By Nate Raymond
NEW YORK, Dec 4 (Reuters) - A U.S. appeals court on Tuesday
upheld the dismissal of two lawsuits aiming to force Bank of
America Corp to sue former Merrill Lynch & Co executives and
directors over losses on mortgages and other risky debt.
The 2nd U.S. Circuit Court of Appeals affirmed rulings last
year by U.S. District Judge Jed Rakoff in Manhattan dismissing
the lawsuits, which were filed by onetime Merrill shareholders.
"We see no error in those rulings," the three-judge panel
wrote in an unsigned opinion.
Bank of America announced it would acquire Merrill Lynch in
September 2008, at the height of the financial crisis. But
shareholder lawsuits soon mounted over losses Merrill had
incurred and $5.8 billion of bonuses its executives agreed to
The two lawsuits in Tuesday's ruling arose from losses
Merrill incurred on investments in collateralized debt
obligations and other mortgage-backed securities before the Bank
of America acquisition. Merrill incurred a $15.84 billion
quarterly loss following the merger announcement. Both cases
were filed shortly after the merger was announced.
Rakoff dismissed the two lawsuits in March 2011. He said
that one of the plaintiffs, S. Leonard Sollins, had failed to
make a required demand on the bank's board of directors before
filing the lawsuit.
The other plaintiff, N.A. Lambrecht, who had made three
demands on the board, wasn't able to establish the board should
have sued former Merrill officers and directors over the losses,
according to Rakoff.
The 2nd Circuit agreed, saying Sollins's arguments were
"misplaced." Rakoff was well within his discretion to also
conclude Lambrecht had "failed to demonstrate that the board
either acted in bad faith or conducted an unreasonable
The panel included Circuit Judges Dennis Jacobs, Robert
Katzmann and Debra Livingston.
The bank agreed in September to a $2.43 billion settlement
of a shareholder class action arising out of claims it hid
information from its investors when it bought Merrill. Bank of
America separately has agreed to a proposed $20 million
settlement in a separate derivative lawsuit that also was filed
by bank shareholders.
Bill Halldin, a Bank of America spokesman, declined to
comment on the 2nd Circuit ruling.
Lawyers for the plaintiffs and the former Merrill directors
and officers did not immediately return requests for comments.
The cases in the 2nd U.S. Circuit Court of Appeals are
Lambrecht v. O'Neal, No. 11-1285, and Sollins v. O'Neal, No.
For Lambrecht: Jonathan Cuneo, Cuneo Gilbert & Laduca.
For Sollins: David Brower, Brower Piven.
For Stanley O'Neal, et al: Jay Kasner, Skadden, Arps, Slate,
Meagher & Flom.
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