A New York appellate court agreed to keep a major mortgage investor case against Countrywide out of court Thursday.

New York's First Department Appellate Division upheld state Judge Barbara Kapnick's decision to dismiss a residential mortgage-backed securities case filed against Countrywide by a group of investors known as Walnut Place. Thomson Reuters reported that Walnut Place is the named widely used by Boston-based Baupost Group.

Defendant Bank of America (BAC) purchased Countrywide in 2008.

The case — Walnut Place v. Countrywide Home Loan — involves allegations that Countrywide misrepresented the underlying quality of mortgages packed into securities and sold off to Walnut Place and other investors.

Initially, New York State Supreme Court Judge Barbara Kapnick called the case "premature."  

The appellate division agreed with the lower court saying provisions in the pooling and servicing agreements state that investor lawsuits are limited to "events of default."

In the earlier decision, Judge Kapnick also ruled for Countrywide — as well as the trustee overseeing the bonds, Bank of New York Mellon (BK) — saying an event of default has not occurred because the central allegations about loan misrepresentations don't involve the actions of the master servicer, but rather the originator of the loans.