A judge has ruled that Bank of America (BAC) does not have to defend itself against a lawsuit filed by the Federal Deposit Insurance Corp. on behalf of a failed bank.
The lawsuit, tied to the FDIC's efforts to reclaim funds on behalf of Colonial Bank in Montgomery, Ala., failed to meet the statute of limitations, U.S. District Judge Mariana Pfaelzer said in a Monday ruling. Her decision means the FDIC is unable to pursue claims for hundreds of millions of dollars in damages that allegedly resulted from misleading statements by the former Countrywide about the quality of loans that backed securities that Colonial purchased in 2006 and 2007.
The FDIC had alleged that Countrywide, which Bank of America bought in 2008, falsely asserted that underlying mortgages followed professional underwriting and appraisal standards. The lawsuit also claimed that the former mortgage lender misled investors about the number of borrowers who lived in houses that secured their loans.
The FDIC filed the lawsuit in August in its role as receiver for Colonial, which failed in August 2009 and was sold to BB&T (BBT) in Winston-Salem, N.C. The FDIC had claimed in its lawsuit that it had three years from the date of its appointment as receiver to file the lawsuit.
Bank of America had contended that Colonial had one year to sue Countrywide, with the clock starting at the time the bank should have discovered the alleged misstatements. The Charlotte, N.C., banking giant had asked the court to dismiss the case, noting that Colonial had joined a class-action lawsuit against Countrywide in 2007 that made charges similar to those in the FDIC's lawsuit.
"The statute of limitations for the FDIC's claims is one year," Pfaelzer wrote in a three-page ruling. "The claims are therefore time-barred unless there is a reason to delay commencement of the statute of limitations. No such reason exists here."
The period for bringing the lawsuit expired before August 2009, Pfaelzer, wrote, adding that the FDIC "does not have the power to revive expired claims like these."
Spokesmen for both the FDIC and Bank of America declined to comment.