Bank of America 2011 Annual Report Download - page 221

Bank of America 2011 219
withdrawing cross-appeals from the court’s June 2010 order.
On March 24, 2010, CFC and other Countrywide entities filed
a separate but related action against FGIC in New York Supreme
Court seeking monetary damages of at least $100 million against
FGIC in connection with FGIC’s failure to pay claims under certain
bond insurance policies. The same day, CFC and the other
Countrywide entities filed an action to enjoin the instruction of the
New York State Department of Financial Services (NYSDFS) to
FGIC to suspend payments claimed under various insurance
agreements or its approval of FGIC’s plan to do so. This action is
currently being voluntarily deferred at the request of the NYSDFS.
MBIA
The Corporation, CFC and other Countrywide entities are named
as defendants in two actions filed by MBIA Insurance Corporation
(MBIA). The first action, MBIA Insurance Corporation, Inc. v.
Countrywide Home Loans, et al., is pending in New York Supreme
Court, New York County. In April 2010, the court granted in part
and denied in part the Countrywide defendants’ motion to dismiss
and denied the Corporation’s motion to dismiss. The parties filed
cross-appeals. On December 22, 2010, the court issued an order
on MBIA’s motion for use of sampling at trial, in which the court
held that MBIA may attempt to prove its breach of contract and
fraudulent inducement claims through examination of statistically
significant samples of the securitizations at issue. In its order, the
court did not endorse any of MBIA’s specific sampling proposals
and stated that defendants have “significant valid challenges” to
MBIA’s methodology that they may present at trial, together with
defendants’ own views and evidence. On June 30, 2011, the
appellate court issued a decision on the parties’ cross-appeals.
The appellate court dismissed MBIA’s breach of implied covenant
of good faith and fair dealing claim, which reversed the trial court
ruling on that claim, and otherwise affirmed the trial court’s
decisions.
On May 25, 2011, MBIA moved for partial summary judgment,
seeking rulings that: (i) MBIA does not have to show that
Countrywide’s alleged fraud and breaches of contract proximately
caused MBIA’s losses; and (ii) the term “materially and adversely
affects” in the transaction documents does not limit the
repurchase remedy to defaulted loans, or require MBIA to show
that Countrywide’s breaches of the representations and warranties
caused the loans to default. On January 3, 2012, the court issued
an order that granted in part and denied in part MBIA’s motion.
The court ruled that under New York insurance law, MBIA does not
need to prove a causal link between Countrywide’s alleged
misrepresentations and the payments made pursuant to the
policies. The court also held that plaintiff could recover “rescissory
damages” (the amounts it has been required to pay pursuant to
the policies less premiums received) on such claims, but must
prove that it was damaged as a direct result of Countrywide’s
alleged material misrepresentations. The court denied the motion
in its entirety on the issue of the interpretation of the “materially
and adversely affects” language. On January 25, 2012,
Countrywide appealed the court’s decision and order to the extent
it granted MBIA’s motion. On February 6, 2012, MBIA filed a cross-
appeal of the court’s decision and order to the extent it denied
MBIA’s motion.
The second MBIA action, MBIA Insurance Corporation, Inc. v.
Bank of America Corporation, Countrywide Financial Corporation,
Countrywide Home Loans, Inc., Countrywide Securities Corporation,
et al., is pending in California Superior Court, Los Angeles County.
MBIA purports to bring this action as subrogee to the note holders
for certain securitized pools of HELOC and fixed-rate second-lien
mortgage loans and seeks unspecified damages and declaratory
relief. On May 17, 2010, the court dismissed the claims against
the Countrywide defendants with leave to amend, but denied the
request to dismiss MBIA’s successor liability claims against the
Corporation. On June 21, 2010, MBIA filed an amended complaint
re-asserting its previously dismissed claims against the
Countrywide defendants, re-asserting the successor liability claim
against the Corporation and adding Countrywide Capital Markets,
LLC as a defendant. The Countrywide defendants filed a demurrer
to the amended complaint, but the court declined to rule on the
demurrer and instead entered an order staying the case until
August 2011. On August 18, 2011, the court ordered a partial
lifting of the stay to permit certain limited discovery to proceed.
The stay otherwise remains in effect.
Syncora
The Corporation, CFC and other Countrywide entities are named
as defendants in an action filed by Syncora Guarantee Inc.
(Syncora) entitled Syncora Guarantee Inc. v. Countrywide Home
Loans, Inc., et al. This action, currently pending in New York
Supreme Court, New York County, relates to bond insurance
policies provided by Syncora on certain securitized pools of HELOC.
In March 2010, the court issued an order that granted in part and
denied in part the Countrywide defendants’ motion to dismiss.
Syncora and the Countrywide defendants filed cross-appeals from
this order. In May 2010, Syncora amended its complaint.
Defendants filed an answer to Syncora’s amended complaint on
July 9, 2010, as well as a counterclaim for breach of contract and
declaratory judgment. The parties subsequently stipulated to the
dismissal of defendants’ counterclaim without prejudice. Following
the appellate court’s June 30, 2011 order on the cross-appeals
in MBIA Insurance Corporation, Inc. v. Countrywide Home Loans, et
al., the parties entered a joint stipulated order withdrawing their
cross-appeals.
On August 16, 2011, Syncora moved for partial summary
judgment, seeking rulings that: (i) Syncora does not have to show
that Countrywide’s alleged fraud and breaches of contract
proximately caused Syncora’s losses; and (ii) the term “materially
and adversely affects” in the transaction documents does not limit
the repurchase remedy to defaulted loans, or require Syncora to
show that Countrywide’s breaches of the representations and
warranties caused the loans to default. On January 3, 2012, the
court issued a decision and order that granted in part and denied
in part Syncora’s motion. The court ruled that under New York
insurance law, Syncora does not need to prove a causal link
between Countrywide’s alleged misrepresentations and the
payments made pursuant to the policies. The Court also held
plaintiff could recover “rescissory damages” (the amounts it has
been required to pay pursuant to the polices less premiums
received) on such claims, but must prove that it was damaged as
a direct result of Countrywide’s alleged material
misrepresentations. The court denied the motion in its entirety on
the issue of the interpretation of the “materially and adversely
affects” language. On January 6, 2012, Syncora appealed the
decision and order to the extent it denied Syncora’s motion. On
January 25, 2012, Countrywide filed a cross-appeal of the court’s
decision and order to the extent it granted Syncora’s motion.