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The Delaware Supreme Court is considering whether former shareholders of Countrywide Financial Corp. should be allowed to pursue a federal lawsuit filed against leaders of the former mortgage lending giant before it was acquired by Bank of America in a hastily arranged buyout in 2008.
The court held a hearing Wednesday following a request by the Ninth U.S. Circuit Court of Appeals asking the Delaware justices to clarify whether, under a “fraud exception” in Delaware law, the former Countrywide shareholders can revive a 2007 lawsuit filed in California federal court.
The justices gave no indication on when they would rule.
The fraud exception, which has never been used, applies to a Delaware law that otherwise requires continuous ownership of a company’s stock in order to pursue derivative claims on behalf of the corporation. Derivative claims are brought by shareholders on behalf of a company, usually against officers and directors.
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