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Merrill Lynch Wins Auction-Rate Securities Suit Dismissal

Merrill Lynch & Co. won dismissal of a lawsuit filed by Cellular South Inc. stemming from the purchase of at least $26 million in auction-rate securities.

U.S. District Judge Loretta Preska in New York today threw out all claims by Cellular South with prejudice, meaning the ninth-largest wireless carrier by customers can’t refile them.

Cellular South accused Merrill of market manipulation and “material misstatements and omissions” stemming from purchases from Aug. 13, 2007, to Jan. 25, 2008, of securities including some connected to preferred stock issued by the Federal Home Loan Mortgage Corp. and the Federal National Mortgage Association.

Merrill, a unit of Bank of America Corp., served as the underwriter, placement agent and auction dealer of the auction-rate securities at issue in the lawsuit.

Preska said that Merrill Lynch’s participation in the auctions was disclosed in prospectuses and on its website and after a statement based upon an order by the U.S. Securities and Exchange Commission.

She said Cellar South failed to offer any evidence supporting the proposition that Merrill made misrepresentations about the liquidity of auction rate securities markets.

‘Inference Upon Inference’

“These same disclosures relieve Merrill of liability on plaintiff’s misstatements and market manipulation claims based on purchases made after the website disclosure,” Preska wrote in an order. “Here, plaintiff’s allegations would require the court to pile inference upon inference and they therefore stop short of the line between possibility and plausibility of entitlement to relieve.”

William Halldin, a spokesman for Charlotte, North Carolina-based Bank of America, said, “We are pleased with the court’s decision.”

Charles McBride Jr., a lawyer for Cellular South, declined to comment immediately on the ruling.

The case is in re Merrill Lynch Auction Rate Securities, 09-md-2030, U.S. District Court, Southern District of New York (Manhattan).

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