On November 21, Judge Mariana Pfaelzer of the United States District Court for the Central District of California dismissed as time-barred an RMBS action brought against Countrywide by the FDIC as receiver for Strategic Capital Bank (SCB). The court held that SCB was on notice of Countrywide’s alleged misrepresentations over a year before the FDIC became its receiver, thus barring the claims under the applicable one year statute of limitations. Judge Pfaelzer further held that the November 2007 filing of a state court investor class action concerning Countrywide RMBS did not toll the statute of limitations because the plaintiff in that case did not have standing to sue on the tranches SCB allegedly purchased, and because a state court class action does not toll the statute of limitations for claims brought later in federal court. Decision.
Judge Mariana Pfaelzer of the U.S. District Court for the Central District of California
Federal Judge Grants Motion to Dismiss Claims Against Bank of America as Successor to Countrywide
On April 20, 2011, Judge Mariana Pfaelzer of the U.S. District Court for the Central District of California granted Bank of America’s motion to dismiss the claims against it in a putative class action complaint that sought to hold Bank of America liable for Countrywide’s alleged misstatements and omissions regarding Countrywide’s loan origination practices. Plaintiffs argued that Bank of America can be held liable as a successor to Countrywide’s liability because the asset transfer between Bank of America and its subsidiary Countrywide constituted a de facto merger. Judge Pfaelzer disagreed; in applying Delaware law, Judge Pfaelzer noted that “Delaware courts use the doctrine of de facto merger sparingly” and declined to apply the doctrine here. Notably, Judge Pfaelzer’s decision runs contrary to an April 2010 decision by New York Supreme Court Justice Eileen Bransten which held, under New York law, that the asset transfer did constitute a de facto merger and that Bank of America could be liable as a successor to Countrywide. Pfaelzer Decision. Bransten Decision.