By Louis M. Solomon
Int'l Group, Inc., et al. v. Bank of America Corp., et al., 11 Civ. 6212 (BSJ) (S.D.N.Y. Oct.
2011) [enhanced version available to lexis.com subscribers], highlights one of the common
ways to order, sequence, rationalize a complex international litigation
(see generally the discussion of ordering or sequencing international litigation in our
Practice: Topics and Trends).
Residential mortgage backed
securities have been the subject of much litigation. This suit involves
349 RMBSs. AIG alleges that it purchased the securities and that
defendants - financial institutions such as Bank of American, Merrill Lynch,
and Countrywide - acted as underwriters, sponsors, and originators. There
are claims pending in multiple jurisdictions alleging that originators of the
loans encouraged borrowers to falsify loan applications so as to originate more
loans. There is multi-district litigation pending in the federal court in
the Central District of California, but the multi-district rules do not appear
to permit the transfer and consolidation of cases pending in state, as opposed
to federal, court.
In this case, the defendants removed
a case from state to federal court and then sought to consolidate the case with
the MDL proceeding. The decision just rendered addressed the propriety of
the removal in the context of a motion to remand.
The District Court denied the motion
to remand. The Court ruled that removal was proper under 28 U.S.C. sec.
632, also known as the Edge Act, which covers, inter alia, claims
"arising out of transactions
involving international or foreign banking, or banking in a dependency or
insular possession of the United States, or out of other international or
foreign financial operations, either directly or through an agency, ownership,
or control of branches or local institutions in dependencies or insular
possessions of the United States or in foreign countries".
The District Court found the federal
statute triggered because some of the properties underlying some of the loans
in some of the challenged RMBS "were located in dependencies and insular
possessions of the United States" and that "the loan pools included some
mortgage loans originated by subsidiaries of (unspecified) foreign
banks". In this connection the Court made three rulings of note to
International Practice Law Blog for more analysis of international
and foreign law issues.
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