On Friday Manhattan State Supreme Court Judge Barbara Kapnick ruled from the bench that the New York State Insurance Department will indeed face a bench trial May 14 over its decision to approve MBIA’s restructuring in 2009, despite the department’s desire to resolve the matter through briefings. But, in a positive development for MBIA, the judge said she would sharply restrict the scope of evidence that Bank of America and two other bank plaintiffs can present at trial.
The trial–which will be the first major civil trial stemming from the mortgage crisis–will test the banks’ claim that state insurance regulators should never have approved the monoline insurer’s restructuring. The deal split the company into two units–one for its troubled structured finance business and another for its financially healthy muni bond insurance business.
