A U.S. District Court in Los Angeles has ruled that Bank of America (NYSE:BAC) is not liable for losses from Countrywide Financial, and dismissed the lawsuit brought by Allstate.

After Bank of America purchased Countrywide, Allstate (NYSE:ALL) argued in the suit that Bank of America took all of the valuable assets of Countrywide that left Allstate holding a $700 million tab. The dismissal still allows Allstate to address its grievances with far more narrowly defined charges.

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James Kwak, a law professor at the University of Connecticut, said, “This is significant for settlement negotiations. It gives Bank of America a card to play in negotiations.”

Bank of America is Still Crippled

Despite minor legal battles, bank analyst Chris Whalen says Bank of America has been permanently crippled by its exposure to troubled mortgage investments. Whalen also says the banking super market would be worth more in pieces. The strongest banks, he says, are the ones without exposure to Wall Street, and his thought is that the big banks “are going to break up.

Here’s how Bank of America and Allstate shares are reacting to the news:

Bank of America Corporation (NYSE:BAC): BAC shares recently traded at $7.69, up $0.24, or 3.22%. They have traded in a 52-week range of $4.92 to $14.95. Volume today was 16,436,586 shares versus a 3-month average volume of 268,902,000 shares. The company’s trailing P/E is 745.00, while trailing earnings are $0.01 per share.

The Allstate Corporation (NYSE:ALL): ALL shares recently traded at $30.70, up $0.41, or 1.35%. They have traded in a 52-week range of $22.27 to $34.40. Volume today was 45,608 shares versus a 3-month average volume of 4,672,380 shares. The company’s trailing P/E is 44.28, while trailing earnings are $0.68 per share.

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To contact the reporter on this story: Scott Gillette at staff.writers@wallstcheatsheet.com

To contact the editor responsible for this story: Damien Hoffman at editors@wallstcheatsheet.com

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