Bank of America 2008 Annual Report Download - page 160

shareholders and bondholders against Merrill Lynch and other defend-
ants. On March 19, 2007, the U.S. Court of Appeals for the Fifth Circuit
reversed the District Court’s decision certifying the case as a class
action. On January 22, 2008, the Supreme Court denied plaintiffs’ peti-
tion to review the Fifth Circuit’s decision. The parties are currently await-
ing the District Court’s decision on Merrill Lynch’s request to dismiss the
case based on the Fifth Circuit’s March 19, 2007 decision and the
Supreme Court’s January 15, 2008 decision in another case, Stoneridge
Investment v. Scientific Atlanta, which rejected liability on the same
theory asserted by plaintiffs in this case. Over a dozen other actions have
been brought against Merrill Lynch and other investment firms in con-
nection with their Enron-related activities. There has been no adjudication
of the merits of these claims.
Heilig-Meyers Litigation
In AIG Global Securities Lending Corp., et al. v. Banc of America Secu-
rities LLC, pending in the U.S. District Court for the Southern District of
New York, the plaintiffs purchased asset-backed securities issued by a
trust formed by Heilig-Meyers Co., and allege that BAS, as underwriter,
made misrepresentations in connection with the sale of those securities
in violation of the federal securities laws and New York common law. The
case was tried and a jury rendered a verdict against BAS in favor of the
plaintiffs for violations of Section 10(b) of the Securities Exchange Act of
1934 and Rule 10b-5 and for common law fraud. The jury awarded
aggregate compensatory damages of $84.9 million plus prejudgment
interest totaling approximately $59 million. BAS filed motions to set aside
the verdict in January 2009.
In re Initial Public Offering Securities Litigation
Beginning in 2001, Robertson Stephens, Inc. (an investment banking
subsidiary of FleetBoston that ceased operations during 2002), BAS,
Merrill Lynch & Co., Inc., MLPFS (collectively Merrill Lynch), other under-
writers, and various issuers and others, were named as defendants in
certain of the 309 putative class action lawsuits that have been con-
solidated in the U.S. District Court for the Southern District of New York
as In re Initial Public Offering Securities Litigation. Plaintiffs contend that
the defendants failed to make certain required disclosures and manipu-
lated prices of securities sold in initial public offerings through, among
other things, alleged agreements with institutional investors receiving
allocations to purchase additional shares in the aftermarket and seek
unspecified damages. On December 5, 2006, the U.S. Court of Appeals
for the Second Circuit reversed the District Court’s order certifying the
proposed classes. On September 27, 2007, plaintiffs filed a motion to
certify modified classes, which defendants opposed. On October 10,
2008, the District Court granted plaintiffs’ request to withdraw without
prejudice their class certification motion. A settlement in principle has
been reached, subject to negotiation of definitive documentation and
court approval. If the settlement is finalized and approved, Robertson
Stephens, Inc., BAS and Merrill Lynch will pay, in total, approximately
$100 million to the settlement classes.
Interchange and Related Cases
The Corporation and certain of its subsidiaries are defendants in putative
class actions filed on behalf of retail merchants that accept Visa and
MasterCard payment cards. Additional defendants include Visa, Master-
Card, and other financial institutions. Plaintiffs seek unspecified treble
damages and injunctive relief and allege that the defendants conspired to
fix the level of interchange and merchant discount fees and that certain
other practices, including various Visa and MasterCard rules, violate
federal and California antitrust laws. The class actions are coordinated
for pre-trial proceedings in the U.S. District Court for the Eastern District
of New York, together with individual actions brought only against Visa
and MasterCard, under the caption In Re Payment Card Interchange Fee
and Merchant Discount Anti-Trust Litigation (Interchange). On January 8,
2008, the District Court dismissed all claims for pre-2004 damages.
Plaintiffs filed a motion for class certification on May 8, 2008, and the
defendants have opposed that motion. On January 29, 2009, the class
plaintiffs filed an amended consolidated complaint.
The class plaintiffs have also filed two supplemental complaints
against certain defendants, including the Corporation and certain of its
subsidiaries, relating to, respectively, MasterCard’s 2006 initial public
offering (MasterCard IPO) and Visa’s 2008 initial public offering (Visa
IPO). The supplemental complaints, which seek unspecified treble dam-
ages and injunctive relief, assert, among other things, claims under
federal antitrust laws. On November 25, 2008, the District Court granted
defendants’ motion to dismiss the supplemental complaint relating to
MasterCard’s IPO, with leave to amend. On January 29, 2009, plaintiffs
amended this supplemental complaint and also filed the supplemental
complaint relating to Visa’s IPO. Responses to all of the complaints are
due on March 16, 2009.
The Corporation and certain of its subsidiaries have entered into
agreements that provide for sharing liabilities in connection with certain
antitrust litigation against Visa (the Visa-Related Litigation), including
Interchange. Under these agreements, the Corporation’s obligations to
Visa in the Visa-Related Litigation are capped at the Corporation’s mem-
bership interest in Visa USA (approximately 12.1 percent as of December
31, 2008, but expected to rise to approximately 12.6 percent after giving
effect to the transaction with Merrill Lynch & Co., Inc.). Also under these
agreements, Visa Inc. has used a portion of the proceeds from the Visa
IPO to fund liabilities arising from the Visa-Related Litigation, including the
settlement during 2008 of Discover Financial Services v. Visa USA, et al.
and the 2007 settlement of American Express Travel Related Services
Company v. Visa USA, et al., and has stated that it will use such pro-
ceeds to fund other liabilities in the future, if any, arising from the Visa-
Related Litigation.
Lehman Brothers Holdings, Inc.
Beginning in September 2008, BAS, MLPFS, Countrywide Securities
Corporation and LaSalle Financial Services Inc., along with other under-
writers and individuals, were named as defendants in several putative
class action complaints filed in the U.S. District Court for the Southern
District of New York and state courts in Arkansas, California, New York
and Texas. Plaintiffs allege that the underwriter defendants violated Sec-
tions 11 and 12 of the Securities Act of 1933 by making false or mislead-
ing disclosures in connection with various debt and convertible stock
offerings of Lehman Brothers Holdings, Inc. and seek unspecified dam-
ages. On January 9, 2009, the U.S. District Court for the Southern District
of New York issued an order consolidating most of these cases under the
caption In re Lehman Brothers Securities and ERISA Litigation.
Mediafiction Litigation
Approximately a decade ago, Merrill Lynch International Bank Limited
(MLIB) (formerly Merrill Lynch Capital Markets Bank Limited) acted as
manager for a $284 million issuance of notes for an Italian library of
movies, backed by the future flow of receivables to such movie rights.
Mediafiction S.p.A (Mediafiction) was responsible for collecting payments
in connection with the rights to the movies and forwarding the payments
to MLIB for distribution to note holders. Mediafiction failed to make the
required payments to MLIB and subsequently filed for protection under
the bankruptcy laws of Italy. MLIB has filed claims in the Mediafiction
bankruptcy proceeding for amounts that Mediafiction failed to pay on the
notes and Mediafiction has filed a counterclaim alleging that the agree-
158 Bank of America 2008