Bank of America Suit Against Two Ex-Bear Stearns Executives Is Dismissed

Ralph R. Cioffi and Matthew M. Tannin, two former Bear Stearns managers who were among the few executives to face a trial on criminal charges in the aftermath of the financial crisis, have won another legal victory.

Late on Tuesday, a federal judge dismissed a lawsuit brought against Mr. Cioffi and Mr. Tannin by Bank of America. The bank accused the two men of lying about the health of their hedge funds, which had invested heavily in subprime mortgage-backed securities that plummeted in value when the housing market collapsed.

Judge Alison J. Nathan of Federal District Court in Manhattan rejected Bank of America’s claims of fraud and breach of fiduciary duty, ruling that bank had failed to prove damages tied to the conduct of the two men.

The Bank of America suit centered on a complex $4 billion deal in which the bank securitized mortgage securities owned by the Bear Stearns hedge funds. When the funds imploded in June 2007 as the credit markets first started to seize up, Bank of America absorbed billions of dollars of losses in the deal, called a C.D.O.-squared.

The dismissal of the civil claims is a big win for Mr. Cioffi and Mr. Tannin. Held up by the government as symbols of Wall Street greed just as the financial markets started to buckle, the two executives staunchly denied any wrongdoing and have fought the battery of cases brought against them.

The most serious was a criminal indictment. In June 2008, federal prosecutors in Brooklyn charged the two men with securities fraud violations. The government said they trumpeted the fund’s prospects to investors while privately worrying about their sagging portfolio and troubled housing market.

A jury acquitted the men in November 2009. The closely watched case was the first major criminal trial connected with the financial crisis. Then last year, Mr. Cioffi and Mr. Tannin agreed to pay about $1 million to settle a civil lawsuit brought by the Securities and Exchange Commission. Neither admitted any wrongdoing. The federal judge who signed off on the hearing, Frederic L. Block, said the case was “being settled for, relatively speaking, chump change.”

In the case dismissed on Monday, Bank of America said the Bear Stearns managers deceived it by failing to disclose that the fund was ailing and had received heavy withdrawal requests in early 2007. The bank said that had it known about the fund’s problems, it never would have made the C.D.O.-squared deal.

Judge Nathan granted summary judgment, meaning that she dismissed the case before trial. In addition to ruling that no rational jury would rule for Bank of America on any of its claims, she said the testimony of one of the bank’s experts regarding its losses was “inherently unreliable.”

In addition to Mr. Cioffi and Mr. Tannin, Bank of America named as defendants another former Bear portfolio manager, Raymond McGarrigal, and JPMorgan Chase, which acquired Bear Stearns in March 2008. Both parties also secured dismissals.

Edward J.M. Little and Marc Weinstein of Hughes Hubbard & Reed represent Mr. Cioffi. Susan Brune, Nina Beattie and MaryAnn Sung of Brune & Richard represent Mr. Tannin. And representing Mr. McGarrigal is Catherine L. Redlich of Driscoll & Redlich. And Barry H. Berke and Eric A. Tirschwell of Kramer Levin Naftalis & Frankel represented JPMorgan.

Lawyers for the defendants parties were not immediately available for comment.