By Karen Freifeld
NEW YORK Feb 19 A New York state judge declined
to delay court approval of Bank of America Corp's $8.5
billion settlement with investors in mortgage-backed securities,
rejecting a move by American International Group Inc.
At a hearing on Wednesday, Justice Saliann Scarpulla of New
York State Supreme Court ordered the judgment by her predecessor
in the case, Barbara Kapnick, to be officially recorded.
"It's very straightforward," Scarpulla told lawyers for AIG,
which was one of the investors in the mortgage securities.
"Judge Kapnick issued the order. ... If you don't like it, your
remedy is to appeal."
Kapnick approved the settlement on Jan. 31, her last day
overseeing the case before she was elevated to a state appeals
court, and ordered a five-day delay before her approval was
officially recorded. AIG on Feb. 4 asked Scarpulla, the new
judge on the case, to delay recording of the judgment, saying
Kapnick had left some matters unresolved.
"Judge Kapnick told me the five-day stay she put in was
merely a convenience to the parties," Scarpulla said on
Wednesday. "She had no intention of leaving anything open."
AIG said in a statement it will appeal Kapnick's decision if
Bank of America agreed to the settlement in June 2011 to
resolve claims by investors who bought mortgage-backed
securities issued by Countrywide Financial before the U.S.
housing crisis. The investors said Countrywide, acquired by Bank
of America in 2008, misrepresented the quality of the underlying
home mortgages, which went sour in the crisis.
Twenty-two institutional investors, including BlackRock Inc
, Allianz SE's Pimco and Metlife Inc,
signed on to the settlement. AIG opposed the deal, saying there
was no evidence it provided adequate compensation for losses.
"AIG's announced strategy of imposing indefinite delay was
defeated today," Kathy Patrick, a lawyer for the investor group
supporting the decision, told Reuters.
Lawrence Grayson, a spokesman for Bank of America, declined
Kevin Heine, a spokesman for Bank of New York Mellon, the
trustee overseeing the securities, said it was pleased the court
will enter the judgment, "which overwhelmingly vindicated the
Bank of New York Mellon and other supporters of the deal
have accused AIG of holding the settlement "hostage."
In her Jan. 31 ruling, Kapnick said Bank of New York Mellon
acted with mostly reasonable judgment in entering into the
settlement. She made one exception, withholding approval
relating to certain loans that had been modified. She said the
trustee should not have settled those claims without
investigating their potential worth.
AIG said Wednesday it will try to get Kapnick's decision
vacated by pursuing a motion it filed Tuesday to reargue the
case before Scarpulla.
In the motion, AIG said Kapnick overlooked disputed and
unresolved issues, applied the wrong standard to the trustee's
actions and failed to adequately explain her decision.
"We are pleased that the court intends to address AIG's
motion for re-argument," AIG said in its statement. "If
necessary, AIG also looks forward to pressing ahead with its
appeal at the appropriate time."
Scarpulla said during the hearing she would hear arguments
on the motion but did not set a date.
The case is In re Bank of New York Mellon, New York State
Supreme Court, New York County, No. 651786/2011.