Appeals Court Clears Way For Class Action Against Countrywide

May 20 2011 | 8:51am ET

A California appellate court has cleared the way for a class action against Countrywide Financial, a company whose name is synonymous with the mortgage-backed securities at the heart of the 2008 financial crisis.

The court reversed a 2010 state court decision dismissing claims against Countrywide, a Bank of America unit, on the grounds that the case should have been brought in a federal, not a state court.

On appeal, investors argued that the state court had improperly interpreted portions of the Securities Act allowing investors to file class actions asserting claims in state court. The appellate panel agreed, reversing the lower court's decision in its entirety, allowing the class action to proceed.

Investor David Luther, a number of pension funds and other institutions sued Countrywide alleging the lender issued mortgage-backed securities between 2005 and 2007 with false and misleading statements as stipulated under the federal Securities Act of 1933.

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