Merrill Lynch is facing nearly 40 arbitration claims filed by former employees claiming hundreds of millions in losses from company stock that cratered during the financial crisis.
In the last month or so, the firm has dropped a series of court actions it filed last fall in an effort to head off the arbitration cases. Merrill argued that the claims allege the same issues that had already been litigated in earlier shareholder lawsuits.
But in the face of some legal setbacks, Merrill is pulling away from the court strategy and will now have to make its arguments in front of Finra arbitrators.
The employee-claimants in the arbitration cases are retired brokers and managers who were longtime Merrill veterans.
“I think the claims are in excess of $450 million in core value, and if you treble that with [Racketeer Influenced and Corrupt Organizations Act] claims it’s $1.3 billion,” said Michael Taaffe, a lawyer with Shumaker Loop and Kendrick LLP in Sarasota, Fla., who represents many of the former employees.
So far, about 60 plaintiffs have 38 arbitration cases against the firm, and more are coming in, Taaffe said. About a dozen cases have had preliminary hearings at Finra, and the first full hearing is set to start in November, he said.
In court filings, Merrill has contended that the former employees are attempting to use arbitration as a back door to bring claims that would otherwise be time-barred if heard in court.
In a statement, Merrill spokesman Bill Halldin reiterated the firm’s contention that issues surrounding the drop in Merrill stock a decade ago “were the subject of extensive litigation addressed in the courts many years ago. The time to bring claims ended long ago.”
Now it will be up to Finra panelists to determine whether the Merrill vets have a case.
The RICO claims being alleged by the former employees are based on wrongdoing they say was first detailed in documents from the $16.7 billion 2014 Department of Justice settlement with Bank of America and its subsidiaries (including Merrill).