Reuters: Regulatory News: Merrill settles broker compensation suit-filing

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Merrill settles broker compensation suit-filing Aug 22nd 2012, 20:25 By Suzanne Barlyn Wed Aug 22, 2012 4:25pm EDT Aug 22 (Reuters) - Merrill Lynch has reached a settlement in a class action lawsuit that is part of its ongoing battle with thousands of former brokers seeking deferred compensation, according to a regulatory filing. Merrill reached an "reached an agreement in principle" to settle the suit with two of its former brokers, who filed the case on behalf of the class in 2009, according to a disclosure filed with the U.S. Securities and Exchange Commission on August 14. The suit stems from Merrill's September 2008 merger agreement with Bank of America. At issue are years of deferred compensation, some held in stock savings plans. The settlement, the terms of which have not yet been disclosed, must be approved by a Manhattan federal court judge, who must also certify the class. That could happen as early as Friday when the parties will next appear in court, according to a source familiar with the case. That person said the settlement could be between $90 million and $100 million for the class. An internal Merrill analysis cited by a FINRA arbitration panel in April estimated the firm's total potential "good reason liability exposure" from departing brokers could range from "hundreds of millions" to "several billion" dollars. Merrill has been very aggressive in fighting the claims of its former brokers. [See nL1E8GPCAU] "We have agreed to a resolution to avoid the cost and distraction of what would likely be continued, lengthy litigation," said William Halldin, a Merrill spokesman, in a statement on Wednesday. He declined to comment on the settlement amount, because details had not been presented to the court. A lawyer for the two former Merrill brokers who filed the suit, Scott Chambers and John Burnette, confirmed the settlement but declined to comment further. Approval of the settlement could be a major step toward resolving claims from many of the 3,300 brokers who left Merrill after the BofA deal. Merrill denied their requests for deferred compensation, money typically paid when a broker stays at a firm for a certain number of years, when they left the company. But brokers can also get the money if they leave for "good reason." Many of the departing Merrill brokers say the merger constituted such a "good reason." But, it is unclear how many brokers will sign on to the settlement, if it is approved. The settlement size will be the key factor for those making that choice, said Joseph Peiffer, a New Orleans-based lawyer who handles both class actions and FINRA arbitration cases. Merrill faces claims from more than 1,000 brokers in the Financial Industry Regulatory Authority's arbitration forum. People typically decline to participate in class action settlements if they think they will get more money from their arbitration cases, said Peiffer, who is not involved in the Merrill cases. "Everyone has to make their own sort of judgment," he said. For people with smaller claims, such as brokers whose deferred compensation was lower than six-figures, participating in the class settlement could be beneficial depending on how the payouts are calculated. But for brokers whose claims reach the high six figures or more, a class settlement could leave them with pennies on the dollar. Michael Taaffe, a lawyer in Sarasota, Florida who is handling the claims of more than 1,000 former Merrill brokers said he believes his clients - whose cases are pending in the Financial Industry Regulatory Authority's arbitration forum - will benefit from the settlement not because they will choose to take part, but rather because the agreement sets a floor for payouts. The settlement is also "a public acknowledgment of Merrill Lynch's obligation to former brokers" and should help brokers whose cases are in arbitration to recover even higher amounts, he wrote in a statement to Reuters. Merrill has already lost some high-dollar deferred compensation cases in arbitration. In April, for example, FINRA arbitrators ordered Merrill to pay $10.2 million to two former brokers represented by Taaffe. Merrill is trying to overturn that ruling. Link this Share this Digg this Email Reprints

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