Bank of America Corp. Sec. Litig., No. 09 MDL 2058 (DC) (S.D.N.Y.)

Southern District of New York

Class Period: September 15, 2008 – January 21, 2010


Robert Kaplan Headshot

Robert N. Kaplan
Headshot: Frederic Fox

Frederic S. Fox
Headshot: Donald Hall

Donald R. Hall

Melinda D. Campbell

$2.43 Billion

Total Settlement


Securities class action settlement [Section 14(a) claim]


Affected Co-Lead Plaintiffs

Kaplan Fox served as Court-appointed co-lead counsel in the case against Bank of America. The State Teachers Retirement System of Ohio, The Ohio Public Employees Retirement System, The Teacher Retirement System of Texas, Stichting Pensioenfonds Zorg en Welzijn, represented by PGGM Vermogensbeheer B.V., and Fjärde AP-Fonden were Court-appointed Co-Lead Plaintiffs in this securities fraud class action arising out of the merger between Bank of America Corp. (“BoA”) and Merrill Lynch & Co (“Merrill”) announced on September 15, 2008 and that closed on January 1, 2009.

On September 25, 2009, Co-Lead Plaintiffs filed their Consolidated Amended Class Action Complaint (the “CAC”). The gravamen of the CAC is that, throughout the Class Period, Defendants violated the federal securities laws by making a series of highly-material false statements and omissions concerning: (1) Defendants’ secret agreement to allow Merrill to pay, on an accelerated basis and prior to the close of the Merger, up to $5.8 billion in bonuses to its executives and employees; (2) Merrill’s undisclosed losses, which were in excess of $15 billion during October and November 2008 alone; (3) BoA’s own unprecedented losses; (4) the internal debate prior to the shareholder vote on the Merger amongst senior BoA officers concerning invoking the material adverse change clause (“MAC”) in the Merger agreement, as a result of Merrill’s massive losses; (5) BoA senior management’s decision to invoke the MAC within days of the shareholder vote; (6) BoA’s agreement to proceed with the Merger only after the Secretary of the Treasury threatened to fire BoA’s senior management and the Board if they invoked the MAC; and (7) the $138 billion taxpayer bailout BoA required to close the Merger.

The truth about Merrill’s financial condition and its materially adverse impact on BoA was not revealed until January 12, 2009, and investors did not learn of the massive taxpayer bailout until January 15. On January 21, 2009, investors finally learned that despite Merrill’s staggering losses, BoA had allowed Merrill to pay $3.6 billion in bonuses before the merger closed. As these facts became known, the price of BoA common stock plummeted from $12.99 per share to a low of $5.10 per share, causing a market capitalization loss of approximately $50 billion.

On November 16, 2009, the Court granted Co-Lead Plaintiffs’ request to partially lift the stay of discovery imposed by the Private Securities Litigation Reform Act of 1995 (the “PSLRA”) with respect to documents and testimony produced by BoA to various governmental entities conducting investigations related to the merger between BoA and Merrill.

Defendants moved to dismiss the CAC on November 24, 2009. Briefing on the motions to dismiss was completed on January 26, 2010. While the motions were pending, on March 25, 2010, Defendants filed a motion to certify a question to the Delaware Supreme Court about whether Co-Lead Plaintiffs’ allegations pursuant to Section 14(a) of the Securities Exchange Act of 1934 constitute direct claims. Briefing on the motion to certify was completed on April 15, 2010.

The Court ruled on the motions to dismiss and denied the motion to certify a question to the Delaware Supreme Court on August 27, 2010. In the August 27 opinion, Judge Castel upheld Lead Plaintiffs’ claims alleging: (1) securities fraud and false proxy statements related to Bank of America’s agreement to allow Merrill to pay up to $5.8 billion in discretionary bonuses to Merrill employees; (2) false proxy statements for failure to disclose Merrill’s fourth quarter 2008 losses; (3) false offering statements related to the secret bonus agreement with Merrill; and (4) control person liability with respect to these claims. Additionally, Judge Castel accepted Lead Plaintiffs’ contention that shareholders have a direct Section 14(a) claim for their out-of-pocket losses as measured by the diminution of the price of their shares, and ruled that Lead Plaintiffs need only establish Defendants’ negligence – as opposed to intent to defraud – to establish liability on these claims. The case proceeded to discovery and a trial was scheduled to start on October 22, 2012.

On September 28, 2012, Kaplan Fox & Kilsheimer LLP announced a $2.43 billion settlement against BoA and Merrill and certain current and former officers and directors for violations of federal securities laws. The settlement also required BoA to institute certain corporate governance policies, including majority voting in director elections, annual disclosure of noncompliance with stock ownership guidelines, policies for a board committee regarding future acquisitions, the independence of the board’s compensation committee and its compensation consultants, and an annual “say-on-pay” vote by shareholders.

On April 9, 2013 the settlement was approved by the Honorable P. Kevin Castel in the United States District Court for the Southern District of New York, where the class action was pending under the caption In re Bank of America Securities, Derivative & Employment Retirement Income Security Act (ERISA) Litigation, 09-MD-2058 (PKC).

The $2.43 billion settlement is the largest securities class action settlement resolving a Section 14(a) claim and is the largest class securities class action settlement where executives of the defendant corporation were not criminally charged. The settlement is also one of the four largest settlements funded by a single corporate defendant for violations of federal securities laws.

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