BofA's $20 Million Settlement Faces Court Challenge
A recently proposed $20 million settlement of shareholder claims by Bank of America over its 2009 acquisition of Merrill Lynch is being challenged by a separate group of shareholders as too small.
A federal judge in New York has ordered the Bank of America directors who were sued over the deal to defend the settlement in court on May 4, along with the lead shareholders they settled with.
The court order by U.S. District Judge Kevin Castel came last week in response to a request by lawyers for the second group of shareholders, who have their own, similar lawsuit pending against Bank of America's board in Delaware Chancery Court.
Castel directed the board members and the lead plaintiffs in the New York case— Bank of America shareholders Louisiana Municipal Police Employees Retirement System and Hollywood Police Officers' Retirement— to appear before him to defend the proposed settlement.
Bank of America, which is based in Charlotte, N.C., did not immediately respond to a request for comment Saturday.
At issue for both shareholder groups is the bank's purchase of Merrill Lynch at the height of the financial crisis.
The $20 billion takeover deal was forged on the same September 2008 weekend that Lehman Brothers collapsed. The deal came into question later after Bank of America disclosed that Merrill would post $27.6 billion in losses that year.
That added significantly to Bank of America's financial woes, and the company subsequently asked for a $20 billion bailout from the government to help offset those losses, on top of the $25 billion it had already received. It has since repaid all $45 billion.
The New York Times reported Friday that the Delaware plaintiffs objected to the April 12 settlement in New York as inadequate. The specifics of the Delaware group's request were not available on the federal court's website Saturday.