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On July 29, 2011, U.S. District Court Judge P. Kevin Castel substantially denied Defendants’ motions to dismiss the Second Amended Complaint in In re Bank of America Corp. Securities, Derivative and “ERISA” Litigation, No. 09-MD-2058 (S.D.N.Y.), upholding Lead Plaintiffs’ claim alleging misstatements and omissions concerning Merrill Lynch’s fourth quarter 2008 losses, but dismissing the ancillary claim of false statements concerning the necessity of obtaining a bailout in order to complete the merger between Bank of America and Merrill.
In its July 29 opinion, the Court reinstated Lead Plaintiffs’ claim concerning Merrill’s fourth quarter losses based on allegations added to the Second Amended Complaint in support of scienter, which led the Court to conclude that scienter was adequately alleged as to CEO Ken Lewis, CFO Joseph Price, and BofA. Specifically, with respect to Lewis, the Court found scienter was adequately alleged “by virtue of his position within BofA and his awareness of Merrill’s losses,” against which Lewis’s inaction in seeking disclosure advice was at least severely reckless. As to Price, the Court found that the complaint adequately alleged that he understood the significance of Merrill’s massive and increasing losses, stating “it is implausible to conclude that Price, the CFO of BofA, did not understand that there was a correlation between the size of Merrill’s losses and BofA’s disclosure obligations.” Moreover, the Court thoroughly rejected Defendants’ arguments that Price merely relied, in good faith, on the advice of counsel in not disclosing the losses because the complaint alleges that he “cherry-picked the figures and even then was untimely in giving counsel updated information.”
Following the ruling, the parties have commenced full discovery. Class certification briefing will begin in October, 2011.
Kaplan Fox is the court appointed co-lead counsel in the case.
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