Bank of America is paying $12.8 million to settle a class action lawsuit filed by Merrill Lynch advisers who were fired soon after the wealth management firm was acquired in 2008, according to court documents.
Attorneys for the 270 advisers alleged that Merrill Lynch violated “change-of-control provisions” for four deferred compensation and bonus plans that required the firm to protect employees after a merger or acquisition.
If an employee in one of the plans voluntarily resigned following the merger due to changes brought on by the merger, that employee was supposed to receive the fully vested value of his or her deferred compensation, with vesting locking in the value of company stock held by the plans at 90 days prior to the merger, or $32 per share in this case.
Merrill Lynch’s stock dipped to $17 per share prior to the merger, and Bank of America's stock cratered to $5.50 per share price within four months of the merger announcement on Sept. 15, 2008, down more than 75%.
Because the settlement negotiations for the plaintiffs started at $32 per share, instead of share prices for Merrill or Bank of America after the 90-day-prior period, means that “a lot of them basically got what they were entitled to when they left, or very close to it,” says Michael Taaffe, attorney at Shumaker, Loop & Kendrick, representing the 270 employees.
All 270 employees were terminated for cause by Merrill Lynch after Jan. 1, 2009, according to attorneys who represented them and their court filings. Terminations for cause, if justified, allow the company to cut employees loose without paying any deferred comp from the four plans. But the plan’s provisions called for terminated-for-cause employees to receive 15 days’ prior notice and for their objections to be heard by a control group. Merrill ignored the protection provisions, Taafe says.
“In this case, [the protection provisions] didn’t occur. They just terminated people and ignored the plan’s requirements,” Taafe says. Attorneys filing the lawsuit excluded any potential plaintiffs who were terminated for cause by Merrill and were barred from the industry or suspended for one year.
The class action lawsuit was filed in federal court in North Carolina. Language in the court-approved settlement requires that any of the 6,500 employees covered by the four Merrill Lynch plans who are terminated for cause in the future must receive a review by an independent panel, Taafe says.
Bank of America did not return calls requesting comment. The bank and Merrill Lynch did not admit to any wrongdoing in the settlement.