US Judge Dismisses Securities Class Actions Against Merrill

by Glen Shapiro, LawAndTax-News.com, New York

03 July 2003

In a ruling issued on Monday, Southern District of New York senior judge, Milton Pollack, dismissed two class action suits brought against Merrill Lynch over claims that the investment bank boosted the stock prices of two internet firms by issuing misleading research reports.

Although Merrill was one of the ten banks investigated by Attorney General, Eliot Spitzer last year, and was obliged to pay a share of the $1.4 billion settlement to the Securities and Exchange Commission (SEC), Judge Pollack suggested that the plaintiffs in the case had presented no more evidence against Merrill than that which was originally presented by Spitzer, and suggested that they were nothing more than 'high risk speculators' who lost their money 'fair and square' as a result of the bursting of the TMT stock market bubble.

'At the times here involved, the stock markets were in the throes of a colossal “bubble” of panic proportions. Speculators abounded to capitalize on the opportunities presented by this bubble,' Judge Pollack wrote, continuing:

'The market “bubble” burst intervened before plaintiffs got out of their holdings and their holdings lost value. The plaintiffs, learning of the subsequent actions of the regulators concerning the conflicts mentioned above, rushed to the courts in these cases seeking to recover the losses they experienced due to the intervening cause, the burst of the bubble.'

Noting that the opinions and predictions of Merrill analysts were broadcast extensively and distributed free of charge, that no customer relationship with defendants is claimed by the plaintiffs; and that no fiduciary or contractual relations existed between the parties, the Southern District senior judge further observed that Merrill's reports also contained extensive data and research that the plaintiffs could have examined.

'Seeking to lay the blame for the enormous Internet Bubble solely at the feet of a single actor, Merrill Lynch, plaintiffs would have this Court conclude that the federal securities laws were meant to underwrite, subsidize, and encourage their rash speculation in joining a freewheeling casino that lured thousands obsessed with the fantasy of Olympian riches, but which delivered such riches to only a scant handful of lucky winners,' Judge Pollack announced in his ruling, clearly angered.

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