A New York appeals court upheld the dismissal of a lawsuit against Bank of America Corp. (BAC:US) by investors seeking the repurchase of defective loans underlying more than $1 billion in securities.
New York State Supreme Court Justice Barbara Kapnick threw out the complaint by Walnut Place LLC and related entities in March, saying the lawsuit was “premature.” An appeals court in Manhattan today upheld the dismissal, saying the complaint was barred by a clause in pooling and service agreements that “plainly limits” the right to sue.
Walnut Place sued Bank of America’s Countrywide Home Loans unit last year, accusing it of making false representations and warranties about loans backing more than $1 billion in securities.
Walnut Place is a pseudonym used by hedge fund Baupost Group LLC, according to Theodore Mirvis, a Bank of America attorney. Boston-based Baupost, founded by Seth Klarman, is the “real plaintiff” in the case, Mirvis said at a court hearing.
Elaine Mann, a Baupost spokeswoman, said in March that the firm doesn’t comment on specific investments.
Walnut Place had said in court papers that it was suing because Bank of New York Mellon Corp. (BK:US), as trustee for bondholders, “unreasonably failed” to sue Bank of America to enforce the obligation to repurchase loans.
In her decision, Kapnick said the filing of the lawsuit was “premature under the circumstances” because it came just days after BNY Mellon said it needed more time to evaluate the matter. Walnut Place had directed BNY Mellon to sue Countrywide over the loans.
In addition, BNY Mellon “did, in fact, act upon” Walnut Place’s complaints, as demonstrated by an $8.5 billion settlement with Bank of America and a group of institutional investors over Countrywide mortgage bonds, Kapnick wrote. That settlement, which Walnut Place has challenged, awaits court approval.
Lawrence Grayson, a spokesman for Charlotte, North Carolina-based Bank of America, and David Grais, a lawyer for Walnut Place, didn’t immediately respond to messages seeking comment on today’s decision.
The case is Walnut Place LLC v. Countrywide Home Loans Inc., 650497-2011, New York State Supreme Court, New York County (Manhattan).
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