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Case 1:11-cv-00733-WHP Document 200 Filed 05/01/13 Page 1 of 20

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK

PENNSYLVANIA PUBLIC SCHOOL
EMPLOYEES’ RETIREMENT SYSTEM,
individually and on behalf of all others similarly
situated,

Plaintiff,

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BANK OF AMERICA CORPORATION, et al.,

Defendants.



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11 Civ. 733 (WHP)

ECF CASE

Electronically Filed


MEMORANDUM OF LAW IN SUPPORT OF DEFENDANT

BRIAN T. MOYNIHAN’S MOTION FOR PARTIAL RECONSIDERATION
OF THE COURT’S APRIL 17, 2013, MEMORANDUM AND ORDER

DLA PIPER LLP (US)
Patrick J. Smith
John M. Hillebrecht
Jeffrey D. Rotenberg
1251 Avenue of the Americas
New York, NY 10020-1104
212-335-4500

Attorneys for Defendant Brian T. Moynihan

Case 1:11-cv-00733-WHP Document 200 Filed 05/01/13 Page 2 of 20

TABLE OF CONTENTS

Page

PRELIMINARY STATEMENT ................................................................................................... 1

BACKGROUND ........................................................................................................................... 2

ARGUMENT ................................................................................................................................. 6

A.

B.

Legal Standard For Reconsideration ...................................................................... 6

The FCIC Letter Does Not Create A Strong Inference Of Scienter With
Respect To Repurchase Claims And The Court’s Finding Otherwise Is
Manifest Error ........................................................................................................ 6

C.

Failure To Consider The Contents Of The FCIC Letter Is Manifest Error ......... 13

CONCLUSION ............................................................................................................................ 15



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Case 1:11-cv-00733-WHP Document 200 Filed 05/01/13 Page 3 of 20

TABLE OF AUTHORITIES

Page(s)





CASES

Bellezza v. Holland,

No. 09 Civ. 8434, 2011 WL 2848141 (S.D.N.Y. July 12, 2011) ............................................14

Certain Underwriters at Lloyd’s, London v. ABB Lummus Global, Inc.,

337 B.R. 22 (S.D.N.Y. 2005) .....................................................................................................6

CSI Inv. Partners II, L.P. v. Cendant Corp.,

180 F. Supp. 2d 444 (S.D.N.Y. 2001)......................................................................................12

In re Currency Conversion Fee Antitrust Litig.,

264 F.R.D. 100 (S.D.N.Y. 2010) .............................................................................................14

DiLaura v. Power Auth. of State of N.Y.,

982 F.2d 73 (2d Cir. 1992).......................................................................................................13

Gucci Am., Inc. v. Guess?, Inc.,

No. 09 Civ. 4373, 2011 WL 6326032 (S.D.N.Y. Dec. 16, 2011) ..............................................6

Kregler v. City of New York,

821 F. Supp. 2d 651 (S.D.N.Y. 2011)......................................................................................13

Lewis v. Whelan,

99 F.3d 542 (2d Cir. 1996).......................................................................................................14

Local No. 38 Int’l Bhd. of Elec. Workers Pension Fund v. Am. Express Co.,

724 F. Supp. 2d 447 (S.D.N.Y. 2010)......................................................................................11

Luminent Mortg. Capital, Inc. v. Merrill Lynch & Co.,

652 F. Supp. 2d 576 (E.D. Pa. 2009) ......................................................................................10

Matusovsky v. Merrill Lynch,

186 F. Supp. 2d 397 (S.D.N.Y. 2002)......................................................................................12

Novak v. Kasaks,

216 F.3d 300 (2d Cir. 2000).....................................................................................................11

Pa. Pub. Sch. Emps.’ Ret. Sys. v. Bank of Am. Corp.,

874 F. Supp. 2d 341 (S.D.N.Y. 2012).............................................................................. passim

Rapoport v. Asia Elec. Holding Co., Inc.,

88 F. Supp. 2d 179 (S.D.N.Y. 2000)..................................................................................12, 14

Rezzonico v. H & R Block, Inc.,

182 F.3d 144 (2d Cir. 1999).....................................................................................................14

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Case 1:11-cv-00733-WHP Document 200 Filed 05/01/13 Page 4 of 20




Sazerac Co., Inc. v. Falk,

861 F. Supp. 253 (S.D.N.Y. 1994) ..........................................................................................12

Tellabs, Inc. v. Makor Issues & Rights, Ltd.,

551 U.S. 308 (2007) .................................................................................................................12

U.S. Titan, Inc. v. Guangzhou Men Hua Shipping Co., Ltd.,

182 F.R.D. 97 (S.D.N.Y. 1998) .................................................................................................6

United States v. Uccio,

940 F.2d 753 (2d Cir. 1991).....................................................................................................14

Westerbeke Corp. v. Daihatsu Motor Co., Ltd.,

304 F.3d 200 (2d Cir. 2002).....................................................................................................14

Woodward v. Raymond James Fin., Inc.,

732 F. Supp. 2d 425 (S.D.N.Y. 2010) .....................................................................................10

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Case 1:11-cv-00733-WHP Document 200 Filed 05/01/13 Page 5 of 20



Pursuant to Local Civil Rule 6.3, Defendant Brian T. Moynihan respectfully moves for

partial reconsideration of this Court’s April 17, 2013, Memorandum and Order (the “April 17

Order”) denying in part the Executive Defendants’ motion to dismiss Plaintiff’s Amended

Consolidated Class Action Complaint (the “Amended Complaint” or the “AC”).

PRELIMINARY STATEMENT

Defendant Moynihan respectfully submits that in its April 17 Order the Court mistakenly

applied a ruling from its July 11, 2012, Memorandum and Order (the “July 2012 Order”)

concerning the contents of a May 13, 2010, letter to the Federal Crisis Inquiry Commission (the

“FCIC Letter”). The July 2012 Order was rendered at a time when the FCIC Letter was not of

record and not before the Court. In that Order, the Court relied on Plaintiff’s inaccurate

description of the FCIC Letter’s contents. Based on these counter-factual allegations and not the

FCIC Letter itself, and relying entirely on its July 2012 Order’s ruling based on these misleading

allegations, in its April 17 Order the Court erroneously concluded that the FCIC Letter supported

a cogent inference of Moynihan’s scienter for claims based on misrepresentations concerning

repurchase claims against Bank of America. Plaintiff led the Court to this mistaken conclusion

by placing both factual and legal error in its path.

Mindful of the significant volume of briefing and argument that the Court has already

entertained around this issue, and the fact that this motion constitutes the first substantive

submission to Your Honor from undersigned counsel in this action, we nonetheless feel

compelled on Moynihan’s behalf to make this narrowly-drawn motion. We do so because, for

the reasons set forth below, we believe that the Court, in relying on Plaintiff’s

mischaracterization of the FCIC Letter, clearly erred in a way that leaves Moynihan defending a

theory of liability that has no place in this case.









Case 1:11-cv-00733-WHP Document 200 Filed 05/01/13 Page 6 of 20




The Court’s finding regarding Moynihan’s scienter as to Plaintiff’s repurchase liability

theory is predicated solely on its earlier adoption of Plaintiff’s erroneous and misleading

characterization of the FCIC Letter. Contrary to Plaintiff’s allegations, the FCIC Letter does not

address the Bank’s exposure to repurchase claims, and it therefore cannot establish Moynihan’s

knowledge about such claims. The FCIC Letter was indisputably in the record on the motion to

dismiss the Amended Complaint. The Court should have considered its contents in assessing

that motion, rather than rely on its earlier decision on the first motion, which necessarily relied

on Plaintiff’s self-serving gloss on the FCIC Letter and not the FCIC Letter itself (which was not

then in the record). From the language in the Court’s April 17 Order, it appears that the Court

did not consider the FCIC Letter itself, record evidence that wholly belied Plaintiff’s

interpretation. Alternatively, to the extent the Court did in fact review the contents of the FCIC

Letter, we respectfully submit that the Court manifestly erred in its interpretation. As set forth

below, Plaintiff cannot establish through the FCIC Letter that Moynihan “knew of specific

contradictory information” regarding repurchase claims when he made allegedly “misleading

statements” to the public. Pa. Pub. Sch. Emps.’ Ret. Sys. v. Bank of Am. Corp., 874 F. Supp. 2d

341, 359 (S.D.N.Y. 2012). Given the absence of any other scienter allegations regarding

repurchase claims, the allegations regarding such claims should have been dismissed as to

Moynihan.

BACKGROUND

Plaintiff’s Consolidated Class Action Complaint, filed on September 23, 2011 (the

“Original Complaint” or the “OC”) asserted claims against, among others, Bank of America

Corporation (“BAC” or the “Bank”) and certain of its current and former officers and directors

(the “Executive Defendants”), including Moynihan. On July 11, 2012, the Court dismissed all





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defendants except BAC, granted Plaintiff leave to re-plead its claims against the Executive

Defendants, and denied the motion to dismiss with respect to the Section 10(b) and Rule 10b-5

claim against BAC. Pa. Pub. Sch. Emps.’ Ret. Sys., 874 F. Supp. 2d at 364 and 370. Among the

claims against BAC that survived were allegations that BAC made misrepresentations and

omissions regarding BAC’s exposure to repurchase claims (that is, “lawsuits or other formal

proceedings seeking to compel repurchase” of loans for breaches of warranties (April 17 Order at

3) (the “Repurchase Claims”)). In allowing the allegations regarding Repurchase Claims to

proceed against BAC, the Court concluded that an amalgam of Plaintiff’s allegations collectively

gave rise to a cogent and compelling inference of BAC’s corporate scienter. Id. at 363

(“[S]everal of the allegations, taken together, raise a strong inference of scienter as to [BAC].”).

Among these allegations was that certain of BAC’s responses in the FCIC Letter evinced the

Bank’s knowledge of Repurchase Claims, which contradicted its public statements. See id. at

364. The Court did not address the sufficiency of this allegation standing alone – nor did it

address the sufficiency of any single one of the other allegations it relied on, standing alone – in

rendering its decision as to BAC’s Repurchase Claims scienter.

Plaintiff did not attach the FCIC Letter to the Original Complaint, and no party placed it

into the record in connection with the initial motion to dismiss. Accordingly, the Court

understandably did not cite to the FCIC Letter in the July 2012 Order, instead relying entirely

upon Plaintiff’s mischaracterization of it in the Original Complaint. Paragraph 101 of the

Original Complaint, which the Court cited in the July 2012 Order, referenced unsurprising

statements by BAC in the FCIC Letter concerning declines in the value of BAC’s subprime

mortgage-backed securities holdings and the rise in subprime and Alt-A loan delinquencies and

defaults between 2006 and 2010. Plaintiff misleadingly characterized such developments as the





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inevitable consequence of the BAC legacy entities’ mortgage underwriting practices, which they

have argued led to the Repurchase Claims. The FCIC Letter does not support this connection

between declines in value and increases in delinquencies and defaults on the one hand, and

Repurchase Claims on the other. Nonetheless, the Court took the allegations set out in Paragraph

101 as true (without reference to the actual contents of the FCIC Letter), and concluded that the

FCIC Letter “summarized the negative effects flowing from [BAC’s] overemphasis on

generating loans for securitization without due regard to prudent lending.” Pa. Pub. Sch. Emps.’

Ret. Sys., 874 F. Supp. 2d at 364 (citing OC ¶ 101). The Court subsequently denied BAC’s

motion for reconsideration and for certification of an interlocutory appeal, again without

addressing the FCIC Letter’s actual contents. Instead, the Court concluded generally that all “of

the facts alleged, taken collectively, give rise to a strong inference of [BAC’s] scienter.” Id. at

372 (internal quotation marks and citations omitted).

Plaintiff filed the Amended Complaint on August 13, 2012, asserting claims against BAC

and the Executive Defendants under Sections 10(b) and 20(a) of the Exchange Act. Plaintiff

included new allegations against the Executive Defendants regarding their purported knowledge

of the extent of BAC’s mortgage repurchase exposure. As respects the Repurchase Claims

allegations, Plaintiff alleged that Moynihan had knowledge of the FCIC Letter, and that it

contradicted his public statements regarding the Bank’s repurchase exposure. (AC ¶¶ 301-02).

In moving to dismiss, the Executive Defendants placed the FCIC Letter into the record

for the first time. (See Exhibit A to the Decl. of Scott D. Musoff (“Exhibit A”), Nov. 5, 2012,

ECF No. 175-1, at 2-9). Citing to and quoting from the FCIC Letter, the Executive Defendants

showed that nothing contained therein is in any way suggestive of fraudulent intent. In pertinent

part, the Executive Defendants highlighted that the FCIC Letter simply reiterated information





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Case 1:11-cv-00733-WHP Document 200 Filed 05/01/13 Page 9 of 20



that in substance was already in the public record and corresponded with public testimony

Moynihan gave before the FCIC. (See, e.g., Mem. Of Law In Supp. Of The Mot. Of Defs.

Kenneth D. Lewis, Joe L. Price, II, Brian T. Moynihan, Charles H. Noski and Neil Cotty To

Dismiss the Am. Consolidated Class Action Compl. (“Exec. Def. Mem.”), Nov. 5, 2012, ECF

No. 174, at 2-3, 16-17). The Executive Defendants noted that the FCIC Letter makes no

reference to repurchase liabilities (either demands or claims), “says nothing about alleged

breache[s] of representations or warranties or put-back claims,” and would simply have alerted

any reader to the decline in value of “subprime mortgages sold by Countrywide at the height of

the real estate boom” – a fact that had already been disclosed. (Exec. Def. Mem. at 2-3). In its

opposition, Plaintiff completely ignored these arguments and the contents of the FCIC Letter,

and instead just referred back to its conclusory allegations and the Court’s earlier rulings on

BAC’s Repurchase Claims scienter. (See Mem. Of Law Of Lead Pl., Pa. Pub. Sch. Emps.’ Ret.

Sys., In Opp. To The Exec. Defs.’ Mot. To Dismiss The Am. Class Action Compl., Dec. 12,

2012, ECF No. 178, at 9).

On April 17, 2013, the Court granted in part and denied in part the Executive Defendants’

motion to dismiss. It upheld Plaintiff’s claims based on the argument that the Executive

Defendants’ alleged violations of GAAP and SEC regulations gave rise to a strong inference of

scienter. (April 17 Order at 11). This motion does not seek reconsideration of this aspect of the

April 17 Order. The Court also held that Plaintiff had adequately pled Moynihan’s scienter

regarding Repurchase Claims by setting out allegations about his awareness of the FCIC Letter

(and nothing else). (Id. at 7). It rejected Moynihan’s argument that “there is nothing in the letter

that specifically contradicted any of his public statements.” (Id.). The Court based this

conclusion solely on its earlier finding in the July 2012 Order that the FCIC Letter “‘summarized





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Case 1:11-cv-00733-WHP Document 200 Filed 05/01/13 Page 10 of 20



the negative effects flowing from [BAC’s] overemphasis on generating loans for securitization

without due regard to prudent lending’” – a finding that was the by-product of Plaintiff’s

misleading characterization of the FCIC Letter at a time when the FCIC Letter was not in the

record or before the Court. (Id. (quoting Pa. Pub. Sch. Emps.’ Ret. Sys., 874 F. Supp. 2d at

364)). The Court also opined that its prior conclusion “closes the door on [any] argument” at the

pleading stage as to whether the FCIC Letter raises a strong inference of scienter. (Id. at 7). The

Court did not cite to or discuss the contents of the FCIC Letter itself in the April 17 Order.

A.

Legal Standard For Reconsideration

ARGUMENT

Under Local Civil Rule 6.3, reconsideration is appropriate where, as here, “the Court

overlooked . . . factual matters that were put before the Court in the underlying motion and

which, had they been considered, might have reasonably altered the result reached by the Court.”

Certain Underwriters at Lloyd’s, London v. ABB Lummus Global, Inc., 337 B.R. 22, 25

(S.D.N.Y. 2005). Reconsideration “provides the Court with an opportunity to correct manifest

errors of . . . fact . . . or prevent manifest injustice.” U.S. Titan, Inc. v. Guangzhou Men Hua

Shipping Co., Ltd., 182 F.R.D. 97, 100 (S.D.N.Y. 1998); accord Gucci Am., Inc. v. Guess?, Inc.,

No. 09 Civ. 4373, 2011 WL 6326032, at *1 (S.D.N.Y. Dec. 16, 2011). On these grounds,

Moynihan respectfully submits that the Court should reconsider the April 17 Order as set forth

below.

B.

The FCIC Letter Does Not Create A Strong Inference Of Scienter With Respect
To Repurchase Claims And The Court’s Finding Otherwise Is Manifest Error

In both the Original Complaint and the Amended Complaint, Plaintiff characterized the

FCIC Letter as one reflecting the “consequences of the overemphasis of BAC . . . on generating

inventory for securitization rather than on making prudent lending decisions.” (OC ¶ 101; AC





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Case 1:11-cv-00733-WHP Document 200 Filed 05/01/13 Page 11 of 20



¶ 86). It is this self-serving and wholly erroneous characterization of the FCIC Letter that the

Court, misled by Plaintiff and without the benefit of the FCIC Letter’s actual text, adopted. (See

April 17 Order at 7 (relying entirely on the Court’s earlier “finding that the letter ‘summarized

the negative effects flowing from [BAC’s] overemphasis on generating loans for securitization

without due regard to prudent lending’”) (quoting Pa. Pub. Sch. Emps.’ Ret. Sys., 874 F. Supp.

2d at 364)). Leaving aside the misleading language from Plaintiff’s pleadings and looking

instead to the actual contents of the FCIC Letter, it is plain that (a) the FCIC Letter in no way

supports the claim that imprudent lending occurred and (b) the FCIC Letter says nothing about

Repurchase Claims and nothing that supports a strong inference of knowledge or scienter about

such Repurchase Claims. Plaintiff relies exclusively on, but does not even quote from, the

following portion of the FCIC Letter in pleading Moynihan’s scienter as to Repurchase Claims:

(15) Did Bank of America acquire subprime mortgages,
create pools of these mortgages and sell securities backed by
these pools? If so, please provide data on the value of the
securities sold, whether Bank of America retained any interest
in these pools, and the nature of these interests and their
respective dollar amounts.

RESPONSE:

In 2006 and 2007, BAC, legacy Countrywide, and legacy Merrill
Lynch each created pools of subprime mortgages, and sold
securities collateralized by those pools. Each entity typically
retained an interest in the residual tranche of those pools. The
value of the entities’ retained interest has substantially decreased
since the issuance of those securities.

The par value at issuance of the securities sold by Bank of America
was approximately $6 billion. The value of BAC’s retained interest
in these securities was approximately $12 million as of February
25, 2010.

The par value at issuance of the securities sold by Countrywide
was approximately $118 billion. The value of BAC’s retained





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Case 1:11-cv-00733-WHP Document 200 Filed 05/01/13 Page 12 of 20




interest in these securities was approximately $2 billion as of
February 19, 2010.

The par value at issuance of the securities sold by Merrill Lynch
was approximately $57 billion. The value of BAC’s retained
interest in these securities was approximately $499 million as of
February 25, 2010.

(22) What are
the delinquency and default rates on
Countrywide’s subprime and Alt-A loans from the date of the
acquisition to December 31, 2009?

RESPONSE:

As of July 1, 2008, BAC (including Countrywide) originated no
new Alt-A or subprime loans. For the legacy Countrywide Alt-A
loan portfolio, as of December 31, 2009, approximately 37% were
delinquent by thirty days or more and approximately 10% were in
default. For the legacy Countrywide subprime first lien loan
portfolio, as of December 31, 2009, approximately 52% of loans
were delinquent by thirty days or more and approximately 7%
were in default.

(Exhibit A at 8). Plaintiff’s characterization of these responses, adopted by the Court at a time

when the FCIC Letter itself was not in the record, is profoundly misleading.

The contents of the FCIC Letter do not comport with the Court’s finding that it addresses

“‘the negative effects flowing from [BAC’s] overemphasis on generating loans for securitization

without due regard to prudent lending.’” (April 17 Order at 7 (quoting Pa. Pub. Sch. Emps.’ Ret.

Sys., 874 F. Supp. 2d at 364)). Nor does the FCIC Letter provide a basis for inferring scienter on

Moynihan’s part or for the Court’s finding that it “establishes that Moynihan had knowledge of

the repurchase claims.” (Id. at 8). The FCIC Letter does not contain a single reference to or

discussion of Repurchase Claims risk, and it in no way speaks to Moynihan’s knowledge of

BAC’s Repurchase Claims exposure. There is no mention of or allusion to any alleged or

potential breaches of representations or warranties or put-back claims. Nothing is said in the

FCIC Letter about the prudence (or imprudence) of BAC’s relevant lending practices or





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Case 1:11-cv-00733-WHP Document 200 Filed 05/01/13 Page 13 of 20



securitization business, nor is there any suggestion in the FCIC Letter of any connections

between such practices and the state of the portfolio. Unsurprisingly, neither the Amended

Complaint, nor Plaintiff’s various motion papers, nor the April 17 Order cite any identifiable

information in the FCIC Letter specifically addressing Repurchase Claims, let alone anything

contradicting BAC’s public disclosures. This is not surprising since the FCIC Letter was

consistent with BAC’s public statements at the time. One searches the FCIC Letter in vain for

any statement of fact that could support the change in the scienter analysis as to Repurchase

Claims against Moynihan from the July 2012 Order’s decision dismissing such claims against

him to the April 17 Order’s finding that the FCIC Letter – standing alone – “establishes that

Moynihan had knowledge of the repurchase claims.” (April 17 Order at 8).

Plaintiff may as well have simply referred to BAC’s public disclosures and asserted that

Moynihan, as CEO, was aware of their contents. The statements from the FCIC Letter relied on

by Plaintiff – which simply describe the decline in value in subprime mortgages sold by

Countrywide at the height of the real estate boom – relate to the industry-wide collapse in the

real estate market, with particulars as to Countrywide’s mortgages. Nothing about these facts

gives a reader, such as Moynihan, any particular knowledge about Repurchase Claims.

Certainly, given the market-wide conditions in the relevant time frame, nothing set forth in the

FCIC Letter provides the requisite specific facts as to any putative breach of representations or

warranties which is the sine qua non of Repurchase Claims. Just as demands are not the

equivalent of claims (see id. (“Here, the repurchase demands required investigation and not all

demands were meritorious.”)), delinquency rates and default rates are not the equivalent of

Repurchase Claims. While the FCIC Letter shows that the value of many mortgage-backed

securities declined during this time frame, nothing about that, or about delinquency rates or





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default rates, means that problems with the underlying loans existed or that origination standards

or other underwriting criteria were intentionally ignored. The Court’s implicit finding to the

contrary, based on Plaintiff’s unsupported and misleading characterization of the FCIC Letter as

suggesting imprudent lending practices (AC ¶ 86), was error.

Furthermore, the basic information contained in the FCIC Letter was disclosed by BAC

and well-known in the market. For example, the data in the FCIC Letter relating to subprime

and Alt-A mortgage delinquency rates and declines in value reflected a state of affairs well

known to the public months before May 2010. BAC itself publicly disclosed similar information

in its 2009 10-K. (See Exhibit C to the Decl. of Scott D. Musoff, Jan. 11, 2012, ECF. No. 115-3,

at 31, 59 (noting increase of noninterest expenses from $4.7 billion to $11.7 billion due in part to

Countrywide delinquencies and noting that of the $5.5 billion of Countrywide loans “that are not

current, approximately 51 percent, or $2.8 billion are in early stage delinquency”)). The FCIC

Letter merely gives further metrics on the change in retained value of these mortgages over a

four-year period and recounts information relating to delinquency rates unsurprising to anyone

familiar with the market-wide housing collapse. Plaintiff cannot and does not dispute the

existence of widespread public awareness during the class period that mortgage securities,

including those in which BAC held interests, had been suffering significant decreases in value

since 2006, while loan defaults and delinquencies had increased. See Luminent Mortg. Capital,

Inc. v. Merrill Lynch & Co., 652 F. Supp. 2d 576, 594 (E.D. Pa. 2009) (noting that declining

housing prices and increasing mortgage defaults and foreclosures were “widely known” in

2007); Woodward v. Raymond James Fin., Inc., 732 F. Supp. 2d 425, 436 (S.D.N.Y. 2010)

(stating that in 2008 “market observers in all sectors were aware of increasing foreclosures . . .





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Case 1:11-cv-00733-WHP Document 200 Filed 05/01/13 Page 15 of 20



and the likelihood that the housing market would worsen and impact the general economic

outlook”).

As reflected in the FCIC Letter, and as disclosed elsewhere, BAC’s retained interest in its

securities and loan portfolio behaved consistently with the market. (See, e.g., Exec. Def. Mem.

at 8, 16-17). The FCIC Letter simply offers general information on this expected (and widely

disclosed) reaction to the real estate crash and financial crisis. One cannot plausibly infer any

conclusions of substance about the scope of any exposure to Repurchase Claims from this

information. See Pa. Pub. Sch. Emps.’ Ret. Sys., 874 F. Supp. 2d at 360 (“Knowledge of

negative economic trends does not equate to harboring a mental state to deceive, manipulate, or

defraud”) (internal quotation marks and citations omitted).

Nonetheless, relying solely on Plaintiff’s characterization of the FCIC Letter but not

citing to the FCIC Letter itself, the Court found that “Plaintiff adequately ple[d] the required

strong inference that Moynihan acted with scienter regarding the repurchase claims.” (April 17

Order at 8). This is manifest error. The high-level statements actually contained in the FCIC

Letter, and relied upon by Plaintiff, do not speak directly to Repurchase Claims and hence are

not “contrary facts” sufficient to transform public statements on Repurchase Claims exposure

into misrepresentations. Novak v. Kasaks, 216 F.3d 300, 309 (2d Cir. 2000) (plaintiffs “must

specifically identify” the “contrary facts” to which they claim defendant had access through

previous reports or statements); Local No. 38 Int’l Bhd. of Elec. Workers Pension Fund v. Am.

Express Co., 724 F. Supp. 2d 447, 461-62 (S.D.N.Y. 2010) (Pauley, J.) (allegation that CFO

“received ‘detailed’ information fails” absent specificity regarding details provided) (collecting

cases). The Court should not have accepted the Plaintiff’s inaccurate allegations as true under

these circumstances. Allegations cannot be well-pled where the documents on which they are





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based in no way support the premise of those allegations. See Matusovsky v. Merrill Lynch, 186

F. Supp. 2d 397, 399-400 (S.D.N.Y. 2002) (noting that plaintiff’s allegations that are

contradicted by documents incorporated into or integral to a complaint are insufficient to defeat a

motion to dismiss); CSI Inv. Partners II, L.P. v. Cendant Corp., 180 F. Supp. 2d 444, 455 n.12

(S.D.N.Y. 2001) (courts are not required “to accept statements about a document incorporated by

reference, if they are clearly contradicted by the document itself”); Rapoport v. Asia Elec.

Holding Co., Inc., 88 F. Supp. 2d 179, 184 (S.D.N.Y. 2000) (noting that where a complaint’s

allegations contradict the terms of documents incorporated by reference, “the documents control

and this Court need not accept as true the allegations in [a] complaint”) (citing Sazerac Co., Inc.

v. Falk, 861 F. Supp. 253, 257 (S.D.N.Y. 1994)). As no plausible, compelling inference of

scienter relating to the Repurchase Claims may be derived from the FCIC Letter, it cannot

support Moynihan’s scienter. See Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308,

324 (2007).

There are any number of more compelling opposing inferences to be drawn from the

FCIC Letter, each of which supports dismissal of the Repurchase Claims allegations against

Moynihan. Tellabs, 551 U.S. at 314. The onset and deepening of the global real estate crisis and

economic recession during the period undermines any assertion that the information contained in

the FCIC Letter somehow supports a cogent inference of Moynihan’s knowledge of Repurchase

Claims. General and widespread market factors, rather than any conduct that might support

Repurchase Claims, far more compellingly explain the financial troubles outlined in the FCIC

Letter. The Court nonetheless erroneously adopted Plaintiff’s sinister misreading of the FCIC

Letter, and its mistake should be corrected.





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C.

Failure To Consider The Contents Of The FCIC Letter Is Manifest Error

The Court’s initial findings regarding the FCIC Letter should not have limited the scope

of its subsequent analysis concerning the contents of the FCIC Letter. The April 17 Order

suggests, however, that the Court in fact drew exclusively upon the July 2012 Order without

considering or assessing the actual contents of the FCIC Letter. Had the Court considered the

contents of the FCIC Letter, it would have recognized that Plaintiff had mischaracterized its

contents, and that no plausible, cogent inference of Moynihan’s scienter as to Repurchase Claims

can be based on it.

We respectfully submit that the Court’s error appears to have resulted, at least in part,

from misapplication of the “law of the case” doctrine. At oral argument, the Court inquired as to

whether its prior decisions on the FCIC Letter and scienter in connection with the Original

Complaint as to BAC, the entity, constituted the law of the case for purposes of the Executive

Defendants’ motion to dismiss the Amended Complaint as to those individual defendants. As

counsel for the Executive Defendants explained, the correct answer is that it does not. (Hr’g Tr.

31:10-23, Feb. 19, 2013). Nonetheless, the April 17 Order suggests that the Court erroneously

proceeded to apply the doctrine and as a result did not properly consider the contents of the FCIC

Letter. (See April 17 Order at 7 (Court’s prior “finding . . . closes the door on that argument”)).

The law of the case doctrine “posits that when a court decides upon a rule of law, that

decision should continue to govern the same issues in subsequent stages in the same case.”

DiLaura v. Power Auth. of State of N.Y., 982 F.2d 73, 76 (2d Cir. 1992) (emphasis added,

internal citations omitted); see Kregler v. City of New York, 821 F. Supp. 2d 651, 658 (S.D.N.Y.

2011) (declining to apply law of the case doctrine where amended pleading “alleges materially

different and more detailed claims than” put forward in prior pleadings). The doctrine only





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applies to legal questions, not to factual questions such as what the FCIC Letter actually says.

See Rezzonico v. H & R Block, Inc., 182 F.3d 144, 148 (2d Cir. 1999). It is also a discretionary

doctrine. See Westerbeke Corp. v. Daihatsu Motor Co., Ltd., 304 F.3d 200, 219 (2d Cir. 2002)

(“[L]aw of the case is necessarily amorphous in that it ‘directs a court’s discretion,’ but does not

restrict its authority.”); United States v. Uccio, 940 F.2d 753, 758 (2d Cir. 1991); In re Currency

Conversion Fee Antitrust Litig., 264 F.R.D. 100, 112 (S.D.N.Y. 2010) (Pauley, J.). Courts

should certainly disregard the doctrine where, as here, there are “cogent or compelling” reasons

to do so, such as to “correct a clear error or prevent manifest injustice.” Bellezza v. Holland, No.

09 Civ. 8434, 2011 WL 2848141, at *3 (S.D.N.Y. July 12, 2011) (internal quotes omitted); see

Lewis v. Whelan, 99 F.3d 542, 545 (2d Cir. 1996) (holding that district court properly

disregarded “discretionary” law of the case doctrine to eliminate an “inconsistency in its prior

findings”).

As a result of its application of the law of the case doctrine, the Court gave undue

deference to its prior ruling adopting Plaintiff’s allegations regarding the contents of the FCIC

Letter on the instant motion to dismiss. The Court assumed the truth of Plaintiff’s allegations

concerning the FCIC Letter, though the Letter itself, which was properly before the Court,

undermined those very allegations. See Rapoport, 88 F. Supp. 2d at 184 (the actual contents of

documents incorporated by reference “control and this Court need not accept as true the

allegations in [a] complaint”).









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Case 1:11-cv-00733-WHP Document 200 Filed 05/01/13 Page 19 of 20




CONCLUSION

For the foregoing reasons, Defendant Brian T. Moynihan respectfully requests that the

Court grant his motion for partial reconsideration, and dismiss the allegations regarding

Repurchase Claims against him.

Dated: New York, New York


May 1, 2013










DLA PIPER LLP (US)


By: /s/ Patrick J. Smith
Patrick J. Smith
([email protected])
John M. Hillebrecht
([email protected])
Jeffrey D. Rotenberg
([email protected])








1251 Avenue of the Americas
New York, New York 10020
(212) 335-4500

Attorneys for Defendant Brian T. Moynihan

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Case 1:11-cv-00733-WHP Document 200 Filed 05/01/13 Page 20 of 20



CERTIFICATE OF SERVICE

The undersigned hereby certifies that a true and correct copy of the foregoing

Memorandum of Law in Support of Defendant Brian T. Moynihan’s Motion for Partial

Reconsideration of the Court’s April 17, 2013, Memorandum and Order was filed electronically

on this 1st day of May, 2013. Notice of this filing will be sent to all parties by operation of the

Court’s electronic filing system. Parties may access this filing through the Court’s system.









/s/ Patrick Smith
Patrick Smith, Esq.
DLA Piper LLP (US)
1251 Avenue of the Americas
New York, New York 10020
Tel.: (212) 335-4500
Fax: (212) 335-4501
[email protected]