UPDATE 2-AIG files to dismiss part of Greenberg suit over bailout

Mon Apr 8, 2013 5:39pm EDT

* Asks court to block derivative action

* AIG board already decided not to join suit

* Greenberg seeking more than $55 bln in damages

April 8 (Reuters) - Insurer American International Group Inc has asked a court to block Maurice "Hank" Greenberg's efforts to sue the U.S. government on AIG's behalf, saying its former CEO has not proven he should have the right to do so.

Earlier this year, AIG drew sharp criticism from members of Congress and an outraged public when the firm considered the possibility of joining Greenberg's lawsuit, which challenges the terms of the insurer's $182.3 billion bailout by the federal government in 2008.

AIG said Greenberg had forced its hand in even deliberating the prospect, but that ultimately it did not want to sue anyway amid a public backlash.

Absent AIG's participation, Greenberg is pursuing a derivative claim, seeking to sue the U.S. government on AIG's behalf over the terms of the $182.3 billion rescue. Greenberg and his company Starr International, which owned 12 percent of AIG before the rescue, are also suing the government directly.

But the insurer, in a filing dated Friday, said Starr had not met the burdens necessary to be allowed to pursue claims on the company's behalf.

"Starr has alleged no facts showing that the AIG board's decision to refuse Starr's demand cannot be attributed to a rational business purpose," AIG said.

The company said its board also feared "incalculable harm to AIG's corporate brand and image and relationships with shareholders, customers, regulators and elected officials" if it pursued a lawsuit.

A lawyer for Starr, Robert Dwyer, said in a statement that AIG's filing repeats the position the company's board took in January and does not impact claims Starr is pursuing directly on behalf of AIG shareholders.

Starr will oppose AIG's motion in a filing later this month, Dwyer, of the law firm Boies, Schiller & Flexner, said. The company has until April 26 to respond in court. Last month Starr amended its complaint, more than doubling the damages it is seeking to roughly $55.5 billion.

The Case is Starr International Co Inc vs. United States, U.S. Court of Federal Claims, No. 11-00779.

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