Countrywide class-action

More complications in Bank of America's purchase of the Calabasas mortgage giant. U.S. District Judge Mariana R. Pfaelzer said she would seriously consider a motion to fast-track a class-action lawsuit filed by group of public pension funds. In the suit, filed before B of A’s offer, Countrywide executives are alleged to have collected $900 million from insider trading. The plaintiffs have asked that the $4-billion deal be halted because they say it undervalues Countrywide. Lawyers familiar with the case told the Daily Journal's Gabe Friedman that it's unlikely Pfaelzer would actually nix the deal. But they wouldn't rule out a class-action trial, which might motivate the defendants to take out their checkbooks and cut a deal. Fast.

Countrywide's lawyer, Eric Roth, of Wachtell, Lipton, Rosen & Katz in New York, suggested that absolute disaster could occur in the national economy if the deal somehow fell apart. "We live in dangerous times," Roth told Pfaelzer ominously. "Your Honor has seen a lot more than I have. We don't know whether we're facing another Great Depression." Eric Waxman, a Skadden, Arps, Slate, Meagher & Flom partner in Los Angeles, who represents a former Countrywide director, followed up on Roth's arguments. Waxman compared the plaintiff's demand for expedited discovery and a trial to Alice in Wonderland, where the verdict occurred before the trial.

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The class-action part of the complaint asserts that Countrywide shareholders are receiving a raw deal in the Bank of America buyout. The $4 billion buyout price, plaintiffs allege, fails to value their derivative claims, which could recoup an additional $900 million for Countrywide from the alleged insider trades. The pension funds want to enjoin Bank of America from purchasing Countrywide until it bumps up the $4 billion buyout offer.