* Judge says California case takes precedence
* Judge questions actions by NY Fed, Maiden Lane vehicle
By Jonathan Stempel
NEW YORK, Feb 26 A federal judge has put
American International Group Inc's dispute with a
financial crisis-era bailout vehicle on hold while another court
addresses the insurer's separate $10 billion lawsuit against
Bank of America Corp over defective mortgages.
In rejecting AIG's effort to litigate quickly against the
Maiden Lane II vehicle created by the Federal Reserve Bank of
New York, U.S. District Judge Lewis Kaplan said that "on the
face of it" some of the New York Fed's and Maiden Lane's actions
"perhaps are unattractive and, indeed, wrongful."
The dispute concerns whether AIG transferred $18 billion of
litigation claims to Maiden Lane, which the New York Fed created
in December 2008 to buy residential mortgage securities from AIG
as part of that company's rescue three months earlier.
AIG said such a transfer would block its efforts to recoup
losses from banks. On Jan. 11, it sued for a court declaration
that it had not transferred those claims, including more than $7
billion in the Bank of America case.
That case had been filed in August 2011 and accuses the
second-largest U.S. bank of having misrepresented the quality of
more than $28 billion of securities that AIG bought.
It is being handled in Los Angeles federal court, where Bank
of America is arguing that Maiden Lane, not AIG, should be
making the claims.
In seeking to halt the New York case, Maiden Lane accused
AIG of trying an "end run" around the California case and that
Bank of America is best able to challenge AIG's ability to sue.
Kaplan concluded that it remained best to let the California
case take its course.
"Given the availability of that course of action, there is
no justification for a wasteful, unseemly, and unnecessary
contest between sister courts over where the controversy should
proceed at this time," he wrote.
He said the New York Fed's support of Bank of America's
argument that AIG had assigned some claims to Maiden Lane
appeared to "circumvent" its choice-of-court agreement with AIG.
The judge said that if the New York Fed or Maiden Lane were to
raise such claims they would have to do so in New York.
"On the face of it, the actions of the FRBNY and its
instrumentality, Maiden Lane II, perhaps are unattractive
and, indeed, wrongful," Kaplan wrote.
Jack Gutt, a New York Fed spokesman, declined to comment.
AIG said in a statement that the New York Fed was wrongfully
trying to avoid a commitment to resolve the dispute in New York.
"We remain hopeful that, in light of the Court's decision,
the New York Fed will honor its commitment to have the matter
addressed in that forum," the company said.
AIG's bailout eventually totaled $182.3 billion. The bailout
was fully paid off last year.
The cases are American International Group Inc et al v.
Maiden Lane II LLC, U.S. District Court, Southern District of
New York, No. 13-00951; American International Group Inc et al
v. Bank of America Corp et al, U.S. District Court, Central
District of California, No. 11-10549.