In an opinion today, Judge Koeltl dismissed a class action accusing Bank of America of failing to disclose that AIG had threatened to sue the bank for misrepresenting the quality of mortgage-back securities. Judge Koeltl found that the risk was already known:
The potential amount of AIG’s suit against BoA was also well within the public domain. The April 27, 2010 New York Times article estimated AIG’s total MBS claims at $40 billion, stated that AIG was preparing suits against four banks, and stated that BoA had the largest exposure, thus communicating to the market that BoA’s potential exposure to AIG’s MBS claims was at least $10 billion. Moreover, it is undisputed that AIG disclosed before the Class Period a precise breakdown of most of the securities at issue in the potential AIG suit. AIG’s published breakdown disclosed both the parties from whom AIG had purchased the securities and AIG’s losses on particular transactions. Accordingly, AIG made publicly available the exact information that investors needed to evaluate the scope of BoA’s liability to AIG.
Judge Koeltl also found that there were insufficient allegations of an intent to defraud:
Viewed holistically, the allegations in the Second Amended Complaint do not support a cogent inference that the defendants’ conduct was highly unreasonable and violative of a known or obvious duty. The much more compelling conclusion is that the defendants did not think that there was any need for public disclosure in view of the information already in the marketplace, the aggregate disclosure in BoA’s filings, and the lack of any definitive regulatory requirement requiring the disclosure of a possible lawsuit of indeterminate amount.
Our prior post on the case is here.