LOS ANGELES -- A federal judge in San Francisco dismissed a lawsuit challenging Richmond, Calif.’s eminent domain plan.

U.S. District Court Judge Charles Breyer said at a hearing on Sept. 12 that he felt the case was not “ripe for determination” since Richmond had not exercised eminent domain and might never do so.

For this reason, the court denied the banks’ motion for a preliminary injunction and also ruled that it would dismiss the case rather than temporarily suspend it.

“Ripeness of these claims does not rest on contingent future events certain to occur, but rather on future events that may never occur,” Judge Breyer wrote in his ruling.

The suit was filed by Wells Fargo and Deutsche Bank last month on behalf of a group of bondholders, including Pacific Investment Management Co. and BlackRock Inc. The group sought to block plans by Richmond city officials to seize and buy underwater mortgages using their powers of eminent domain.

The Bay Area city announced the adoption of its controversial plan on July 30. The concept was created by a San Francisco firm called Mortgage Resolution Partners, which has marketed the plan to cities and local governments for more than a year.

“This is not a victory for the program and only postpones the day that Richmond and MRP will have to defend this program in court,” said John Ertman, partner at Ropes & Gray LLP, lead counsel for the banks that filed the lawsuit. “If implemented by the city, this eminent domain program will cause economic harm to millions of savers and retirees throughout the United States. We stand ready to act at the appropriate time to prevent this unconstitutional investment scheme from unfolding in Richmond or elsewhere.”

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.