NU Online News Service, Feb. 2, 2:17 p.m.EST
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A New York appeals court has thrown out asuit from bond insurer MBIA against Merrill Lynch, saying thatsophisticated business entities should have understood what theywere getting into.
On Tuesday, the New York State Appellate Court in Manhattanrejected a suit from MBIA against Merrill Lynch that accused thebank of fraudulently representing $5.7 billion in risk debt thatMBIA insured.
|The court said that Armonk, N.Y.-based MBIA and co-defendantLaCrosse Financial Products were sophisticated business entitiesand had the capacity to research the products they were insuring.Their failure to properly evaluate the transactions was not thefault of Merrill and they understood and accept the risks.
|The court said the MBIA could not claim breach of contactbecause there was no promise in the agreement. There was alsonothing in the agreement promising credit quality.
|According to reports, MBIA said it plans to appeal thedecision.
|The action is one of a number of suits MBIA has filed againstbanks that it sold bond insurance to covering mortgage backedsecurities that eventually defaulted in the face of the GreatRecession of 2007.
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