New York appellate court

New York Appellate Court Preserves MBIA’s Fraud Claim in RMBS Suit Against Countrywide

On June 30, 2011, a New York appellate court affirmed the denial of Countrywide Home Loans, Inc.’s and certain of its affiliates’ (“Countrywide”) motion to dismiss MBIA, Inc’s (“MBIA”) claim that it had been fraudulently induced to insure 15 Countrywide RMBS securitizations. The court held that MBIA’s fraudulent inducement claim was not duplicative of its contract claims and that the fraudulent inducement claim adequately alleged misstatements of fact that could be argued to have caused MBIA’s losses. The court, however, sustained the dismissal of MBIA’s negligent misrepresentation claim, holding that an arm’s length business transaction does not create the special relationship of trust or confidence required to establish such a claim. The court also dismissed MBIA’s claim for breach of the implied duty of good faith and fair dealing, holding that the claim was duplicative of MBIA’s breach of contract claim. Decision.