Merrill Reaches Settlement in Class Action Lawsuit

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In a statement issued on Wednesday, William Halldin, a Merrill spokesman said, “We have agreed to a resolution to avoid the cost and distraction of what would likely be continued, lengthy litigation,” referring to the class-action lawsuit representing thousands of former brokers seeking deferred compensation.

According to a regulatory filing, Merrill has “reached an agreement in principle” for settling the lawsuit brought by two of its former brokers on behalf of the class in 2009. The lawsuit resulted from Merrill’s merger agreement with Bank of America in 2008, with years of deferred compensation at issue including some that held stock savings plans.

While the terms of the settlement are yet to be disclosed, sources close to the matter say the settlement may range between $ 90 million and hundred million dollars for the class. The settlement needs to be approved by a Manhattan federal court, which also needs to certify the class. The parties are scheduled to appear at court on Friday.

  

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While Merrill has aggressively fought the claims of its former brokers, an internal Merrill analysis cited by a FINRA arbitration panel in April found that the firm’s possible “good reason liability exposure” from departing brokers could range from “hundreds of millions” to “several billion” dollars. Naturally, Merrill would not like to test the waters if a settlement could be arranged at a minimum cost.

The lawyers representing the plaintiffs confirmed the existence of the settlement, and approval of the settlement could lead to immediate relief for about 3300 brokers who left Merrill following the deal with Bank of America. However, it is unclear how many brokers would agree to the settlement even if it is approved. Merrill is also facing a parallel proceedings on the issue at the FINRA arbitration forum which is on behalf of more than 1000 former brokers.