Bank of America Corp. won a federal appeals court ruling upholding the dismissal of so-called double derivative lawsuits over the lender’s 2009 merger with Merrill Lynch & Co.
The lawsuits sought to hold Merrill responsible for losses on allegedly risky investments in collateralized debt obligations and mortgage-backed securities before it was acquired by the bank, according to a March 2011 opinion by U.S. District Judge Jed Rakoff in Manhattan throwing out the cases.
A U.S. Court of Appeals panel in New York today agreed with Rakoff that plaintiffs in the two cases either initially failed to demand that the bank’s directors pursue claims against former Merrill officers, or couldn’t “show that the board had wrongfully refused” requests to pursue the claims.
Rakoff said in his opinion that if the allegations in the complaints were true, they describe “the kind of risky behavior by high-ranking financiers that helped create the economic crisis from which so many Americans continue to suffer.”
“The district court was well within its discretion” in concluding that a plaintiff “failed to demonstrate that the board acted in bad faith or conducted an unreasonable investigation,” the appeals court said.
“We are pleased with the Court’s decision,” Lawrence Grayson, a spokesman for Charlotte, North Carolina-based Bank of America, said in an e-mailed message.
The cases are In Re: Merrill Lynch & Co. Securities Litigation, 07-CV-09633, and N.A. Lambrecht v. O’Neal , 09-cv- 08259, U.S. District Court, Southern District of New York (Manhattan).
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