Bank Of America ( NYSE: BAC) Investor Files Class Action Lawsuit On Behalf Of Certain BAC Investors Over Merrill Lynch Acquisition 01/21/2009

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Company Name(s): 
Bank of America
Case Name: 
Bank Of America ( NYSE: BAC) Investor Files Class Action Lawsuit On Behalf Of Certain BAC Investors Over Merrill Lynch Acquisition 01/21/2009
Case Status: 
Lawsuit Filed
Case Status: 
Settlement Proposed
Affected Securities
NYSE: BAC
Lawsuit Overview
Type of Lawsuit: 
Shareholder Class Action
Date Filed: 
01/21/2009
Class Period Begin: 
09/18/2008
Class Period End: 
01/21/2009
Court of Filing: 
U.S. District Court for the Southern District of New York
Deadline To File for Lead: 
03/20/2009
Date Settled: 
04/05/2013
Settlement Amount: 
$2,425,000,000
Deadline to Participate in Settlement: 
04/25/2013
Settlement Notice: 
Settlement Proof: 
Summary: 

09/28/12 (Update) -- $2.43 billion proposed Bank of America settlement. BofA denied allegations that is mislead shareholders ahead of the Merrill deal, but has agreed to the settlement to put the case behind them.

04/13/2012 (Update) -- On April 12, 2012, the Court issued an order granting defendants' motions to dismiss claims unique to an individual plaintiff. The plaintiff's application for leave to replead was denied. However, the plaintiffs claims regarding the Merrill Lynch inquisition that parallel those that stated a claim for relief in the securities action remain pending in this action and therefore the case could proceed.

03/21/ 2012 (Update) - Investors, who are affected by the case should have received a 'Notice of Pendency of Class Action'. The notice among other things defines the investment time frame and explains who is affected by the case. There are several options and investors has until May 7, 2012 to take action.

02/06/2012 (Update) - The court granted the Lead Plaintiffs' Motion for Class Certification.

10/17/2011 (Update) -- The parties have been ordered to complete class certification discovery no later than October 3, 2011 and the court said that the plaintiffs may move for class certification no later than October 17, 2011. Subsequently the plaintiffs filed a motion to certify the class on October 17, 2011.

07/29/2011 (Update) -- The Court in part denied the defendants motion to dismiss the case and therefore the case could move on. According to the Memorandum and Order signed by the Judge the defendants’ motion to dismiss is granted as to plaintiffs’ Section 10(b) and Rule 10b-5 claim directed toward non-disclosure of federal financial assistance.The motion also was granted as to plaintiffs’ standing to pursue claims on behalf of holders of BofA preferred shares, debt securities and call options, and only those claims brought on behalf of holders of CUSIP 060505DP6 bonds and January 2011 call options may proceed.

However, the defendants’ motion is denied as to plaintiffs’ Section 10(b) and Rule 10b-5 claims directed to non-disclosure of Merrill’s losses in the fourth quarter of 2008.

10/22/2010 (Update) -- The lead plaintiff filed the second amended complaint and defendants responded by filing several motions to dismiss.
09/25/2009 (Update) -- The lead plaintiff filed a consolidated amended complaint, naming a number of additional defendants and claims to the action and the defendants filed several motions to dismiss the Consolidated Amended Class Action Complaint.
06/30/2009 (Update) -- The court consolidated several related cases into one case and appointed lead plaintiff and lead counsels for this case.
02/13/2009 (Update) -- An investor with over 1,000,000 shares of Bank of America filed lawsuit against BofA in relation with Merrill losses.

The lawsuits allege that Bank of America failed to properly value its mortgage-related assets and engage in proper due diligence in determining the fairness of its proposed merger with Merrill Lynch. It was at this time that Bank of America sold 455 million shares of its common stock at $22 per share in a secondary common stock offering that raised some $10 billion. On December 5, 2008, shareholders of both Bank of America and Merrill Lynch approved the merger with Merrill Lynch. But then on January 16, 2009, Bank of America announced its first quarterly loss in 17 years. Bank of America announced a $1.8 billion loss for the fourth quarter of 2008, citing deeper trading and loan losses. Bank of America reduced its dividend from $0.32 to a penny a quarter. In addition to its own losses, Bank of America reported that Merrill Lynch’s preliminary results for the fourth quarter of 2008 indicated a net loss of $15.3 billion. Bank of America further confirmed that it would receive an additional $20 billion in assistance from the U.S. Government and that the government had agreed to provide guarantees against further Merrill Lynch losses of $118 billion. Over the course of the next several days details began to emerge concerning the truth behind Bank of America’s deal with Merrill Lynch, including the fact that Bank of America had learned of Merrill Lynch’s substantial fourth quarter losses prior to completing its acquisition of Merrill Lynch. During a conference call Kenneth Lewis, the chief executive of Bank of America, said the bank was caught off-guard by the extent of the losses. "It wasn't an issue of not identifying the assets," he said. "It was that we did not expect the significant deterioration which happened in mid- to late December that we saw."

Between January 15 and 20, 2009, as news of Bank of America’s financial position came to light, Bank of America’s stock lost 50% of its value, declining from $10.20 per share on January 14, 2009 to close at $5.10 per share on January 20, 2009.

Case - 01/21/2009

It was expected that BoA’s silence on Merrill losses may prompt lawsuits, now one day later two investors have filed proposed class action lawsuits against Bank of America Corp. (NYSE: BAC) , Kenneth Lewis and John Thain, among others, in the United States District Court for the Southern District of New York, on behalf of all persons who owned shares of Bank of America on October 10, 2008, who were entitled to vote to approve the adoption of a merger agreement between Bank of America and Merrill Lynch & Co., Inc. pursuant to a Proxy Statement dated October 31, 2008.

According to the complaint the plaintiff alleges claims for violations of Section 14(a) of the Securities Exchange Act of 1934. The facts underlying this action concern the Merger of Bank of America and Merrill Lynch, which closed on January 1, 2009. In Bank of America's January 1, 2009 announcement that the merger had closed, Kenneth Lewis, the chief executive of Bank of America, made no mention of the losses. Instead, he said the combined company -- faced with those losses and without a final commitment from the government to cover some of them -- was "uniquely positioned to win market share and expand our leadership position in markets around the world." The complaint alleges that on January 16, 2009, Bank of America disclosed Merrill Lynch's preliminary 2008 fourth quarter loss of $15.3 billion. Bank of America reported its first quarterly loss in 17 years on Friday and received a $20 billion U.S. government lifeline to help it absorb Merrill. Merrill Lynch's fourth quarter 2008 "principal transactions" revenue was negative $13.1 billion, reflecting a net loss owing to write-downs, mark-to-market valuation declines and other losses on assets held in its trading portfolio. It is alleged that as a result of this massive loss Bank of America was compelled to seek additional funding and asset guarantees from the United States Treasury Department.

Following these disclosures, Bank of America shares declined by 31% between January 14, 2009 and January 16, 2009. The complaint charges that the Proxy Statement contained material misrepresentations and failed to disclose facts necessary to make the disclosures true. Specifically, defendants' misrepresentations and omissions include the failure to update, amend or correct the Proxy Statement to reflect, among other things, the risk or existence of Merrill Lynch's fourth quarter losses, prior to the December 5, 2008 vote by Bank of America shareholders to approve the Merger. During a conference call on Friday, Lewis said the bank was caught off-guard by the extent of the losses. "It wasn't an issue of not identifying the assets," he said. "It was that we did not expect the significant deterioration which happened in mid- to late December that we saw."

Meanwhile Merrill Lynch agreed to settle another class action lawsuit from last May by Ohio’s State Teachers Retirement System for $475M. The lawsuit alleged securities fraud on the part of the financial services company after Merrill Lynch’s stock fell when the company wrote down the value of billions of dollars in assets tied to subprime mortgages. According to this lawsuit Merrill Lynch executives had artificially boosted the stock price with misleading statements to investors ahead of the devaluation. Investors who bought common or preferred shares in Merrill Lynch between Oct. 17, 2006 and Dec. 31, 2008 were eligible for this class-action status. The settlement must be approved by a judge in U.S. District Court in New York. In addition to the $475Million settlement the employee class action brought under the Employee Retirement Income Security Act settled for $75Million, bringing the total to $550Million. The ERISA class action on behalf of employees was filed in 2007 by the firm’s employees over losses on its stock.
Merrill “vigorously disputed” the claims, said firm spokesman Mark Herr in a statement, but “we are pleased to have these lawsuits behind us.”