NEW YORK, July 2 (Reuters) - A U.S. appeals court threw

out the dismissal of an antitrust lawsuit accusing 10 large

banks of overcharging investors on corporate bonds, saying the

trial judge should have been recused because his wife owned

stock in one of the banks.

The 2nd U.S. Circuit Court of Appeals in Manhattan said that

while U.S. District Judge Lewis Liman "almost certainly

unknowingly" had a conflict of interest, his partiality could

reasonably be questioned because his wife's ownership of Bank of

America ( BAC ) stock created an "appearance of impropriety."

A spokesman for the Manhattan federal court, where Liman

works, declined to comment.

Tuesday's unsigned decision came nearly three years after a

Wall Street Journal investigation found that more than 130

federal judges had since 2010 violated federal law and judicial

ethics by overseeing cases involving companies in which they or

family members owned stock.

Bond investors accused Bank of America ( BAC ), Barclays ( JJCTF ),

Citigroup ( C/PN ), Credit Suisse, Deutsche Bank

, Goldman Sachs ( GS ), JPMorgan Chase ( JPM ), Morgan

Stanley ( MS ), NatWest ( NWG ) and Wells Fargo ( WFC ) of

overcharging them on "odd-lot" trades, which are worth less than

$1 million and comprise most corporate bond trades.

Liman, an appointee of former President Donald Trump, was

assigned the lawsuit in April 2020 and dismissed it with

prejudice in October 2021, three months after his wife sold

$15,000 of Bank of America ( BAC ) stock.

In February 2022, a court clerk alerted parties to the

conflict, writing of the judge that the "ownership of stock

neither affected nor impacted his decisions."

It wasn't clear when Liman learned of the conflict, and the

case was reassigned to U.S. District Judge Valerie Caproni,

while investors appealed the dismissal.

The banks said Liman's failure to uncover his conflict

didn't require recusal or reviving the case.

But the appeals court found a "legitimate risk" that similar

violations could undermine public confidence in the judicial

process.

U.S. Supreme Court Chief Justice John Roberts highlighted in

his 2021 annual report on the judiciary a need for judges to be

vigilant about financial conflicts.

George Zelcs, a lawyer for the investors, said: "We look

forward to litigating the case on the merits before Judge

Caproni."

Bank of America ( BAC ) and lawyers who handled the banks' appeal

did not immediately respond to requests for comment.

The case is Litovich v Bank of America Corp ( BAC ) et al, 2nd U.S.

Circuit Court of Appeals, No. 21-2905.