Analysis: New York may have to drop claims against BofA over Merrill

Fri May 10, 2013 7:06am EDT
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By Karen Freifeld

NEW YORK (Reuters) - Last month, New York Attorney General Eric Schneiderman withdrew claims for up to $6 billion in damages against former AIG (AIG.N: Quote) chief Hank Greenberg. Now, another big case - against Bank of America (BAC.N: Quote) over its acquisition of Merrill Lynch - looks headed the same way.

The 2010 case, one of the highest profile lawsuits brought by Andrew Cuomo when he was New York attorney general, accuses Bank of America and former top executives Ken Lewis and Joseph Price of misleading shareholders about Merrill Lynch's losses.

The case appeared to hit trouble on April 5, when a federal judge approved a $2.43 billion settlement in a shareholder class action against Bank of America over the Merrill Lynch deal. Because shareholders have settled, New York can no longer pursue damages on their behalf, according to legal experts.

"Once shareholders have made their peace, they can't take a second bite at the apple through the attorney general," said Jacob Zamansky, a New York securities lawyer.

As a result, Schneiderman may either have to withdraw his claims for damages, severely narrowing the case, or face a legal fight involving a landmark 2008 decision by New York's highest court, the experts said.

The decision may have undercut the Martin Act, the powerful New York state securities statute of 1921 that attorneys general have wielded like a club against Wall Street since it was revived in the early 2000s.

Damien LaVera, a spokesman for Schneiderman, declined to comment on the Bank of America case.

William Jeffress, an attorney who represents Price, said the class action settlement significantly affects the case against his client.   Continued...

The company logo of the Bank of America and Merrill Lynch is displayed at its office in Hong Kong March 8, 2013. REUTERS/Bobby Yip