BNY Mellon loses motion to get Countrywide lawsuit moved to state court
A federal district judge has denied The Bank of New York Mellon (BK) motion to move a lawsuit filed by Countrywide RMBS investors out of federal court and back into state court. The case was originally filed by investors in soured Countrywide mortgage-backed securities who were trying to block a proposed $8.5 billion settlement between The Bank of New York Mellon, the trustee overseeing the securitized loans, and the loans' originator, Countrywide (Bank of America). The investor plaintiffs, who are suing under the name Walnut Place, had the original case moved from state court to federal court on the grounds that it's a class-action with multiple parties, making it qualified for federal jurisdiction. Bank of New York Mellon motioned to have the case moved back to state court. As part of the settlement process, which prompted investors to sue, BNY Mellon filed a petition in state court to begin proceedings under state Article 77. At the time, Manal Mehta with Branch Hill Capital said Bank of New York Mellon wanted the case in state court because federal court would make the Article 77 proceedings irrelevant. "Article 77 is a New York Statute," Mehta explained. "Bank of America wanted to use Article 77 to make the settlement binding upon all 530 trusts including those who objected to the settlement." At the time, analysts felt the move to federal court ended BNY Mellon's ability to hold investors to the settlement. On Wednesday, U.S. District Court of the Southern District of New York Judge William Pauley III said the case is not immune from federal jurisdiction. In fact, the judge viewed the case as touching upon key federal issues. "The settlement agreement at issue here implicates core federal interests in the integrity of nationally chartered banks and the vitality of the national securities markets," Judge Pauley wrote in his ruling. He added, "A controversy on these paramount federal interests should proceed in federal court." Write to Kerri Panchuk.