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Class Action Defense Cases—In re Merrill Lynch: Judicial Panel On Multidistrict Litigation (MDL) Grants Defense Motion To Centralize Class Action Litigation In Southern District Of New York

Judicial Panel Grants Defense Request for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407, Over Objections of Class Action Plaintiffs, and Transfers Actions to Southern District of New York

Four class actions – one each in Kentucky, Louisiana, Massachusetts and New York – were filed against various defendants including Merrill Lynch arising out of “allegations that Merrill Lynch and/or its employees made misrepresentations or omissions in the context of the sale of auction rate securities (ARS) and manipulated the auctions for ARS in order to prevent auction failures.” In re Merrill Lynch & Co., Inc., Auction Rate Securities (ARS) Marketing Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. June 10, 2009) [Slip Opn., at 1]. According to the allegations underlying the class action lawsuits, “Merrill Lynch failed to disclose that (1) ARS were not cash alternatives similar to money market funds, and (2) the ARS sold by Merrill Lynch were only liquid because, at the time of sale, Merrill Lynch and other broker-dealers artificially supported and manipulated the market to maintain the appearance of liquidity and stability.” Id., at 1-2. Defense attorneys filed a motion with the Judicial Panel for Multidistrict Litigation (MDL) requesting centralization of the class actions pursuant to 28 U.S.C. § 1407 in the Southern District of New York; plaintiffs in the class actions pending outside of that district opposed the motion. Id., at 1. The Judicial Panel rejected the objections to pretrial coordination and granted the motion to centralize the class action lawsuits, finding that “Centralization under Section 1407 will eliminate duplicative discovery, prevent inconsistent pretrial rulings, and conserve the resources of the parties, their counsel and the judiciary.” Id. The Panel also agreed that the Southern District of New York – “where the first-filed has been pending for over a year” – was the appropriate transferee court. Id., at 2. Accordingly, the Panel ordered all class actions outside of the Southern District of New York transferred to that district, id., at 34.

Download PDF file of In re Merrill Lynch & Co., Inc., Auction Rate Securities (ARS) Marketing Litigation Transfer Order