Ohio Attorney General Richard Cordray on Monday called a federal court ruling that allows two investor lawsuits to proceed over Bank of America Corp.'s disclosures before its acquisition of the investment bank Merrill Lynch & Co. "a major win" for shareholders.
"The court ruled that companies cannot pick and choose what they will tell their shareholders," Cordray said, pledging to move forward aggressively with the suits.
In a 140-page order Friday, U.S. District Judge P. Kevin Castel in Manhattan allowed some claims in a consolidated shareholder lawsuit and a separate derivative lawsuit against the bank's directors to continue. However, the judge dismissed other claims regarding the bank's disclosure obligations. In a derivative lawsuit, shareholders typically seek to have any damages recovered returned to the company as opposed to being paid to individual shareholders.
Castel allowed some claims that Bank of America made misstatements about or failed to disclose billions of dollars in bonuses to be paid by Merrill Lynch before the merger, as well as its alleged failure to disclose "staggering losses" in Merrill's fourth-quarter before the merger closing. The $50 billion merger closed Jan. 1, 2009.
The State Teachers Retirement System of Ohio and Ohio Public Employees Retirement System are among the defendants who accused the banking giant of committing securities fraud and issuing false proxy statements. If successful, the lawsuit could potentially recover billions of dollars for shareholders, Cordray said.