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Investors seek to move case against Bank of America to federal court


NEW YORK (Reuters)—Investors objecting to Bank of America Corp’s proposed $8.5 billion settlement of claims over losses on mortgage-backed securities are seeking to move the case to federal court from a New York state court.

In a filing on Friday, investors led by 11 entities sharing the name Walnut Place said the size of the case qualifies as a “mass action,” giving federal courts jurisdiction.

It wants the case handled in the U.S. District Court in Manhattan, rather than in the New York State Supreme Court located there, where it has been for two months.

The filing may delay final approval of a settlement, which Bank of America had intended to resolve much of its remaining legal liability tied to its disastrous 2008 purchase of mortgage lender Countrywide Financial Corp.

Bank of New York Mellon Corp., as trustee under 530 mortgage securitization trusts, had negotiated the accord with 22 institutional investors including BlackRock Inc. and Allianz S.E.’s Pimco, covering mortgages with a $174 billion unpaid principal balance.

Unhappy investors had had until Aug. 30 to intervene in the case, ahead of a Nov. 17 court hearing to consider whether the accord is fair. Friday’s filing throws that timetable into uncertainty.

The effort by “a small number of objectors” to move the case “is unsupported by the law and will only serve to delay the resolution of the proceeding,” a Bank of New York Mellon spokesman said.

A Bank of America spokesman called the filing a “tactical maneuvering” that has no impact on the underlying merits of the settlement.

David Grais, a lawyer for Walnut Place and some other intervenors, did not immediately respond to an emailed request for comment.

Worries about how much Bank of America will ultimately have to pay angry mortgage securities investors have driven down the bank's share price in recent weeks to a nearly 2-1/2-year low.

On Thursday, the bank won a vote of confidence through a $5 billion investment from Warren Buffett's Berkshire Hathaway Inc.

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