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Case Status:    SETTLED
On or around 03/11/2010 (Date of order of final judgment)

Filing Date: October 30, 2007

Beginning in October 2007, the Company was named in putative class actions filed on behalf of certain persons who acquired Merrill Lynch securities (the “Securities Action”) or participated in Merrill Lynch retirement plans (the “ERISA Action”) and purported shareholder derivative actions (the “Derivative Actions”) that have largely been consolidated under the caption, In re Merrill Lynch & Co., Inc. Securities, Derivative, and ERISA Litigation, filed in the U.S. District Court for the Southern District of New York. The complaints allege, among other things, that the defendants misrepresented and omitted facts related to Merrill Lynch’s exposure to subprime collateralized debt obligations and subprime lending markets in violation of the federal securities laws, and seek damages in unspecified amounts. The Securities Action plaintiffs allege harm to investors who purchased Merrill Lynch securities during the class period; the ERISA Action plaintiffs allege harm to employees who invested retirement assets in Merrill Lynch securities, in violation of the Employee Retirement Income Security Act of 1974 (“ERISA”); and the plaintiffs in the Derivative Actions allege harm to Merrill Lynch itself from alleged breaches of fiduciary duty.

The complaint first filed on October 30, 2007, charges Merrill and certain of its officers and directors with violations of the Exchange Act. Merrill offers a broad range of services to private clients, small businesses, institutions and corporations, organizing its activities into two interrelated business segments – Global Markets & Investment Banking Group and Global Wealth Management, which is comprised of Global Private Client and Global Investment Management. Specifically, the complaint alleges that, during the Class Period, defendants issued materially false and misleading statements regarding the Company’s business and financial results. Merrill had gone heavily into Collateralized Debt Obligations (“CDOs”) which generated higher yields in the short term but which would be devastating to the Company as the real estate market continued to soften and the risky loans led to losses. According to the complaint, Defendants knew or recklessly disregarded that (i) the Company was more exposed to CDOs containing subprime debt than it disclosed; and (ii) the Company’s Class Period statements were materially false due to their failure to inform the market of the ticking time bomb in the Company’s CDO portfolio due to the deteriorating subprime mortgage market, which caused Merrill’s portfolio to be impaired. In early October 2007, Merrill acknowledged it would have to take a $5 billion third quarter 2007 charge for mortgage and credit problems. Then, on October 24, 2007, before the market opened, Merrill issued a press release which announced the third quarter charge would be $8 billion instead of $5 billion. On this news, Merrill’s stock dropped from $67.12 per share to as low as $61.40 per share, closing at $63.22 per share on volume of 52 million shares. Subsequently, on October 25, 2007, S&P reduced Merrill’s credit rating to negative after the brokerage reported the biggest quarterly loss in its 93-year history, causing Merrill’s stock to dramatically drop to $60.90 per share.

On December 28, 2007, a similar class action complaint, James Conn, et al. v. Merrill Lynch & Co., Inc., et al., filed in the U.S. District Court for the Southern District of New York, docket number 07-CV-11626, was filed on behalf of those who exchanged securities of First Republic Bank for securities of Merrill Lynch in connection with a merger. According to the complaint, the action was brought in violation of Sections 11, 12a(2) and 15 of the Securities Act of 1933. On March 12, 2008, this action was consolidated into the lead action, docket number 07cv9633. According to the complaint for this action, in late 2006 and early 2007, Merrill Lynch approached First Republic bank about a possible merger. On January 29, 2007, after a period of negotiations, Merrill Lynch announced that it had reached an agreement to acquire First Republic, subject to shareholder approval, for a total transaction value of $1.8 billion. Under the agreement, First Republic shareholders would receive at their election, cash or Merrill Lynch common stock having a value of equal to $55.00 for each share of First Republic common stock owned at the completion of the Merger. The aggregate consideration would be paid with 50% cash and 50% Merrill Lynch common stock. To obtain approval from First Republic’s shareholder, Merrill Lynch filed the Registration Statement dated May 8, 2007, as amended on June 8, 2007 and June 21, 2007, which became effective on June 22, 2007, and the Proxy Statement and Prospectus dated June 22, 2007. Unfortunately, the Registration Statement and Proxy/Prospectus were materially false and misleading because, inter alia, they: a. failed to disclose and hid the fact that Merrill Lynch was overexposed to risky subprime loans, to the sum of billions of dollars; b. failed to disclose and hid the fact that Merrill Lynch had begun to accumulate a massive directional position in one of the riskiest types of collateralized debt obligations (CDOS), ABS CDOs; c. failed to disclose the risks of these CDOs, including the belief of Merrill Lynch’s own credit analysts that ABS CDOs were structurally deficient and would suffer in price as the underlying collateral deteriorated; and d. failed to disclose and hid the fact that Merrill Lynch did not properly value the CDO positions on its balance sheet. After receiving approval from the First Republic shareholders, the Merger was completed on September 21, 2007. However, just weeks after the Merger was completed, and contrary to the representations in the Registration Statement and Proxy/Prospectus, and the oral communications made in the conference call of July 17, 2007, Merrill Lynch’s true exposure to subprime loans and CDOs began to emerge. On October 24, 2007, before the market opened, Defendants issued a press release acknowledging that Merrill Lynch’s third quarter writedown for CDO and subprime lending losses had ballooned to $7.9 billion. On November 2, 2007, The Wall Street Journal ran an article indicating that Merrill Lynch’s exposure to CDOs was even greater than Defendants had acknowledged, noting that Merrill Lynch would likely take an additional $4 billion in writedowns in the fourth quarter related to its CDO portfolio. The article also stated that the SEC had started an informal inquiry into how the company had marked its mortgage securities and whether it had lied to investors regarding the size of its positions. That same day, Deutsche Bank AG analyst Michael Mayo issued a research note stating that Merrill Lynch may have to take an additional $10 billion in writedowns related to its CDO and subprime exposure. The news was devastating to First Republic’s former shareholders, who had just exchanged their valuable shares for Merrill Lynch stock. Based on the September 21, 2007, closing date, Merrill Lynch stock was trading at approximately $75.00 per share. Thus, First Republic shareholders received approximately 0.7332 shares of Merrill Lynch stock for each share of First Republic stock. However, by November 2, 2007, after Merrill Lynch’s massive CDO exposure had been revealed, the Merrill Lynch shares obtained through the Merger had plummeted to $57.28, a 23% drop, and are presently trading at less than $55.00 per share.

On March 12, 2008, Judge Leonard B. Sand signed the Order consolidating several Securities Action in into the docket number 07cv9633 (LBS)(AJP)(DFE) for all purposes including, but not limited to, discovery, pretrial proceedings and trial. Ohio STRS is appointed Lead Plaintiff in the Securities Action for the proposed class of persons and entities who purchased or otherwise acquired Merrill Lynch securities. Ohio STRS' choice of co-lead counsel is approved. Accordingly, the law firms of Kaplan Fox & Kilsheimer LLP, Berger & Montague, P.C. and Barrack Rodos & Bacine are appointed co-Lead Counsel for the Securities Action. Judge Sand also consolidated Derivative Actions into docket number 07cv9696 and consolidated ERISA Actions into docket number 07cv10268, appointing co-lead counsels in each. According to the Order, he docket in 07cv9633 (LBS)(AJP)( DFE) shall constitute the Master Docket for the Securities Action, Derivative Action and ERISA Action, and every pleading filed in the Securities Action, Derivative Action and ERISA Action shall bear the following caption, In Re Merrill Lynch & Co., Inc. Securities, Derivative And ERISA Litigation.

On May 21, 2008, Consolidated Amended Complaints were filed in the Securities, Derivative and ERISA Actions. According to the Consolidated Amended Complaint for the Securities Action, plaintiffs alleged claims against the Defendants under Sections 10(b), 14(a), and 20(a) of the Securities Exchange Act of 1934 and Sections 11, 12(a)(2), and 15 of the Securities Act of 1933 on behalf of investors in Merrill Lynch common stock and the Preferred Securities issued by Merrill Lynch or its affiliates. The defendants responded by filing a motion to dismiss the complaints.

On or about July 28, 2008, Lead Plaintiff entered into a tolling agreement with Citigroup Global Markets, Morgan Stanley & Co., UBS Securities, and Wachovia Capital Markets LLC (collectively, the “Underwriter Defendants”), as a result of which
Lead Plaintiff agreed to voluntarily dismiss without prejudice the Underwriter Defendants from the Securities Action. On August 5, 2008, the Court approved the voluntary dismissal of the Underwriter Defendants.

On July 21, 2008, certain of the Defendants moved to dismiss the Consolidated Amended Complaint. Merrill Lynch also moved to strike certain allegations of the Consolidated Amended Complaint, and certain other Defendants also joined in this motion. On September 19, 2008, Plaintiffs filed a consolidated opposition to Defendants’ motions to dismiss and Merrill Lynch’s motion to strike. Plaintiffs also filed a motion to strike certain arguments and documents Defendants submitted with their motions to dismiss.

On November 14, 2008, Defendants filed reply memoranda in further support of their motions to dismiss, and in opposition to Plaintiffs’ motion to strike. Plaintiffs filed a reply memorandum in further support of their motion to strike on November 14, 2008.
On November 25, 2008, the Court issued an Order setting oral argument on the pending motions to dismiss in the Securities Action for January 15, 2009.

According to the Company’s Form 10-K for the fiscal year ended December 26, 2008, in January 2009, the parties entered into agreements in principle to settle the Securities Action for $475 million and the ERISA Action for $75 million, all of which has been accrued and reflected in the Company’s consolidated financial statements. The settlements are subject to a number of conditions, including court approval and confirmatory discovery, and were reached without any adjudication of the merits or finding of liability. On February 17, 2009, the court granted Defendants’ motion to dismiss the Derivative Actions. On July 28, 2009, the plaintiffs filed a Third Amended Complaint regarding the derivative claims.

On August 4, 2009, Judge Jed S. Rakoff signed the Final Judgment and Order approving the settlement for the Securities Action. The action is dismissed with prejudice. That day, Judge Rakoff also approved the plan of allocation and the attorneys' fees and expenses. The court awarded 7.815% of the $475 million Securities Action settlement fund to Co-Lead Counsel as attorneys' fees, and $1,071,790.55 as reimbursement of expenses.

According to a press release dated August 26, 2009, on August 21, 2009, the Honorable Jed S. Rakoff granted final approval of the ERISA settlement in In re Merrill Lynch & Co., Inc. Securities, Derivative and ERISA Litigation. This class action alleged breaches of fiduciary duty in violation of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), in connection with the acquisition and holding of Merrill Lynch stock in the Merrill Lynch & Co., Inc. 401(k) Savings and Investment Plan, the Merrill Lynch & Co., Inc. Retirement Accumulation Plan, and the Merrill Lynch & Co., Inc. Employee Stock Ownership Plan (collectively, the "Plans"). The settlement provides for a payment of $75 million to resolve the Class's claims.

On August 24, 2009, the Court preliminarily approved a settlement outlined in the Stipulation of Settlement dated August 12, 2009. The settlement is in the amount of $150 million in cash. The settlement resolves claims on behalf of all persons and entities who purchased or otherwise acquired any Bond Class Securities. The Final Hearing is set for November 23, 2009.

On November 25, 2009, Judgment was entered approving settlement in favor of the plaintiffs. On December 2, 2009, the Court entered the Order awarding attorneys’ fees in the amount of 15% of the $150 million Settlement Amount and $507,794.07 in reimbursement of litigation expense.


Sector: Financial
Industry: Investment Services
Headquarters: United States


Ticker Symbol: MER
Company Market: New York SE
Market Status: Public (Listed)

About the Company & Securities Data

"Company" information provides the industry and sector classification and headquarters state for the primary company-defendant in the litigation. In general, "Securities" information provides the ticker symbol, market, and market status for the underlying securities at issue in the litigation.

In most cases, the primary company-defendant actually issued the securities that are the subject of the litigation, and the securities information and company information relate to the same entity. In a small subset of cases, however, the primary company-defendant is not the issuer (for example, cases against third party brokers/dealers), and the securities information and company information do not relate to the same entity.
COURT: S.D. New York
DOCKET #: 07-CV-09633
JUDGE: Hon. Leonard B. Sand
DATE FILED: 10/30/2007
CLASS PERIOD END: 10/23/2007
  1. Abraham, Fruchter & Twersky (New York, 42 Street)
  2. Coughlin Stoia Geller Rudman & Robbins LLP (Melville)
  3. Coughlin Stoia Geller Rudman & Robbins LLP (San Diego)
No Document Title Filing Date
COURT: S.D. New York
DOCKET #: 07-CV-09633
JUDGE: Hon. Leonard B. Sand
DATE FILED: 05/21/2008
CLASS PERIOD END: 10/23/2007
  1. Barrack, Rodos & Bacine (Main office, Philadelphia)
  2. Berger & Montague PC
  3. Kaplan Fox & Kilsheimer, LLP (New York)
No Document Title Filing Date
No Document Title Filing Date