Bloomberg News

BofA Accord Transfer to Federal Court to Be Heard on Appeal

December 28, 2011

(Updates with Walnut Place response in seventh paragraph.)

Dec. 27 (Bloomberg) -- A group of institutional investors including BlackRock Inc. persuaded a federal appeals court to consider its request to return an $8.5 billion bond settlement with Bank of America Corp. to state court for possible approval.

The U.S. Court of Appeals in New York today agreed to review the appeal of U.S. District Judge William Pauley’s ruling in October to keep the case in federal court for review, rather than sending it back to New York State Supreme Court.

The proposed agreement, first filed in New York state court, would settle claims from investors in the mortgage bonds of Countrywide Financial Corp., which Charlotte, North Carolina- based Bank of America bought in 2008. The deal was reached with the institutional investor group that includes BlackRock and Pacific Investment Management Co. and would apply to 530 mortgage-securitization trusts.

Bank of New York Mellon Corp., the trustee for the mortgage-bond trusts, filed the settlement in state court and planned to seek approval of it there. Under the state proceeding, approval would bind investors outside the group that negotiated the agreement. Bank of New York had also asked the court to review Pauley’s ruling.

Acted Reasonably

The proponents of the settlement are seeking a state-court determination that Bank of New York acted reasonably in reaching the settlement.

An investor group, Walnut Place LLC and related entities, moved the case to federal court and is fighting the bid to return it to state court. Walnut Place and the other opponents of the deal want it reviewed by Pauley. They claim the federal Class Action Fairness Act gives him jurisdiction over the litigation.

Owen Cyrulnik, a lawyer representing Walnut Place, declined to comment on the court’s decision to hear the appeal.

The case is Bank of New York Mellon v. Walnut Place LLC, 11-4554, 11-4571, U.S. Court of Appeals for the Second Circuit (Manhattan).

--With assistance from Patricia Hurtado in New York. Editors: Peter Blumberg, Mary Romano

To contact the reporter on this story: Bob Van Voris in New York at rvanvoris@bloomberg.net

To contact the editor responsible for this story: David E. Rovella at drovella@bloomberg.net


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