Bank of America Says It Wasn't `Malicious' in Taking Lehman's $500 Million

Bank of America Corp., ordered to return $500 million in deposits to Lehman Brothers Holdings Inc. and pay $90 million in interest, said it didn’t act with “maliciousness” and shouldn’t have to pay damages greater than $1.3 million of Lehman’s costs for litigating the case.

The bank wants to argue the point in a written brief to U.S. Bankruptcy Judge James Peck, who has said he might fine Bank of America for breaking bankruptcy rules in taking the deposits, according to the bank’s Jan. 14 filing in U.S. Bankruptcy Court in Manhattan.

Peck is considering several cases involving big banks such as Barclays Plc and JPMorgan Chase & Co. as Lehman, which filed the biggest bankruptcy in U.S. history two years ago, sues to recover money to pay creditors. The defunct firm’s creditors stand to get less than 19 cents on the dollar on average, according to data presented to Peck last week.

Lehman isn’t entitled to punitive damages because it can’t prove the bank acted maliciously, Bank of America said in the filing, a report by the two banks on the status of the case.

On top of the $590 million, Lehman said it wants at least $10 million more, including attorney fees and other funds taken by the bank.

Peck said in his November ruling that Charlotte, North Carolina-based Bank of America took deposits unrelated to the loans to Lehman that it sought to protect. The seizure after New York-based Lehman went bankrupt violated the law, he said.

‘Legal Rules’

Bank of America delayed an appeal of Peck’s ruling last month after he said it wasn’t “final.” Under U.S. banking law, it had a right to take Lehman’s deposits to offset unrelated loans, based on “uncontradicted legal rules and written contracts,” Bank of America said in court documents.

The bank said its interpretation of those so-called setoffs “presents a substantial possibility of a different outcome on appeal.”

The case is Bank of America NA v. Lehman Brothers Holdings Inc., 08-01753, in U.S. Bankruptcy Court, Southern District of New York (Manhattan).