Judge declines BofA’s efforts to settle Countrywide lawsuit

Bank of America’s effort to settle a shareholder lawsuit over 2008 acquisition of mortgage lender Countrywide Financial Corp was rejected by a Delaware Chancery Court Judge John Noble on the grounds that the settlement would have improperly freed Charlotte, North Carolina-based Bank of America from claims raised by hedge fund SRM Global Fund LP, which once owned more than 8 percent of Countrywide's shares.

SRM run by British investor and former UBS AG trader Jon Wood claims it lost $80 million by holding onto its Countrywide shares following upbeat statements by Bank of America Chief Executive Kenneth Lewis on January 14, 2008, three days after the purchase was announced. At the time Lewis denied speculations that Countrywide is on the brink of bankruptcy saying the lender "had a very impressive liquidity plan."

According to Noble’s conclusion there was "precious little doubt" that the ultimate purchase price for Countrywide was "anything other than at least fair," in light of the absence of evidence that anyone else was interested in buying the mortgage lender. Still, he found that SRM had "uniquely individual" claims for money damages that were not covered by the proposed settlement. The judge suggested either that investors be allowed to opt out of the settlement or file fraud claims based on Lewis' statements, or that efforts to settle be abandoned.

Source: Reuters