Wells Fargo (NYSE: WFC) & Morgan Stanley (NYSE: MS) Lose Dismissal Motion on Municipal Bond Suit

Wells Fargo & Co (NYSE: WFC), UBS AG (NYSE: UBS), Morgan Stanley (NYSE: MS) and many other financial institutions lost a bid to dismiss legal claims accusing the banks of conspiring to rig bids for municipal derivatives.

U.S. District Judge Victor Marrero in Manhattan today declined to toss out the lawsuit brought by the state of Mississippi, municipalities and other bond issuers. The suit, which was first filed in 2008 and dismissed by Marrero last year, was re-filed as a new complaint against fewer defendants. The case will now go forward after today’s ruling.

The lawsuit accuses banks, brokers and dealers of conspiring with one another to not compete for and to rig bids for municipal derivatives sold to issuers of municipal bonds. Allegedly, the defendants allocated customers among themselves and fixed and stabilized prices, including the interest rates paid to issuers.

Marrero did not rule on the merits of the case, but said that the re-filed case had enough facts for the case to go forward. The judge said that the new complaint “is replete with detailed allegations regarding the acts in furtherance of the conspiracy.”

Bank of America (NYSE: BAC) did not seek the dismissal of the lawsuit, Marrero said in a ruling. The Charlotte, N.C. based bank received amnesty from the U.S. Justice Department for its cooperation in a federal probe in 2007.

Similar suits have been filed against banks by the city of Baltimore, the University of Mississippi Medical Center and the Central Bucks County School District.