LOS ANGELES, March 14 (Reuters) - Lawyers for Countrywide Financial Corp CFC.N and its directors asked a federal judge in Los Angeles to postpone discovery in an investor lawsuit for several weeks in what opposing attorneys say is a “blatant attempt” to shield company directors from investor claims.
In documents filed on Thursday with the U.S. District Court in Los Angeles, Countrywide’s lawyers said they should not have to hand over “four years’ worth of all-encompassing discovery” until after U.S. District Judge Mariana Pfaelzer decides whether there is enough evidence for the case to go to trial.
A hearing on the dismissal motion is set for April 28.
Investors suing Countrywide directors and executives for reaping hundreds of millions from alleged insider trading want Pfaelzer to speed up discovery and allow them to try their claims before the company is acquired by Bank of America Corp (BAC.N) after June 30 — an event they say will nullify their claims.
Alternatively, the investors led by Arkansas Teacher Retirement System and Fire & Police Pension Association of Colorado asked Pfaelzer to set up a “constructive trust” to preserve those claims for trial after the merger closes.
Countrywide and its directors face three similar investor lawsuits — two in Los Angeles and one in Delaware Chancery Court — challenging the proposed $3.7 billion merger with Bank of America as too cheap.
The two Los Angeles suits in federal and state courts also bring shareholder derivative claims on behalf of Countrywide to force its directors and officers to return alleged insider trading profits.
That would increase the company’s value and presumably force Bank of America to pay shareholders more.
“Our standing (to sue) is arguably eliminated when B of A consummates its purchase of Countrywide,” attorney Blair Nicholas, who represents the pension funds, said on Friday. “Bank of America is never going to pursue those claims.”
In court documents, Countrywide’s attorneys said the investor claims “would pass to B of A in the merger” and that the bank’s board “would be obligated to consider (them) in good faith.”
Countrywide’s directors would remain potentially liable for any shareholder derivative claims after the merger, despite provisions in the merger agreement to indemnify them, the documents said.
Countrywide has said it is cooperating with a U.S. Securities & Exchange Commission probe of stock sales by Chief Executive Angelo Mozilo.
Countrywide has been hit with numerous lawsuits by holders of subprime mortgages, as well as investigations by states attorney general and federal authorities. (Editing by Ben Tan)