Tag Archives: 09 Civ. 02058

04 Jan
2013

Judge Castel Directs Parties to Consider Revising $20 Million Settlement in Bank of America Derivative Case

by Charles Michael Link to post

Judge Castel issued a short Order today reflecting some skepticism about a proposed $20 million settlement in the derivative suit arising from Bank of America’s acquisitions of Merrill Lynch and Countrywide.  A fairness hearing is set for January 11, and Judge Castel ordered the parties to consider revising the deal before then:

Without deciding any issue and only by way of example, the Court has not yet been persuaded of the fairness, reasonableness and adequacy of a settlement of the derivative claims against defendant [former Bank of America CEO Kenneth] Lewis in exchange for corporate governance reforms of  unquantifiable value and $20 million in cash, some, most or all of which will be consumed by plaintiffs’  attorneys’ fees.

Counsel for the lead derivative plaintiffs, the individual defendants and the Delaware objectors are directed to meet at 2 p.m. on January 7, 2013  at the offices of counsel for the individual defendants to discuss revisions to the proposed settlement.

Prior posts on this case are here.

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28 Nov
2012

Delaware Plaintiffs Object to $20 Million Southern District Settlement in Bank of America Derivative Case

by Charles Michael Link to post

As we reported before, there were two parallel derivative suits against Bank of America directors concerning its merger with Merrill Lynch, one in the Southern District and another in Delaware.  The plaintiffs in the Southern District case agreed to a $20 million settlement, which the Delaware plaintiffs, whose case would effectively end, unsuccessfully sought to enjoin.  Judge Castel ruled their complaints could be heard at the objection stage.

Today, the Delaware plaintiffs objected, arguing that $20 million is inadequate in comparison to the $500 million in insurance available and the $2.43 billion Bank of America agreed to pay in a related class action.  The Delaware plaintiffs contend that the settlement resulted from an unfair “reverse auction” in which the defendants were able to bid the Southern District and Delaware plaintiffs against one another.  Based on a declaration from NYU Law professor Geoffrey Miller, the Delaware plaintiffs claim the settlement’s corporate governance reforms add little to the directors’ preexisting fiduciary duties.  For their part, the settling parties contend that the settlement was the result of arm’s length negotiations and was fair in light of the risks of the case.  Their briefs are here (from the Southern District plaintiffs) and here (from the defendants).

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03 Oct
2012

Bank of America Settles Merrill Class Action

by Jessica Holloway Link to post

With summary judgment motions pending before Judge Castel, and a trial date of October 22 fast approaching, Bank of America announced Friday that it has agreed to pay $2.43 billion to settle a class action arising from Bank of America’s acquisition of Merrill Lynch (a case we have been following closely).  Plaintiffs’ counsel Bernstein Litowitz also put out an announcement.   The docket reflects that the parties informed Judge Castel of the settlement during a status conference on Friday, and that a deadline of November 16, 2012 has been set for filing the motion for preliminary approval of the settlement.  For a full analysis of the settlement and a comparison to past securities class action settlements see Alison Frankel at Reuters.

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02 Jul
2012

Class Action Plaintiffs Contend Bank of America-Merrill Proxy Claims Reflect Direct Shareholder Injury

by Charles Michael Link to post

In the class action alleging that Bank of America’s proxy statement for the Merrill merger failed to disclose massive expected losses at Merrill, the plaintiffs filed on Friday a 102-page omnibus opposition to the series of summary judgment motions we covered previously. In response to the principal defense argument — that any failure to disclose the extent of Merrill’s expected losses was an injury to the company that must be brought, if at all, derivatively — the plaintiffs argued as follows:

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20 Jun
2012

Judge Castel Considers Delaying Approval of Bank of America Derivative Settlement Pending Securities Class Action Trial

by Charles Michael Link to post

In a case we have followed closely, the parties to the derivative claims against Bank of America’s directors and officers relating to the Merrill Lynch and Countrywide acquisitions told Judge Castel today that they had executed a definitive settlement agreement, presumably reflecting the $20 million agreement in principle disclosed in April. In an interesting twist, Judge Castel issued an order suggesting that he might delay approval of the deal until after a trial on October 22 on related securities class action claims:

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03 Jun
2012

Parties Cross-Move for Summary Judgment Concerning Bank of America-Merrill Merger Disclosure Claims

by Charles Michael Link to post

A securities class action before Judge Castel accuses Bank of America, Merrill Lynch and certain officers and directors of securities fraud and related violations for failing to disclose, before the shareholder vote to approve the Bank of America-Merrill merger, that Merrill was expecting enormous losses for the fourth quarter of 2008 and that Bank of America and Merrill had agreed to set aside up to $5.8 billion for Merrill bonuses.  The parties today cross-moved for summary judgment.

The class plaintiffs (represented by Bernstein Litowitz) moved for partial summary judgment to establish that the pre-merger disclosures about the effect of the deal on earnings were both false and material:

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15 May
2012

Judge Castel Denies Motion to Enjoin $20 Million Bank of America Derivative Settlement

by Charles Michael Link to post

In an order yesterday, Judge Castel denied a challenge to a proposed $20 million settlement of the Bank of America derivative suit concerning its acquisitions of Countrywide and Merrill Lynch.  (See here for a prior post on the case.)  The challenge was broughy by lawyers for a parallel case in Delaware who claimed the settlement was grossly inadequate.  Judge Castel found, however, that any complaints about the settlement’s adequacy are “best raised in the settlement approval process,” and that the Delaware lawyers “have not adequately explained why intervention is required to protect their interests, as distinguished from exercising their rights as objectors under Rule 23.1.”

The Delaware lawyers may yet prevail, however.  They raised a question about whether the New York plaintiffs had sold their stock (and hence lost standing), and Judge Castel directed the plaintiffs to submit affidavits on the subject within 14 days.

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30 Apr
2012

Bank of America Derivative Settlement Challenged by Lawyers in Parallel Delaware Action

by Charles Michael Link to post

The proposed settlement of a derivative suit before Judge Castel concerning Bank of America’s acquisitions of Countrywide and Merrill Lynch is being challenged by lawyers in a parallel case in Delaware state court.

The parties to the federal case told Judge Castel on April 12 that they had settled. The next day, the Delaware lawyers filed a motion to enjoin the settlement, and Judge Castel signed an order to show cause that set a briefing schedule that will be complete by May 4.

The motion papers were not (and still are not) available on ECF, but the grounds for the motion were made clear by a story in the New York Times: the Delaware lawyers contend the settlement amount of $20 million is grossly inadequate because it is a fraction of the $150 million SEC fine from the Merrill merger and because the bank’s insurance policy would result in the defendants paying nothing out of pocket. A Reuters story later provided additional background, including the unusual fact that two parallel derivative actions would proceed for so long without one case or the other being stayed.

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12 Apr
2012

Judge Castel Dismisses Securities Fraud Claims Against Bank of America Relating to Countrywide Acquisition

by Charles Michael Link to post

In an opinion released this afternoon, Judge Castel dismissed claims that Bank of America committed securities fraud by describing its due diligence on Countrywide as “extensive” and by allegedly failing to disclose the full litigation and regulatory exposure of Countrywide at the time of the acquisition.  Judge Castel concluded that “plaintiff offers only a retrospective critique of BofA’s analysis concerning Countrywide’s exposure.”  The word “hindsight” appears six times in the opinion.

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