By Suzanne Barlyn
Dec 7 (Reuters) - Merrill Lynch may be one step closer to
ending its battle with former brokers who say the firm denied
them deferred compensation when they left after the brokerage
was bought by Bank of America Corp.
Merrill Lynch and lawyers for some ex-brokers have agreed to
changes in a proposed $40-million class action settlement over
retention bonuses and other deferred compensation they said was
wrongly denied them. The revised settlement may encourage some
brokers to drop arbitration and other legal claims against the
brokerage, according to court documents.
The brokerage is also in talks to settle some individual
cases with brokers, a lawyer involved with the case said.
Merrill declined comment about whether it was working to settle
Merrill has been facing a pile of arbitration claims and
hundreds more that could be filed. About 3,000 brokers left
after the merger. More than 1,000 have already filed or planned
to file arbitration or court claims.
A proposed settlement designed to address claims of more
than 1,400 brokers who brought in under $500,000 in revenue was
presented to a federal judge in August. That was several months
after Merrill was ordered by a Financial Industry Regulatory
Authority arbitration panel to pay $10.2 million to two
ex-brokers over deferred compensation claims.
The ruling in that case was far more detailed than most from
FINRA arbitrators, spelling out that Merrill "intentionally,
willfully and deliberately breached its fiduciary duty" by
depriving the two brokers of their rights to collect their money
after Bank of America acquired Merrill in late in 2008.
Lawyers for some ex-brokers balked at that proposed
settlement, saying the amounts many brokers would receive were
too low and that some brokers might be better off pursuing
Under the new agreement, which still needs to be approved by
a judge, brokers who drop their other legal cases to participate
in the settlement would get higher payouts than under the
original agreement. Merrill would pay the class action lawyers
up to $6.3 million in fees, depending on how many brokers
participate in the settlement, instead of the lawyers being paid
from the settlement pool.
The parties presented the revised agreement to U.S. District
Judge Alison Nathan at Manhattan federal court this week. It was
filed with the court in late November.
The lawsuit stems from Merrill's September 2008 merger with
Bank of America. At issue are years of deferred compensation,
some of which was held in brokers' stock savings plans.
Paying a bigger class action settlement to brokers who have
already initiated individual cases, but who would drop them in
lieu of the class action, would help compensate them for legal
expenses and fees they have already taken on, said Charles
(Chip) McCallum III, a lawyer in Vestavia Hills, Alabama who
represents the class action brokers.
Brokers who do so would, in the most generous scenario,
receive 70 percent of the deferred compensation plan's value for
their time in the plan through 2008, rather than the 60 percent
they would have received in the initial settlement. They would
also receive 50 percent of the plan's value for 2009, compared
with 24 percent in the initial settlement. The brokers will also
benefit from a pool of funds that would not be diminished by
Payout percentages for brokers who never made any deferred
compensation requests, though, will go down if the agreement is
approved. That decrease, however, could be offset by the larger
settlement fund pool.
The changes to the agreement are meant to level the playing
field between brokers who are eligible for the settlement but
still pursuing individual cases and those already poised to
participate. It also makes it less likely that brokers who
settle individually will receive larger payouts than
similarly-placed brokers who participate in the class action.
The revised settlement would still exclude former Merrill
brokers from the deal if their revenues topped $500,000 prior to
their departure. Those brokers - which could number more than
1,000 - still need to pursue their own claims.
In a related move, a lawyer representing more than 1,000
former Merrill brokers in individual arbitrations announced in
court on Monday that he would withdraw a motion he had filed to
intervene in the class action suit. Of those brokers, about 572
were eligible for the class as August, said Michael Taaffe, the
Sarasota-based lawyer for the brokers, at the time.
Taaffe argued that the stock price used to establish the
$40-million figure was too low. He did not return a call
(Additional reporting by Jed Horowitz)
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