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NEW YORK - (Mealey's) A federal judge in New York on April 5 granted final approval of a $2.4 billion settlement between shareholders and Bank of America Corp. (BoA) to settle claims that it and certain of its executive officers and directors misrepresented the company's business and financial condition, as well as the business and financial condition of Merrill, Lynch & Co. Inc. prior to BoA's acquisition of Merrill (In re: Bank of America Corp. Securities, Derivative, and ERISA Litigation, No. 09-MDL-2058, S.D. N.Y.).
According to a media relations source at shareholder law firm Kessler Topaz Meltzer & Check, U.S. Judge Kevin Castel of the Southern District of New York granted approval of the settlement from the bench. No further information was provided.
After the Judicial Panel on Multidistrict Litigation consolidated 31 separate but similar class action, derivative and Employee Retirement Income Security Act lawsuits in the Southern District of New York on June 10, 2009, five pension funds named as lead plaintiffs filed a consolidated complaint in the District Court on behalf of all purchasers of BoA common stock from Sept. 15, 2008, to Jan. 21, 2009, excluding "any shares of BoA common stock acquired by exchanging the stock of Merrill Lynch & Co. Inc. for BoA stock through the merger between the two companies consummated on January 1, 2009," who "held BoA common stock or 7% Cumulative Redeemable Preferred Stock, Series B as of October 10, 2008, and were entitled to vote on the merger between BoA and Merrill" or who "purchased BoA common stock issued under the Registration Statement and Prospectus for the $10 billion offering of BoA common stock that occurred on or about October 7, 2008, and were damaged thereby."
The lead plaintiffs named BoA and Merrill, as well as BoA CEO Kenneth D. Lewis, former Chief Financial Officer Joe L. Price, Chief Accounting Officer Neil A. Cotty and Merrill CEO John A. Thain (collectively, the officer defendants), the BoA board of directors and underwriters Banc of America and Merrill subsidiary Merrill Lynch, Pierce, Fenner & Smith Inc. as defendants.
The lead plaintiffs alleged that the defendants violated Sections 10(b), 14(a) and 20(a) of the Securities Exchange Act of 1934, Securities and Exchange Commission Rules 10b-5 and 14a-9 and Sections 11, 12 and 15 of the Securities Act of 1933 by issuing a series of false and misleading statements concerning BoA's due diligence in preparing its multibillion-dollar acquisition of Merrill and its ensuing payment of millions of dollars in executive year-end performance bonuses and compensation to Merrill officers and directors. The lead plaintiffs sought damages and costs associated with litigating the action.
On July 29, 2011, Judge Castel found that the lead plaintiffs could bring securities fraud claims against Lewis and Price, saying the plaintiffs sufficiently alleged that Lewis and Price acted recklessly when they did not disclose to shareholders that Merrill was losing billions of dollars. On Feb. 6, 2012, Judge Castel certified the class.
Soon after, Bank of America agreed to settle all claims for $2.43 billion and institute a number of corporate governance policies.
The lead plaintiffs are represented by Robert N. Kaplan and Frederic S. Fox of Kaplan Fox & Kilsheimer in New York, Max W. Berger and Steven B. Singer of Bernstein Litowitz Berger & Grossmann in New York and David Kessler and Gregory M. Castaldo of Kessler Topaz Meltzer & Check in Radnor, Pa.
The defendants are represented by Mitchell A. Lowenthal and Lewis J. Liman of Cleary Gottlieb Steen & Hamilton in New York and Peter C. Hein, Eric M. Roth, Joshua A. Naftalis, Kevin S. Schwartz and Olivia A. Maginley of Wachtell Lipton Rosen & Katz in New York.
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