MBIA Inc. has decided not to pursue a lawsuit against Bank of America Corp.'s Merrill Lynch unit.
In a filing Tuesday with a New York state court, the two sides said they agreed to voluntarily dismiss the case and pay their own legal fees. Insurer MBIA had sued the bank saying that Merrill had bought insurance in 2006 and 2007 on $5.7 billion of bonds it knew would fall in value.
MBIA shares soared 6.9 percent to $9.04 on hopes that Bank of America had offered it a settlement. The dismissal is a sign that Bank of America is trying to put its litigation issues behind it. Last week it reached an $8.5 billion settlement with institutional investors on mortgage bonds.