In the latest response, filed June 1, lawyers for Greenberg contend that the Fed is wrong in stating that it has immunity from claims incurred in all of its actions regarding AIG.

“In sum, there is no basis for dismissing this case at this preliminary stage and FRBNY's motion [to dismiss the case] should be denied,” the Greenberg response says.

The suit contends the Federal Reserve Board breached its fiduciary duty to AIG shareholders “when it caused AIG to take actions which helped third parties and furthered FRBNY's goals unrelated to FRBNY's core statutory purpose: lending.”

Greenberg's lawyers say the Reserve Board is wrong in contending that when it exercised control of AIG as part of a rescue operation, “it was freed of any duty whatsoever to the loan-receiving entity or its common-stock shareholders.”

The Fed is arguing that all fiduciary duties are preempted and that it is not subject to constitutional constraints.

“FRBNY is not correct, and indeed its argument fundamentally misapprehends the nature of the claims against it,” Greenberg's attorneys say in the filing.

In April, the Fed said the complaint should be dismissed without further imposition of burdens on the FRBNY “and, ultimately, taxpayers.

“Although the complaint downplays AIG's plight as 'a liquidity problem, not a solvency problem,' the 'liquidity problem' was gargantuan and threatened AIG with bankruptcy,” the Fed added.

Greenberg took back Starr as part of an earlier settlement of claims he made against the federal government. Greenberg was ousted from AIG by directors in 2005 and at that time initiated litigation against the company.