The New York Supreme Court late Monday denied Countrywide and Bank of America’s motion to consolidate various claims against them made by four bond insurers led by MBIA Insurance Corp.
Judge Eileen Bransten said consolidation is generally favored by the courts when common issues of fact exist, but denial is appropriate when plaintiffs’ actions are at “markedly different procedural stages.”
In this case, MBIA “is the front-runner in completing discovery,” Bransten wrote in her 17-page decision. “Rather than four plaintiffs with similar, but varying, interests attempting to work together to obtain discovery, efficiency may be increased by allowing one party to take the lead.”
The decision allows MBIA’s case against the parties to proceed without delay.
MBIA filed suit against Countrywide in September 2008, alleging the home mortgage giant “fraudulently induced” it to insure risky RMBS that failed to meet typical underwriting standards and guidelines.
Similar claims followed by Syncora Guarantee, Financial Guaranty Insurance Co., and Ambac Assurance Corp.
BofA acquired Countrywide in July 2008. In May 2010, Bransten called that acquisition “a de facto merger” and said the bank is therefore responsible for any “pre-existing liabilities” of Countrywide.
MBIA spokesman Kevin Brown issued a statement via e-mail: “We are pleased that MBIA’s successor liability claims against Bank of America for Countrywide’s fraud and breach of contract will be permitted to continue without further delay.”
Shares of MBIA’s parent company jumped nearly 5% in the final minutes of trading after the order was released. Shares closed the day 1.85% higher at $8.80, whereas the S&P 500 fell 2.47%.
MBIA is a guarantor of structured finance products. Its domestic public finance portfolio was ceded to a new entity — National Public Finance Guarantee Corp. — in a company restructuring in February 2009. That split spurred a series of ongoing lawsuits challenging the transfer of capital away from MBIA and into the new bond insurer.