New York and Delaware won their bids to intervene in litigation over Bank of America Corp. (BAC:US)’s proposed $8.5 billion settlement with mortgage-bond investors.
New York State Supreme Court Justice Barbara Kapnick in Manhattan granted motions by the attorneys general of the states to intervene in the case over the objections of an investor group, according to a decision today.
New York Attorney General Eric Schneiderman and Delaware Attorney General Beau Biden “have identified legitimate quasi- sovereign interests at play” in the case, Kapnick wrote. The judge also said she isn’t persuaded by arguments that the intervention would delay or burden the proceeding.
The settlement would resolve claims from investors in Countrywide Financial Corp. mortgage bonds. Bank of America acquired the mortgage lender in 2008. Bank of New York Mellon Corp. (BK:US), as trustee for investors, is seeking approval of the deal in state court.
A federal judge previously approved requests by the states to participate in the proceeding. The case was then transferred to state court, and the states asked Kapnick for permission to intervene.
Schneiderman’s office said in court papers that there are “serious questions about the fairness and adequacy” of the settlement, which covers just “a small fraction” of investor losses. Biden’s office said it was seeking to intervene to protect investors as well as homeowners affected by the agreement.
“Today’s ruling is an important victory in Attorney General Schneiderman’s extensive work to protect the integrity of New York’s global financial markets while providing meaningful relief to those who have suffered from the mortgage crisis,” James Freedland, a spokesman for Schneiderman, said in a statement.
A group of institutional investors that negotiated the settlement, including BlackRock Inc. (BLK:US), argued the states don’t have standing to intervene in a private contract dispute. Robert Madden, an attorney for the group, didn’t respond to an e-mail seeking comment.
Lawrence Grayson, a spokesman for Charlotte, North Carolina-based Bank of America, and Kevin Heine, a spokesman for BNY Mellon, declined to comment about Kapnick’s decision.
The case is In the matter of the application of the Bank of New York Mellon, 651786-2011, New York State Supreme Court (Manhattan).
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