UPDATE 2-Calif. court allows class action vs Countrywide

* Ruling reinstates state class action securities lawsuit

* Case covers billions of mortgage-backed securities

By Tom Hals

WILMINGTON, Del., May 19 (Reuters) - A California state appellate court cleared the way on Thursday for a state class action lawsuit over billions of dollars of mortgage-backed securities to proceed against Countrywide Financial, a unit of Bank of America Corp (BAC.N).

The court reversed a 2010 state court decision that dismissed the mortgage-backed securities lawsuit against Countrywide because it was brought in state, not federal court, but cited claims under federal law.

The lawsuit, on behalf of all investors who purchased the hundreds of billions of dollars of Countrywide mortgage-backed securities, alleged the company published false and misleading registration statements and prospectuses.

Orville Armstrong wrote in an 11-page opinion the case could proceed in state court because it did not involve "covered securities," or those that trade on a national exchange.

The case has a lengthy legal history, having already climbed the federal system to the Ninth Circuit Court of Appeals, which ruled the case belonged in state court.

Bank of America did not immediately return a request for comment.

The case is David H. Luther v Countrywide Financial Corp., Los Angeles Superior Court No. BC380698 and Court of Appeal of the State of California, Second Appellate District, Division Five No. B222889 (Reporting by Tom Hals, editing by Matthew Lewis and Andre Grenon)