A federal judge in Florida last week denied class-action status to plaintiffs suing Amsouth's brokerage division over allegedly misleading sales practices.
The ruling was the first written decision by a federal judge refusing to grant class status to a suit accusing a bank of deceptive investment sales practices. Industry lawyers said the decision should help stave off similar suits.
"Banks have been perceived as easy targets," said Donald W. Smith, a partner at Kirkpatrick & Lockhart, Washington. "Plaintiffs' lawyers may have to think twice before bringing these blanket accusations of impropriety."
In her decision, U.S. District Judge Elizabeth A. Kovachevich said the request for class-action status "poses significant manageability difficulties because it is over-inclusive."
Similar suits in state and federal courts-some are pending and some have been settled-charge that banks sold investment products without properly disclosing the risk of buying investments.
Jonathan Alpert, the plaintiffs' lawyer in the Amsouth case, has filed many of these suits. His targets include NationsBank, Barnett Banks, First Union Corp., and Great Western Financial Corp.
Mr. Alpert sought to include Amsouth Investment Services customers in Florida, Alabama, Tennessee, and Georgia.
"This is good news for our customers to see that our evidence dwarfed (the plaintiffs') in this case," a spokesman for Birmingham, Ala.-based Amsouth said.
Plaintiff Matthew Fischler will pursue the suit, Mr. Alpert said. Mr. Fischler claims that the Amsouth investment sales representative who sold him an annuity gave him erroneous information about the investment's early withdrawal penalties.
According to Mr. Fischler's complaint, the investment rep also failed to give him a buyer's guide to annuities and a contract summary, as is required by law.
"We obviously would have preferred it to go the other way, but we're not discouraged," Mr. Alpert said in a telephone interview. He said he will consider other avenues to bring a class action in federal court against Amsouth.
His options include asking the judge to reconsider the ruling, submitting new evidence, or redefining the class, he said.
Amsouth's lawyers sent Judge Kovachevich's ruling to Alabama's supreme court, where the bank is appealing a state court's grant of class status in a similar case, said Gregory Jordan, Amsouth's outside counsel and a partner at Reed, Smith, Shaw & McClay, Pittsburgh.