Thursday, November 21, 2013

Bank of America investors appeal dismissal of lawsuit brought by shareholders

Three investors are appealing a federal judge's dismissal of a case in which shareholders had accused Bank of America of failing to disclose the potential for a lawsuit eventually brought by mortgage-securities investor American International Group.

Camcorp Interests, Alaska Electrical Pension Fund and Northern Ireland Local Government Officers’ Superannuation Committee filed a notice of appeal Wednesday in U.S. district court for the Southern District of New York.

Shareholders sued Bank of America in September 2011, just a month after AIG sued the bank over $10 billion in losses it said it suffered on $28 billion invested in mortgage-backed securities.

In their lawsuit, the shareholders said Bank of America knew by at least January 2011 that AIG intended to file a "massive" lawsuit against the bank. But the bank's 2010 annual report submitted to regulators in February 2011 failed to mention the possible AIG lawsuit, the shareholders claimed.

On the day the lawsuit was filed, Bank of America shares fell 20 percent, resulting in losses to shareholders, the shareholders said in their suit. It was also the first trading day since Standard & Poor's downgraded U.S. debt, causing the Dow Jones industrials to fall 634.76 points. 

Their appeal follows a Nov. 1 decision by U.S. District Judge John Koeltl in New York.

Koeltl said the bank had disclosed the heightened litigation risks it faced because of its acquisitions of Countrywide Financial Corp. and Merrill Lynch. Koeltl also wrote that Bank of America was not obligated to disclose the imminence of the AIG lawsuit, because the bank could not be certain about that.