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American International Group Inc (AIG), Bank of America Corp (BAC): What’s The Real Battle?

It might be an overstatement to say that American International Group Inc (NYSE:AIG) wants Bank of America Corp (NYSE:BAC)‘s head on a platter, but it’s not far-fetched to say that the insurer is ready to get tough with the bank. With one more court ruling going to American International Group Inc (NYSE:AIG)’s win column, a long-standing suit can start moving along, with $7 billion in damages hanging in the balance.

A federal court judge ruled in favor of American International Group Inc (NYSE:AIG) on Monday when she wrote that the insurer did not give up its rights to pursue certain legal claims after it sold troubled securities to the Federal Reserve Bank of New York during a 2008 bailout. This ruling clears up a major blockade that had halted any proceedings, with Bank of America Corp (NYSE:BAC) claiming that when American International Group Inc (NYSE:AIG) ransferred the securities to the FRBNY, it lost any ability to sue over the investments.

This new ruling came after another in favor of the insurer, which petitioned for the case to be moved to the state court systems — arguing that the federal court system was not the correct venue for the case. A judge agreed, with a ruling that the case should be heard in the New York State courts.

AIG: 2 BAC: 0.5
With the case proceeding, American International Group Inc (NYSE:AIG) will be fighting on a few less items because of the judge’s having dismissed some claims as a part of Monday’s ruling. While the judge agreed that American International Group Inc (NYSE:AIG)’s claims adequately allege that documents provided to it from Countrywide and Merrill Lynch may have misrepresented the securities allowing a claims for “fraudulent inducement,” she dismissed the claim of “negligent misrepresentation.”

AIG is still happy with the ruling, stating that it is now capable of pursuing its full damages from the bank.

With Bank of America Corp (NYSE:BAC)’s recent settlement with insurer MBIA Inc. (NYSE:MBI), it may have set a precedent for future insurer claims. While there’s no telling if AIG and B of A will settle out of court, the bank may find it more favorable to do so — getting its name out of the headlines and putting another legacy legal battle behind it.