Bank of America at center stage in U.S. top court bankruptcy case

By Lawrence Hurley
A woman walks past as customers use ATMs at a Bank of America banking center in New York's financial district January 17, 2013. REUTERS/Brendan McDermid

By Lawrence Hurley

WASHINGTON (Reuters) - As the U.S. Supreme Court on Wednesday considered the case of a Massachusetts homeowner battling his mortgage lender over a bankruptcy plan, several justices focused their attention on his unlikely ally: Bank of America Corp.

Bank of America, one of the largest U.S. banks, filed a friend-of-the-court brief in support of Louis Bullard, who owes community bank Blue Hills Bancorp Inc $387,000 for the mortgage on a property in the town of Randolph.

During a one-hour oral argument on the technical issue of whether Bullard can appeal a bankruptcy judge's rejection of his proposed bankruptcy plan, some justices wondered why Bank of America, as a major creditor, would support a debtor.

Bank of America originated more than $80 billion in mortgage loans in 2014.

Another question raised in court was why Blue Hills, formerly known as Hyde Park Savings Bank, had no similar support from the business community. The U.S. government also filed a brief backing Bullard.

That left Blue Hill's lawyer, Douglas Hallward-Driemeier, playing defense.

At one point, Justice Anthony Kennedy asked why "some of the very major creditors in the country" had sided with the debtor.

Hallward-Driemeier responded that the Bank of America brief was "somewhat surprising to me." He said Bank of America's role in the case may have prompted other creditors to "give pause as to whether they want to be adverse to them on our side."

Justice Elena Kagan sounded unconvinced.

"But, I mean, really, do you think everybody in the world is so intimidated by the Bank of America?" Kagan asked.

Bank of America's brief says allowing appeals when bankruptcy plans are rejected would assist with "the orderly and uniform development of bankruptcy law," which would benefit creditors as well as homeowners like Bullard.

The brief, along with the one by the U.S. government, could prove critical in swaying the court, with several justices probing lawyers on both sides about the practical consequences of a ruling in favor of Bullard.

Kagan noted that in parts of the country where such appeals are allowed, "it hasn't really led to the kinds of bad consequences we're all surmising about."

A ruling is due by the end of June.

The case is Bullard v. Hyde Park Savings Bank, U.S. Supreme Court, No. 14-116.

(Reporting by Lawrence Hurley; Editing by Will Dunham)