Bank of America Corp : Ex-Merrill Brokers Reach Settlement Over Deferred Pay
08/22/2012| 08:19pm US/Eastern
--Parties to meet in New York federal court Friday
--Finra arbitrators sided with brokers in recent ruling
--Firm says deal made to avoid "cost and distraction" of litigation
(Updates with comment from attorney in fourth paragraph.)
By Christian Berthelsen and Caitlin Nish
Merrill Lynch has reached a legal settlement in a putative class-action suit over deferred pay with potentially thousands of disaffected brokers who left the firm in the wake of its acquisition by Bank of America (BAC).
Lawyers for the brokers and Merrill are scheduled to appear in New York federal court Friday afternoon. The parties reached an "agreement in principle" on Aug. 10 to settle the case, Merrill said in its quarterly financial filing earlier this month. The agreement is subject to approval by the court.
In a prepared statement, Merrill spokesman William Halldin said the firm "agreed to a resolution to avoid the cost and distraction of what would likely be continued, lengthy litigation." He declined further comment on the details because terms of the settlement had not yet been presented to the court.
Charles A. McCallum III, an attorney representing the two brokers who filed the lawsuit, said "we're pleased to finally reach a settlement in principle and we expect it to be favorably received by class members." He also declined to comment on the terms.
Merrill's own analysis of the dispute found it could face "anywhere from hundreds of millions to several billion dollars" in potential liability, according to a document in a Financial Industry Regulatory Authority arbitration ruling in April. News of the settlement was first reported by Reuters, which said the settlement could reach between $90 million and $100 million for the class. Terms of the deal couldn't be independently confirmed late Wednesday.
The case stems from a dispute between Merrill and as many as 3,000 former brokers, who say the firm's September 2008 sale to Bank of America constituted a "change in control" that nullified strictures governing their deferred compensation.
Often, much of the money piling up in brokers' deferred-compensation accounts vests only if they remain with the firm for some time. But lawyers for the brokers have argued that the terms for several Merrill Lynch deferred-compensation programs gave brokers the right to the money if they leave the firm with "good reason."
In the April arbitration ruling, a Finra panel sided with two of the brokers and awarded them $10 million in back pay, finding Merrill and its senior management "intentionally, willfully and deliberately engaged in a systematic and systemic fraudulent scheme to deprive claimants of their rights and benefits" under its deferred compensation plan after the firm's sale. Merrill is seeking to overturn the decision in court.
Michael S. Taaffe, the lawyer who represented the two brokers in the case, said he has 1,000 additional arbitration cases in the works stemming from ex-Merrill brokers' fights over deferred pay. The settlement of the class action, if approved, would not preclude brokers from opting out of the class and pursuing their individual claims through the arbitration process, Taaffe said.
Write to Christian Berthelsen at firstname.lastname@example.org
Subscribe to WSJ: http://online.wsj.com?mod=djnwires