(Updates with comments from judge’s order in fourth paragraph.)
June 14 (Bloomberg) -- Allstate Corp.’s lawsuit against Bank of America Corp.’s Countrywide Financial unit was moved by a U.S. judge to a federal court in California from a court in New York.
U.S. District Judge Alvin K. Hellerstein in New York today granted a motion by Countrywide to move the case to the Western Division of the Central District of California, where similar litigation over the same issues has been ongoing since January 2010, according to court documents.
The similar litigation, filed by the Maine State Retirement System, is a class-action suit that began in California Superior Court in November 2007 and was refiled in federal court. The case has been before U.S. District Judge Mariana Pfaelzer since January 2010, Hellerstein wrote.
Coordinating the Allstate lawsuit with the Maine case will “promote the efficient use of judicial resources and will prevent the possibility of inconsistent results that could arise from pursuing the very same litigation before different courts and different judges,” Hellerstein said in today’s ruling.
‘Rapid’ Value Loss
Allstate, based in Northbrook, Illinois, sued Countrywide in federal court in New York in December, saying that the company misrepresented $700 million in residential mortgage- backed securities the insurer purchased.
Allstate said in the complaint that the securities, purchased from March 2005 to June 2007, suffered “drastic and rapid loss in value” when large numbers of homeowners began to default on their mortgages. Bank of America, based in Charlotte, North Carolina, acquired Countrywide for $4.2 billion in July 2008.
In its complaint, Allstate claimed that Countrywide began ignoring its own underwriting standards in 2003 in an effort to increase its share of the home mortgage market. The company adopted an internal strategy to match any mortgage product feature offered by a competitor, Allstate said.
Lawyers for Countrywide in March asked Hellerstein to dismiss the complaint, saying the suit “parrots unsubstantiated allegations from other lawsuits” about the company’s loan origination practices and Allstate was provided with all the necessary information needed to assess the credit risk of the securities that were purchased.
The case is Allstate Insurance Co. v. Countrywide Financial Corp., 10-cv-9591, U.S. District Court, Southern District of New York (Manhattan).
--Editors: Mary Romano, Stephen Farr
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