Bank of America 2012 Annual Report Download - page 235

Bank of America 2012 233
the Southern District of New York, and the JPML issued an order
transferring the case to the Countrywide RMBS MDL in the U.S.
District Court for the Central District of California. On April 5, 2012,
the U.S. District Court for the Central District of California
remanded the case to New York Supreme Court.
Policemen’s Annuity Litigation
On April 11, 2012, the Policemen’s Annuity & Benefit Fund of the
City of Chicago, on its own behalf and on behalf of a proposed
class of purchasers of 41 RMBS trusts collateralized by
Washington Mutual-originated (WaMu) mortgages, filed a proposed
class action complaint in the United States District Court for the
Southern District of New York, entitled Policemen’s Annuity and
Benefit Fund of the City of Chicago v. Bank of America, NA and U.S.
Bank National Association. BANA and U.S. Bank are named as
defendants in their capacities as trustees, with BANA (formerly
LaSalle Bank National Association) having served as the original
trustee and U.S. Bank having replaced BANA as trustee. Plaintiff
asserts claims under the federal Trust Indenture Act as well as
state common law claims. Plaintiff alleges that, in light of the
performance of the RMBS at issue, and in the wake of publicly-
available information about the quality of loans originated by
WaMu, the trustees were required to take certain steps to protect
plaintiff’s interest in the value of the securities, and that plaintiff
was damaged by defendants’ failures to notify it of deficiencies in
the loans and of defaults under the relevant agreements, to ensure
that the underlying mortgages could properly be foreclosed, and
to enforce remedies available for loans that contained breaches
of representations and warranties. Plaintiff seeks unspecified
compensatory damages and/or equitable relief, and costs and
expenses.
On December 7, 2012, the court granted in part and denied
in part defendants’ motion to dismiss, and granted plaintiff leave
to replead some of the dismissed claims. The court ruled, among
other things, that plaintiff has standing to pursue claims on behalf
of purchasers of certificates in certain tranches of five trusts.
Plaintiffs filed a second amended complaint on January 13, 2013,
which added plaintiffs and asserted claims concerning 19 trusts.
Ocala Litigation
Ocala Investor Actions
On November 25, 2009, BNP Paribas Mortgage Corporation and
Deutsche Bank AG each filed claims (the 2009 Actions) against
BANA in the U.S. District Court for the Southern District of New
York entitled BNP Paribas Mortgage Corporation v. Bank of America,
N.A. and Deutsche Bank AG v. Bank of America, N.A. Plaintiffs allege
that BANA failed to properly perform its duties as indenture trustee,
collateral agent, custodian and depositary for Ocala Funding, LLC
(Ocala), a home mortgage warehousing facility, resulting in the loss
of plaintiffs’ investment in Ocala. Ocala was a wholly-owned
subsidiary of Taylor, Bean & Whitaker Mortgage Corp. (TBW), a
home mortgage originator and servicer which is alleged to have
committed fraud that led to its eventual bankruptcy. Ocala provided
funding for TBW’s mortgage origination activities by issuing notes,
the proceeds of which were to be used by TBW to originate home
mortgages. Such mortgages and other Ocala assets in turn were
pledged to BANA, as collateral agent, to secure the notes. Plaintiffs
lost most or all of their investment in Ocala when, as the result of
the alleged fraud committed by TBW, Ocala was unable to repay
the notes purchased by plaintiffs and there was insufficient
collateral to satisfy Ocala’s debt obligations. Plaintiffs allege that
BANA breached its contractual, fiduciary and other duties to Ocala,
thereby permitting TBW’s alleged fraud to go undetected. Plaintiffs
seek compensatory damages and other relief from BANA, including
interest and attorneys’ fees, in an unspecified amount, but which
plaintiffs allege exceeds $1.6 billion.
On March 23, 2011, the U.S. District Court for the Southern
District of New York issued an order granting in part and denying
in part BANA’s motions to dismiss the 2009 Actions. The court
dismissed plaintiffs’ claims against BANA in its capacity as
custodian and depositary, as well as plaintiffs’ claims for
contractual indemnification and other claims. The court retained
the claims questioning BANA’s performance as indenture trustee
and collateral agent. Finally, the court agreed with BANA that
plaintiffs may not pursue claims based upon Ocala notes issued
prior to July 20, 2009 (the date on which plaintiffs purchased the
last issuance of Ocala notes).
On August 30, 2010, plaintiffs each filed new lawsuits (the
2010 Actions) against BANA in the U.S. District Court for the
Southern District of Florida entitled BNP Paribas Mortgage
Corporation v. Bank of America, N.A. and Deutsche Bank AG v. Bank
of America, N.A., which the parties agreed to transfer to the U.S.
District Court for the Southern District of New York as related to
the 2009 Actions. On December 29, 2011, plaintiffs voluntarily
dismissed the 2010 Actions without prejudice and moved for leave
to amend their complaints in the 2009 Actions to include additional
contractual, tort and equitable claims. On June 5, 2012, the court
granted plaintiffs’ motion. Plaintiffs filed amended complaints on
October 1, 2012.
FDIC Action
On October 1, 2010, BANA filed suit in the U.S. District Court for
the District of Columbia against the FDIC as receiver of Colonial
Bank, TBW’s primary bank, and Platinum Community Bank
(Platinum, a wholly-owned subsidiary of TBW) entitled Bank of
America, National Association as indenture trustee, custodian and
collateral agent for Ocala Funding, LLC v. Federal Deposit Insurance
Corporation (the FDIC Action). The suit seeks judicial review of the
FDIC’s denial of the administrative claims brought by BANA in the
FDIC’s Colonial and Platinum receivership proceedings. BANA’s
claims allege that Ocala’s losses were in whole or in part the result
of Colonial and Platinum’s participation in TBW’s alleged fraud.
BANA seeks a court order requiring the FDIC to allow BANA’s claims
in an amount equal to Ocala’s losses and, accordingly, to permit
BANA, as trustee, collateral agent, custodian and depositary for
Ocala, to share appropriately in distributions of any receivership
assets that the FDIC makes to creditors of the two failed banks.
On August 5, 2011, the FDIC answered and moved to dismiss
the amended complaint, and asserted counterclaims against
BANA in BANA’s individual capacity seeking approximately $900
million in damages. The counterclaims allege that Colonial sent
4,808 loans to BANA as bailee; that BANA converted the loans
into Ocala collateral without first ensuring that Colonial was paid;
and that Colonial was never paid for these loans. BANA filed an
opposition to the FDIC’s motion to dismiss on October 21, 2011,
along with a motion to dismiss the FDIC’s counterclaims.
On December 10, 2012, the U.S. District Court for the District
of Columbia granted in part and denied in part the FDIC’s motion
to dismiss BANA’s amended complaint. The court dismissed
BANA’s claims to the extent they were brought on behalf of Ocala,
holding that those claims were not administratively exhausted, and
also dismissed three equitable claims, but allowed BANA to
continue to pursue claims in its individual capacity and on behalf