U.S. judge tosses BofA suit vs FDIC over $1.7 billion investor losses

Mon Aug 26, 2013 6:51pm EDT
 
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By Jonathan Stempel

(Reuters) - A federal judge on Monday threw out Bank of America Corp's (BAC.N: Quote) lawsuit against the Federal Deposit Insurance Corp over $1.7 billion of investor losses stemming from the collapses in 2009 of a large regional bank and a large mortgage lender.

The lawsuit concerned the FDIC's role as receiver for an banking unit of Alabama's Colonial BancGroup Inc and the implosion of Taylor, Bean & Whitaker Mortgage Corp, home to what federal prosecutors called a $2.9 billion mortgage fraud.

Bank of America, as trustee for notes issued by Taylor Bean's Ocala Funding LLC unit, had contended that the FDIC wrongly denied claims by Ocala noteholders to recover from Colonial Bank. Among the buyers of Ocala's notes were Deutsche Bank AG (DBKGn.DE: Quote) and France's BNP Paribas SA (BNPP.PA: Quote).

Last December, U.S. District Judge Barbara Rothstein in Washington, D.C. dismissed some of Bank of America's claims but let the Charlotte, North Carolina-based lender pursue claims on behalf of itself, Deutsche Bank and BNP Paribas.

But on Monday, she dismissed those claims as well, saying the FDIC determination that there were not enough assets in Colonial's estate to pay general unsecured creditors deprived her of jurisdiction.

"The No-Value Determination is a final agency action that is binding on this court and is preclusive as to whether there are now or ever will be assets sufficient to satisfy general unsecured claims against the Colonial receivership," she wrote.

Rothstein said the only way for Bank of America to challenge this determination is under the Administrative Procedures Act, not through individual lawsuits against the FDIC. She dismissed the lawsuit with prejudice, meaning it cannot be brought again.

Bank of America spokesman Bill Halldin declined immediate comment.   Continued...

 
People walk at a Bank of America's Tower in New York October 24, 2012. REUTERS/Eduardo Munoz