Bank of America $8.5 billion settlement heads for court showdown
By Karen Freifeld
NEW YORK (Reuters) - A long-running fight comes to a head on Monday when court proceedings begin over an $8.5 billion settlement between Bank of America Corp and investors in mortgage securities that turned sour in the financial crisis.
Bank of America agreed to the proposed settlement in June 2011 to resolve claims by investors who held bonds issued by mortgage lender Countrywide Financial Corp, which Bank of America bought in 2008.
Twenty-two institutional investors, including BlackRock Inc, MetLife Inc and Allianz SE's Pacific Investment Management Co entered into the deal. But American International Group Inc and others objected, saying the settlement offered them only a fraction of the money they lost.
Justice Barbara Kapnick of New York State Supreme Court, who will decide the case without a jury, has set aside the first two weeks of June to hear the case.
If she rejects the settlement, the parties could face years of litigation.
Kathy Patrick, who will argue for the institutional investors who negotiated the deal, said objectors comprise only seven percent of certificate-holders.
"There is massive support for this settlement," Patrick said in arguments during a last-minute appeal last week.
The proposed deal "offers pennies on the dollar," Colorado attorney Daniel Reilly, who represents AIG, said during last week's arguments. Continued...