposit Insurance Corp., which had sued Countrywide as the receiver for Strategic Capital Bank, a failed bank that had bought $62.6 million in Countrywide residential mortgage-backed securities.