Saturday, September 3, 2011

Bank of America - Comments on Lawsuits

Here are a couple of outstanding articles on the Bank of America/Countrywide lawsuits.  Since there is so much emotion involved in discussing Bank of America, it's refreshing to see some facts discussed.

Here is a link to the State of Nevada lawsuit against Bank of America, filed Aug 30th, 2011.

General Comments

I have read the above lawsuits, California Judgement, and the opinion of the Stanford Law Professor (click here).  Limited liability laws exist to prevent these types of lawsuits.  The claims in the Nevada lawsuit will not fly as the judge in California has already rule on the claim "WITH PREJUDICE".  This means that state attorneys and others can't sue Bank of America for Countywide's liabilities. 

In the Stanford Law Professor's report under Successor Liability he states:

Generally speaking, a corporation which acquires the assets of another corporation is not liable for the seller’s debts. This is not surprising: when you buy a used car from a neighbor, you don’t have to start paying his mortgage as well. The corporate equivalent of this rule is well established and comes from the idea that corporations are persons and therefore liable for their debts and not the debts of others (not even of their affiliates). This rule is taught in every introductory corporate law class and relied on every day by business planners. Thus, it is indisputable that BAC would not normally become liable for Countrywide’s debts when it bought Countrywide assets.


Don't let all this noise about the Bank of America lawsuits scare you.  If these lawyers don't want to settle Bank of America will play their trump card and put Countrywide into Chapter 11.  Then the vultures can fight over the carcass. 

Best Regards,

Disclosure - Long BAC common and warrants. 

1 comment:

  1. "Where's the Bottom for Bank of America Shares?"-good piece at Guru Focus about worst case senario. Unfortunatly, requires a subscription to read.

    Added to BAC for $7 this week --Lot's of lies on BAC--1. need to raise equity 2. JPmorgan buyout of BAC 3. WIll close ANOTHER 600 branches

    Also,Bruce Berkowitz to be interviwed on Consuelo Mack WealthTrack next week--should be interesting