Justice Saliann Scarpulla of New York state court in Manhattan, who
took over the case this week, agreed to delay the decision from
taking effect until at least February 19, according to lawyers
involved in the case.
Scarpulla's decision came just four days after Justice Barbara
Kapnick approved the settlement with the investors, who had bought
securities issued by mortgage lender Countrywide Financial Corp.
Bank of America acquired Countrywide during the financial crisis.
In her ruling last Friday, Kapnick said the ruling would take effect
on February 7. Kapnick's decision came on her last day as a trial
court judge. She was promoted to a state appeals court effective
February 3, and most of her cases were handed over to Scarpulla.
On Tuesday, American International Group Inc <AIG.N>, which led
investors who opposed the settlement, sought a further delay. A
postponement was necessary so that the "many issues that were left
open" in Kapnick's decision could be litigated, AIG's lawyer, Mark
Zauderer, wrote in court papers.
Scarpulla agreed to the delay at a court hearing later on Tuesday,
lawyers involved in the case told Reuters.
Lawrence Grayson, a spokesman for Bank of America, declined to
comment on the delay.
Kevin Heine, a spokesman for Bank of New York Mellon <BK.N>, the
trustee for the mortgage securities, also declined to comment.
Bank of America agreed to the settlement in June 2011 to resolve the
claims of investors in 530 residential mortgage-backed securities
trusts issued by Countrywide before the U.S. housing crisis. The
investors said Countrywide misrepresented the quality of the
underlying home mortgages.
A group of 22 investors supported the settlement, including
institutions such as BlackRock Inc <BLK.N>, MetLife Inc <MET.N> and
Allianz SE's <ALVG.DE> Pacific Investment Management Co.
But other investors, led by AIG, said there was no evidence the
settlement would adequately compensate them for their losses and
tried to block approval of the deal in a New York state court.
[to top of second column]
In her ruling on Friday, Kapnick wrote that Bank of New York Mellon,
the trustee representing investors, had acted mostly in good faith
in entering into the settlement. But she withheld her approval for
one part of the settlement in which she said the trustee had failed
to investigate claims regarding Bank of America's obligations to
repurchase modified loans.
Bank of America said on Friday it did not expect Kapnick's
exception to hold up the accord.
But in its court papers on Tuesday, AIG said Scarpulla should
withhold final judgment until she conducts further proceedings to
determine how losses will be calculated and how the settlement money
will be distributed.
Kenneth Warner, a lawyer representing the 22 investors who support
the settlement, said in a letter to the judge that a delay would be
"prejudicial to the thousands of certificate holders who are waiting
for the settlement proceeds to be distributed."
John Moon, a lawyer who represents the Triaxx funds, which also
oppose the settlement, said he was still assessing the impact of
Kapnick's decision. "No one knows what's going to happen, but all
indications are this is going to be a very vociferous fight," Moon
The case is In re Bank of New York Mellon, New York State Supreme
Court, New York County, No. 651786/2011.
(Reporting by Karen Freifeld; editing by
Eddie Evans and Ken Wills)
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