Magistrate Judge Recommends Dismissal of DOJ Suit Against BofA

Skadden secured a recommendation of dismissal in an action against Bank of America entities by the Department of Justice brought under the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA). The DOJ has alleged that, in connection with the sale of a securitization of prime mortgages, the bank made false statements to the government and made false statements in connection with a banking activity of another financial institution. On behalf of Bank of America, Skadden argued that the case should be dismissed because the government was dressing up a securities fraud claim as a FIRREA action to circumvent deficiencies in their fraud case.

On March 27, Magistrate Judge David S. Cayer of the U.S. District Court for the Western District of North Carolina (Charlotte Division) agreed with Skadden’s arguments and concluded that the DOJ’s complaint failed to allege facts supporting all the elements of the government's two claims. If the district court adopts the magistrate judge's recommendation, Bank of America will be the first defendant to win the dismissal of a FIRREA action arising from the financial crisis.