Judge Dismisses Merrill Lynch Derivative Suits

Judge Dismisses Merrill Lynch Derivative Suits - 2/17/2009

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2009 News and Press Releases

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News	News 2009
HEADLINES \| SETTLEMENTS AND DISMISSALS \| COURT FILINGS LINKS TO OTHER NEWS \| NEWS ARCHIVE	HEADLINES ARCHIVED SETTLEMENTS AND DISMISSALS ARCHIVED

DISMISSAL NEWS:

Judge Dismisses Merrill Lynch Derivative Suits
Ryan Davis

Securities Law 360. February 17, 2009
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EXCERPT: Finding that the acquisition of Merrill Lynch & Co. Inc. by Bank of America Corp. last year means that the plaintiffs no longer have standing to sue, a federal judge has tossed out the derivative actions in a consolidated suit alleging that Merrill Lynch misrepresented its subprime mortgage debt exposure. Judge Jed Rakoff of the U.S. District Court for the Southern District of New York ruled Tuesday that the plaintiffs, Merrill shareholders who sued on behalf of the company alleging breach of fiduciary duty by company executives, are no longer shareholders after the stock-for-stock Bank of America transaction, and therefore do not have standing to bring derivative actions. However, Judge Rakoff noted that the dismissal was without prejudice, so the plaintiffs will be allowed to file "a renewed action, recast as a derivative action against Bank of America ... but based on the same underlying allegations as the actions here dismissed." Reached for comment on the dismissal, Jonathan Cuneo, an attorney for one of the plaintiffs in the derivative suit, said that "the court’s ruling could not be more clear that the dismissal was without prejudice to our ability to bring another action in the future." Last month, Merrill Lynch agreed to a $550 million settlement with the Ohio State Teachers Retirement System and other plaintiffs in securities class actions and Employee Retirement Income Security Act actions regarding the same allegations. That settlement did not apply to the derivative actions, though all three types of suits were consolidated into one proceeding. The derivative actions allege that the investment bank and its executives misrepresented and failed to disclose facts about the extent of their involvement with subprime mortgages by issuing misleading and false financial statements about the company.

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