Walnut Place

Walnut Place LLC Withdraws Opposition to $8.5 Billion Bank of America Settlement

On July 23, Judge Barbara Kapnick of the Supreme Court of the State of New York approved the withdrawal of Walnut Place LLP’s opposition to Bank of America’s $8.5 billion settlement with holders of Countrywide RMBS. In its motion to intervene in the settlement, Walnut Place alleged that the trustee, Bank of New York Mellon, had not properly disclosed the settlement negotiations or kept the investors informed, and that the investors who took the lead in negotiating the settlement were improperly biased due to “substantial ongoing business relationships” with Bank of America. Decision.

Bank of America $8.5 Billion RMBS Settlement Proceeding to Stay in Federal Court

Judge William H. Pauley III of the Southern District of New York ruled on October 19 that federal court is the proper forum for the proceeding brought by Bank of New York Mellon Corp., as Trustee, seeking court approval of the $8.5 billion settlement between Bank of America Corp. and holders of Countrywide mortgage-backed securities. BONY Mellon commenced the proceeding in state court in June 2011. A number of investor groups, and the attorneys general of two states, intervened to oppose the settlement, and one of the objecting investor groups – the “Walnut Place” investors – then removed the action to federal court. Judge Pauley denied BONY Mellon’s motion to remand to state court, holding that the case was properly removed as a “mass action” under the Class Action Fairness Act. Order.

Walnut Place Investors Remove Proceeding Concerning Bank of America’s Proposed $8.5 Billion Settlement to Federal Court

On August 26, 2011, Walnut Place Investors removed Bank of America’s proposed $8.5 billion settlement with holders of Countrywide Financial Corporation’s RMBS from New York State Court to the United States District Court for the Southern District of New York. The attorneys for Walnut Place Investors, Grais & Ellsworth, noted that the case is subject to federal jurisdiction as a mass action under the Class Action Fairness Act (“CAFA”). In a letter addressed to counsel for Bank of New York Mellon, Grais & Ellsworth argued that removal should not create any additional delay in ultimately settling the action. Grais & Ellsworth also represents several other parties that intervened in the proposed settlement including several Federal Home Loan Banks, pension funds, and private equity firms. Letter and Notice of Removal.

Walnut Place Files Derivative Suit Against Bank of New York Mellon and Countrywide in Response to Recent Settlement

On August 2, 2011, several investment entities under the name Walnut Place (“Plaintiffs”) filed a derivative complaint against Countrywide Home Loans on behalf of Bank of New York Mellon (“BNYM”) in New York State Court. Plaintiffs allege that Countrywide breached representations and warranties concerning the mortgage loans underlying Countrywide RMBS that Plaintiffs purchased. According to the Complaint, upon realization of the breach, Plaintiffs demanded in May 2011 that Countrywide repurchase the loans, which Countrywide allegedly refused to do. Plaintiffs are now suing Countrywide on behalf of BNYM, the Trustee to the RMBS that Plaintiffs purchased, to enforce the rights of the Trust on behalf of themselves and other RMBS certificateholders. According to Plaintiffs, because Countrywide and BNYM have since announced a proposed settlement that would extinguish Plaintiffs’ claims against Countrywide, it is futile to expect BNYM to sue Countrywide to enforce its repurchase obligations and Plaintiffs therefore bring their suit in a derivative action. Complaint.

Challenges Mount to Bank of America’s Proposed $8.5 Billion Settlement

Numerous investor groups, regulators and politicians have challenged Bank of America’s June 29, 2011 announcement proposing an $8.5 billion settlement of claims based on representations and warranties made by Countrywide in RMBS securitizations. Between July 5 and July 13, four separate groups of investors each moved to intervene in the Article 77 proceeding brought by Bank of New York Mellon, as Trustee or Indenture Trustee of the various securitization trusts, seeking judicial approval of the settlement. Potential objections have been voiced to the size of the settlement, potential conflicts of interest, and a failure to provide sufficient information to evaluate the settlement terms. On July 12, New York Attorney General Eric Schneiderman reportedly sent letters to investors that participated in the settlement negotiations seeking additional information, suggesting that the Attorney General’s office may object to the settlement. Representative Brad Miller, a North Carolina Democrat, raised additional questions about the terms of the settlement in a July 8 letter to the Federal Housing Finance Agency. Walnut Place Motion to Intervene. Pension Fund Motion to Intervene. TM1 Motion to Intervene. FHLB Motion to Intervene. Miller Letter.