The acquisition of Merrill Lynch by Bank of America is a perfect example of a deal that can go horribly wrong. Not only does Bank of America face a host of shareholder class-action claims related to the transaction, it has claims from the Securities and Exchange Commission to contend with as well.
In a series of cases in the Delaware Chancery Court and in the Federal District Court in Manhattan, plaintiffs contend that the bank's board of directors breached its fiduciary duties by approving the acquisition of Merrill Lynch and failing to try to terminate the deal based on Merrill's poor performance in the fall of 2008. The plaintiffs also claim that board members failed to disclose the compensation to be paid at yearend to Merrill employees and failed to disclose interim and yearend results in a timely manner.
Then there's the federal securities case related to proxy violations. That lawsuit claims that Bank of America and some of its executives failed to disclose in the proxy statement problems at Merrill Lynch. Among other claims, the federal securities case says the bank ignored that there was a material adverse change, with respect to Merrill, and that Bank of America withheld information about compensation payouts due at Merrill.
Because the shareholder cases are based on state law, they are called a derivative suit. Shareholders are trying to sue the board on behalf of the company, asserting that the directors violated their fiduciary duties in connection with the Merrill acquisition.
This is a difficult claim to prove. The parties have to show that Bank of America's board acted in bad faith for going through with the acquisition or failing to disclose important information. Stephen Hance has experience representing clients in fiduciary duty claims like those asserted in this litigation. Contact Hance Law Firm for all your business litigation needs.