The group, called Walnut Place, said it had "serious concerns about the secret, non-adversarial and conflicted way in which the proposed settlement was negotiated and about the fairness of the terms," The Wall Street Journal reported Tuesday.
The $8.5 billion settlement with BlackRock Inc., MetLife and 23 other large investors requires court approval. Walnut Place says the size of the settlement is "inadequate," the negotiations were not inclusive and the talks were too chummy.
Walnut Place filed its complaint in New York County Supreme Court.
The case revolved around mortgage-backed securities that soured on BofA's investors.
Walnut Place has already filed a petition to force BofA to make amends for loans issued by Countrywide Financial Corp, the ailing California lender BofA bought in 2008.
The loans in question were issues before BofA purchased Countrywide.