Bank of America 2013 Annual Report Download - page 227

Bank of America 2013 225
(FIRREA) and/or state securities laws and other state statutory
and common laws.
These cases generally involve allegations of false and
misleading statements regarding: (i) the process by which the
properties that served as collateral for the mortgage loans
underlying the MBS were appraised; (ii) the percentage of equity
that mortgage borrowers had in their homes; (iii) the borrowers’
ability to repay their mortgage loans; (iv) the underwriting practices
by which those mortgage loans were originated; (v) the ratings
given to the different tranches of MBS by rating agencies; and (vi)
the validity of each issuing trust’s title to the mortgage loans
comprising the pool for that securitization (collectively, MBS
Claims). Plaintiffs in these cases generally seek unspecified
compensatory damages, unspecified costs and legal fees and, in
some instances, seek rescission. A number of other entities have
threatened legal actions against the Corporation and its affiliates,
Countrywide entities and their affiliates, and Merrill Lynch entities
and their affiliates concerning MBS offerings.
The Corporation, Countrywide, Merrill Lynch and/or their
affiliates may have claims for and/or may be subject to claims for
contractual indemnification in connection with their various roles
in regard to MBS.
On August 15, 2011, the JPML ordered multiple federal court
cases involving Countrywide MBS consolidated for pretrial
purposes in the U.S. District Court for the Central District of
California in a multi-district litigation entitled In re Countrywide
Financial Corp. Mortgage-Backed Securities Litigation (the
Countrywide RMBS MDL).
AIG Litigation
On August 8, 2011, American International Group, Inc. and certain
of its affiliates (collectively, AIG) filed a complaint in New York
Supreme Court, New York County, in a case entitled American
International Group, Inc., et al. v. Bank of America Corporation, et
al. AIG has named the Corporation, Merrill Lynch, Countrywide
Home loans, Inc. (CHL) and a number of related entities as
defendants. AIG’s complaint asserts certain MBS Claims
pertaining to 347 MBS offerings and two private placements in
which it alleges that it purchased securities between 2005 and
2007. AIG seeks rescission of its purchases or a rescissory
measure of damages or, in the alternative, compensatory damages
of no less than $10 billion, punitive damages and other unspecified
relief. Defendants removed the case to the U.S. District Court for
the Southern District of New York and the district court denied
AIG’s motion to remand. On April 19, 2013, the U.S. Court of
Appeals for the Second Circuit issued a decision vacating the order
denying AIG’s motion to remand, and remanded the case to the
district court for further proceedings concerning whether the court
will exercise its jurisdiction on other grounds.
On December 21, 2011, the JPML transferred the Countrywide
MBS claims to the Countrywide RMBS MDL in the Central District
of California. The non-Countrywide MBS claims remain in the U.S.
District Court for the Southern District of New York.
On May 23, 2012, the district court in the Central District of
California dismissed with prejudice plaintiffs’ federal securities
claims and certain of the state law common law claims. On August
31, 2012, AIG filed an amended complaint, which among other
things, added claims against the Corporation and certain related
entities for constructive fraudulent conveyance and intentional
fraudulent conveyance. On May 6, 2013, the district court
dismissed the fraudulent conveyance and successor liability
claims against the Corporation and related entities. On October
10, 2013, AIG filed a Third Amended Complaint, which is limited
to the claims transferred to the Countrywide RMBS MDL. It
concerns 159 offerings and asserts damages of approximately
$5 billion only with respect to the RMBS at issue in the Countrywide
RMBS MDL.
Civil RMBS Matters Filed by the DOJ and the SEC
On August 6, 2013, the DOJ and the SEC filed separate civil actions
in the U.S. District Court for the Western District of North Carolina
against MLPF&S, BANA and Banc of America Mortgage Securities,
Inc. (and, in the DOJ case, the Corporation). Both cases allege
generally that the offering materials for a single 2008 RMBS
offering contained material misstatements and omissions
regarding, inter alia, the concentration of loans originated in the
wholesale loan channel. The DOJ case asserts violations of FIRREA
and the SEC case asserts claims under Sections 17(a)(2) and (3)
and Section 5(b)(1) of the Securities Act of 1933. The complaints
demand unspecified damages and other relief. Defendants moved
to dismiss both complaints on November 8, 2013.
FHFA Litigation
FHFA, as conservator for FNMA and FHLMC, filed an action on
September 2, 2011 against the Corporation and related entities,
Countrywide and related entities, certain former officers of these
entities, and NB Holdings Corporation in New York Supreme Court,
New York County, entitled Federal Housing Finance Agency v.
Countrywide Financial Corporation, et al. (the FHFA Countrywide
Litigation). FHFA’s complaint asserts certain MBS Claims in
connection with allegations that FNMA and FHLMC purchased MBS
issued by Countrywide-related entities in 86 MBS offerings
between 2005 and 2008. FHFA seeks, among other relief,
rescission of the consideration paid for the securities or, in the
alternative, unspecified compensatory damages allegedly incurred
by FNMA and FHLMC, including consequential damages. FHFA also
seeks recovery of punitive damages.
On September 30, 2011, Countrywide removed the FHFA
Countrywide Litigation from New York Supreme Court to the U.S.
District Court for the Southern District of New York. On February
7, 2012, the JPML transferred the matter to the Countrywide RMBS
MDL. On October 18, 2012, the court dismissed as untimely FHFA’s
Section 11 claims as to 24 of the 86 MBS allegedly purchased by
FNMA and FHLMC, but otherwise denied the motion to dismiss on
statute of limitations and statute of repose grounds. On February
6, 2013, FHFA agreed to voluntarily dismiss certain of its Virginia
blue sky claims. On March 15, 2013, the court dismissed the
negligent misrepresentation and aiding and abetting claims as to
all defendants, and the Securities Act of 1933 and Washington,
D.C. blue sky claims as to certain defendants. The court also
dismissed FHFA’s successor liability claims but permitted FHFA
leave to amend its fraudulent conveyance claims. The court
otherwise denied defendants’ motions to dismiss. On June 7,
2013, the court denied with prejudice FHFA’s motion for leave to
amend its successor liability claims, based upon fraudulent
conveyance theories, against the Corporation.
Also on September 2, 2011, FHFA, as conservator for FNMA
and FHLMC, filed complaints in the U.S. District Court for the
Southern District of New York against the Corporation and Merrill
Lynch-related entities, and certain current and former officers and
directors of these entities. The actions are entitled Federal Housing
Finance Agency v. Bank of America Corporation, et al. (the FHFA
Bank of America Litigation) and Federal Housing Finance Agency v.