Bank of America Avoids Multiple Liability By Filing Interpleader Complaint


On October 12, 2010, Judge Melvin L. Schweitzer held that Bank of America's filing of an interpleader complaint to resolve ambiguities in an indenture contract was in good faith, reasonable, and prudent, and therefore denied the defendant's motion to dismiss. Bank of America, N.A. v. Prima Capital Advisors LLC, Index No. 600740/10 (Sup. Ct., NY County Oct. 12, 2010). The Court further held that a material question of fact existed, weighing against summary judgment. Id.

Prima Capital Investors LLC ("Prima") is an advisory firm that, among other things, establishes investment vehicles through which its clients and other investors may purchase various types of assets. In May 2005, Prima created an investment vehicle that issued notes (the "2005 Notes") to various investors (the "2005 Note holders"). The 2005 investment vehicle is comprised of two companies: Prima Capital CDO 2005-1 Ltd. and Prima Capital CDO 2005-1 Corp (serving together as the "2005 Issuer"). The 2005 Issuer used funds paid by the 2005 Note holders as the purchase price for the 2005 Notes to purchase commercial mortgage assets. In November 2006, Prima created a second investment vehicle issuing notes (the "2006 Notes") to investors (the "2006 Note holders"). The 2006 investment vehicle is likewise comprised of two companies: Prima Capital CRE Securitization 2006-1 Ltd. and Prima Capital CRE Securitization Corp (the "2006 Issuers," and together with the 2005 Issuers, the "Issuers"). The 2006 Issuer used funds paid by the 2006 Note holders as the purchase price for the 2006 Notes to purchase commercial mortgage assets.

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