Bank of America 2010 Annual Report Download - page 208

between January 2005 and December 2007. The Luther Plaintiffs certified
that they collectively purchased securities in 61 of the 429 offerings for
approximately $216 million. On January 6, 2010, the court granted CFC’s
motion to dismiss, with prejudice, due to lack of subject matter jurisdiction.
The Luther Plaintiffs’ appeal to the California Court of Appeal is currently
pending.
Following the dismissal of the Luther Action, the Maine State Retirement
System filed a putative class action in the U.S. District Court for the Central
District of California, entitled Maine State Retirement System v. Countrywide
Financial Corporation, et al. (the Maine Action). The Maine Action names the
same defendants as the Luther Action, as well as the Corporation and NB
Holdings Corporation, and asserts substantially the same allegations regard-
ing 427 of the MBS offerings that were at issue in the Luther Action. On
May 14, 2010, the court appointed the Iowa Public Employees’ Retirement
System (IPERS) as Lead Plaintiff. On July 13, 2010, IPERS filed an amended
complaint, which added additional pension fund plaintiffs (collectively, the
Maine Plaintiffs). The Maine Plaintiffs certified that they purchased securities
in 81 of those 427 offerings, for approximately $538 million. On November 4,
2010, the court granted CFC’s motion to dismiss the amended complaint in
its entirety, and ordered the Maine Plaintiffs to file a second amended
complaint within 30 days. In so doing, the court held that the Maine Plaintiffs
only have standing to sue over the 81 offerings in which they actually
purchased MBS. The court also held that the applicable statute of limitations
could be tolled by the filing of the Luther Action only with respect to the
offerings in which the Luther Plaintiffs actually purchased MBS. On Decem-
ber 6, 2010, the Maine Plaintiffs filed a second amended complaint that
relates to 14 MBS offerings.
Western Conference of Teamsters Pension Trust Fund (Western Team-
sters) filed suit against the same defendants named in the Maine Action on
November 17, 2010 in the Superior Court of California, Los Angeles County,
entitled Western Conference of Teamsters Pension Trust Fund v. Countrywide
Financial Corporation, et al. Western Teamsters claims that it and other
unspecified investors purchased MBS issued in the 428 offerings that were
also at issue in the Luther Action. The Western Teamsters action has been
stayed by the Superior Court pending resolution of the appeal of the Luther
Action.
The New Mexico State Investment Council, New Mexico Educational Re-
tirement Board and New Mexico Public Employees Retirement Association
(the New Mexico Plaintiffs) have also brought an action against CFC and
several of its affiliates, current and former officers, as well as third-party
underwriters in New Mexico District Court for the County of Santa Fe, entitled
New Mexico State Investment Council, et al. v. Countrywide Financial Corpo-
ration, et al. A related action was later filed against the individual defendants
in California Superior Court, entitled New Mexico State Investment Council, et
al. v. Stanford L. Kurland, et al. On November 15, 2010, the parties agreed to
resolve and dismiss these two cases in their entirety with prejudice for an
amount that is not material to the Corporation’s results of operations.
Putnam Bank filed a putative class action lawsuit on January 27, 2011
against CFC, the Corporation, certain of their subsidiaries, and certain indi-
viduals in the U.S. District Court for the District of Connecticut, entitled
Putnam Bank v. Countrywide Financial Corporation, et al. Putnam Bank
alleges that it purchased approximately $33 million in eight MBS offerings
issued by subsidiaries of CFC between August 2005 and September 2007. All
eight offerings were also included in the Luther Action and the Maine Action. In
addition to certain MBS Claims, Putnam Bank contends among other things
that defendants made false and misleading statements regarding: (i) the
number of mortgage loans in each offering that were originated under reduced
documentation programs; (ii) the method by which mortgages were selected
for inclusion in the collateral pools underlying the offerings; and (iii) the
analysis conducted by ratings agencies prior to assigning ratings to the MBS.
Countrywide may also be subject to contractual indemnification obliga-
tions for the benefit of certain defendants involved in the MBS matters
discussed above.
IndyMac Litigation
In 2006 and 2007, MLPFS, CSC and other financial institutions participated
as underwriters in MBS offerings in which IndyMac MBS, Inc. securitized
residential mortgage loans originated or acquired by IndyMac Bank, F.S.B.
(IndyMac Bank) and created trusts that issued MBS. In 2009, the Corporation
was named as an underwriter defendant, along with several other financial
institutions, in its alleged capacity as “successor-in-interest” to MLPFS and
CSC in a consolidated class action in the U.S. District Court for the Southern
District of New York, entitled In re IndyMac Mortgage-Backed Securities
Litigation. In their complaint, plaintiffs assert MBS Claims relating to 106
offerings of IndyMac-related MBS. On June 21, 2010, the court dismissed the
Corporation from the action because the plaintiffs failed to plead sufficient
facts to support their allegation that the Corporation is the “successor-in-in-
terest” to MLPFS and CSC. On August 3, 2010, plaintiffs filed a motion to add
MLPFS and CSC as defendants, which MLPFS and CSC have opposed.
Merrill Lynch MBS Litigation
Merrill Lynch, MLPFS, Merrill Lynch Mortgage Investors, Inc. (MLMI) and
certain current and former directors of MLMI are named as defendants in
a putative consolidated class action in the U.S. District Court in the Southern
District of New York, entitled Public Employees’ Ret. System of Mississippi v.
Merrill Lynch & Co. Inc. In addition to MBS Claims, plaintiffs also allege that
the offering documents for the MBS misrepresented or omitted material facts
regarding the credit ratings assigned to the securities. In March 2010, the
court dismissed claims related to 65 of 84 offerings with prejudice due to lack
of standing as no named plaintiff purchased securities in those offerings. On
November 8, 2010, the court dismissed claims related to 1 of 19 remaining
offerings on separate grounds. MLPFS was the sole underwriter of these 18
offerings. On December 1, 2010, the defendants filed an answer to the
consolidated amended complaint.
Cambridge Place Investment Management Litigation
Cambridge Place Investment Management Inc. (CPIM), as the alleged exclu-
sive assignee of certain entities that allegedly purchased MBS offered or sold
by BAS, MLPFS and CSC, brought an action against BAS, MLPFS, CSC and
several of their affiliates in Massachusetts Superior Court, Suffolk County,
entitled Cambridge Place Investment Management Inc. v. Morgan Stanley &
Co., Inc., et al. CPIM also brought claims against more than 50 other defen-
dants in this action. In addition to MBS Claims, CPIM contends that BAS,
MLPFS, CSC and their affiliates made false and misleading statements in
violation of the Massachusetts Uniform Securities Act regarding: (i) due
diligence performed by the underwriters on the mortgage loans and the
mortgage originators’ underwriting practices; and (ii) the credit enhance-
ments applicable to certain tranches of the MBS. On August 13, 2010,
certain defendants removed the case to the U.S. District Cour t for the District
ofMassachusetts.OnSeptember13,2010,CPIMfiledamotiontoremand
the case back to state court. On October 12, 2010, the court referred the
motion to remand to a Magistrate Judge for consideration. On December 28,
2010, the Magistrate Judge issued a report and recommendation that the
action be remanded to state court. On January 18, 2011, the defendants filed
an objection to that recommendation, which CPIM opposed on February 1,
2011. The objection to the Magistrate Judge’s recommendation remains
pending.
On February 11, 2011, CPIM commenced a separate civil action in
Massachusetts Superior Court, Suffolk County, captioned Cambridge Place
Investment Management Inc. v. Morgan Stanley & Co., Inc., et al.,in
206 Bank of America 2010