Recently, a U.S. District judge in Manhattan has dismissed a lawsuit filed against Merrill Lynch – acquired by Bank of America Corporation (BAC - Free Report) in 2009. The lawsuit was filed by South Korea-based Woori Bank, a unit of Woori Finance Holdings Co. Ltd. (WF - Free Report) in May 2012.
The case against BofA was rescinded as it failed to meet the 3-year deadline of filing the lawsuit after incurring the losses under the South Korean law. The District judge rejected the plea even after Woori argued that the 3-year time period began following the publication of a report by the U.S. Financial Crisis Inquiry Commission on Jan 27, 2011.
The lawsuit accused Merrill of creating and selling 7 collateralized debt obligations (CDOs) that were made up of residential mortgage-backed securities (RMBS) in 2005–2006. Moreover, Woori alleged that Merrill issued misleading statements and omissions related to these RMBS and had concealed the associated risks. As a result, these provoked investments.
The lawsuit seeks damages worth $143 million along with other penal charges.
Similar to the dismissal of the abovementioned lawsuit, another legal charge made by Woori against The Royal Bank of Scotland Group plc (RBS - Free Report) was also rejected by a U.S. District judge in Manhattan in Dec 2012. However, the reason for the dismissal was different in this case. The judge found the supporting evidence furnished by Woori to be weak, and hence the verdict was ruled in favor of Royal Bank.
Currently, Woori still has one lawsuit pending against Citigroup Inc. (C - Free Report) over suspected losses on nearly $95 million worth of mortgage-backed securities (MBS).
As for BofA, the lawsuit brought some relief. The company has been facing a string of lawsuits and investigations pertaining to various MBS sold by Merrill and also by Countrywide Financial – a company acquired by BofA in 2008.
Currently, BofA retains a Zacks Rank #3 (Hold).