On September 5, 2007, the Court issued the Opinion and Order No. 95140. According to the Order, U.S. District Judge John F. Keenan certified the class action, approved the settlement, approved the Plan of Allocation and finalized the award of attorneys’ fees and expenses. On September 19, 2007, the Court entered the Order and Final Judgment for In re Merrill Lynch Research Reports Securities Litigation, 02 MDL 1484.
According to the Notice of Pendency and Proposed Settlement of Class Actions, dated March 19, 2007, for In re Merrill Lynch Research Reports Securities Litigation, 02-MDL-1484, the case In re Merrill Lynch & Co., Inc. Homestore.com Research Reports Securities Litigation, 02cv9931, is part of a proposed settlement of $125 million in cash. A settlement hearing will be held before the Honorable John F. Keenan, United States District Judge of the Southern District of New York to determine whether the settlement should be approved.
According to the Decision & Order dated October 29, 2003, the case was dismissed with prejudice because plaintiffs failed to meet the essential pleading requirements of FRCP9(b) and the Reform Act. According to the Order, the complaints fail to state a claim principally because (1) there are no claims in the Complaints that the alleged misrepresentations or omissions proximately caused the losses claimed; additionally, (2) the Complaints are barred by the relevant statute of limitations; and (3) the Complaints fail to plead any facts giving rise to a strong inference of scienter. These reasons alone are adequate to merit dismissal of the Complaints with prejudice. The Plaintiffs filed an appealed on December 1, 2003. The appeal was later withdrawn in May 2006. Plaintiffs appealed decision after the District Court's rejection of their theory of loss causation [1] alleged in the complaint. The Dismissal was upheld by appellant court ruling, which stated that the allegations of purchase-time value disparity, standing alone, could not preclude operation of the loss causation requirement.
The original complaint charges defendants Merrill Lynch and Blodget with violations of the Securities Exchange Act of 1934. The complaint alleges that defendants issued analyst reports concerning Homestore that recommended the purchase of Homestore common stock and that set price targets for Homestore common stock, which were materially false and misleading and lacked any reasonable factual basis. In particular, it is alleged that defendants failed to disclose significant material conflicts of interest which resulted from the use by defendant Merrill Lynch of defendant Blodget's reputation and ability to issue favorable analyst reports, to obtain investment banking business for Merrill Lynch.
The complaint further alleges that defendants, in issuing their Homestore analyst reports, in which they recommended the purchase of Homestore securities, failed to disclose material, non-public, adverse information which they possessed about Homestore. Throughout the Class Period, defendants maintained an "Accumulate/Buy" or "Buy/Buy" recommendation on Homestore stock in order to obtain and support lucrative financial deals for Merrill Lynch.
Specifically, the complaint alleges [1] that plaintiffs were injured because the alleged misrepresentations and omissions artificially inflated the price of the securities and thereby allegedly induced a disparity between the transaction price and the true investment quality of the securities. In other words, according to the complaint plaintiffs were damaged because they acquired the various securities at "artificially inflated prices" and that "had they known of the omitted material facts, they would not have purchased or otherwise acquired their" securities or if they had they would not have done so at the artificially inflated prices which they paid.
Note: the Merrill Lynch 24/7 Real Media and Interliant plaintiffs alleged similar theory of loss causation mentioned in the last paragraph of this summary, and the Court rejected it.
