Merrill lawsuits dismissed...for now

Discussion in 'Politics' started by AAAintheBeltway, Jul 3, 2003.

  1. The markets got a boost this week when Federal Judge Milton Pollack of the Southern District Of New York dismissed two potentially dangerous lawsuits against Merrill Lynch. One suit was a class action over allegedly biased research reports on two internet stocks brought public by MER. The other was brought on behalf of shareholders in a mutual fund managed by MER.

    Judge Pollack has been on the bench forever and is generally pretty well regarded. Thus, some observers think his highly critical assessments of the plaintiffs' cases will carry a fair amount of weight. Basically, he said they were sore losers who got what they deserved. His comments have been picked up and carried by a number of commentators who seem eager to pile on to investors who bought into the bubble market.

    I haven't read the actual decisions, but I think there is a very good chance they will be overturned on appeal. The cases were at a preliminary stage and hadn't gone to trial. Unless the dispositive facts were undisputed, it is basic law that the plaintiffs must be given the benefit of the doubt at this stage and their allegations accepted as true. Thus, if they alleged they relied on MER research, it would be error for the Judge at this stage to rule that they hadn't.

    The lawyers who bring these types of cases are clever and very savvy. I find it hard to believe they would invest their time in a case that couldn't get past a motion to dismiss. Judge Pollack's quoted comments are likewise troubling. He seemed outraged over the whole idea of "speculators" expecting a basic level of honesty from an investment bank or mutual fund manager. In effect, he put the victims on trial, rather than vice versa. He also seemed to think it was significant that the plaintiffs in the internet case were not MER customers. If there was fraud on the market, I don't see how that can prevent them from suing.

    He also rejected the infamous internal e-mails as insignificant. How he can do that on a motion to dismiss is beyond me. MER itself found them embarrassing enough that they coughed up $100 million to Eliot Spitzer.

    I think the Court of Appeals is likely to view this decision with great skepticism, despite the judge's reputation. He seems to have let his distaste for speculators and the internet bubble to cloud his legal reasoning.
  2. Seems to me ole Pollack has his 96 year old mind all made up about "high-risk speculators"

    OTOH - The class action suit has been brought by investors who were not actually clients of Merill - their suit claims that Merill's actions were tantamount to market manipulation - as opposed to having been duped directly by Merill brokerage. - Quite a bit more ground to cover if you ask me.
  3. jem


    In keeping with the date of the original post.

    I do not think Merrill can survive much past 2009.
  4. Hello


    Quite frankly while i agree that it is not a judges place to make this determination, his overall assesment was correct, if you invest in the stock market and think that a bank or mutual fund should actually be looking out for your best interest as opposed to their own you deserve to lose your money. A fool and their money are easily parted. Have you ever met a real estate agent who tells you "now is not a good time to buy" when you are going to see the house he is listing? Or what about a car salesman who says "our company is going down the shitter odds are pretty good this car will be cheaper, and it would be a good idea to purchase this car some tmie down the road, but not now" It doesnt happen.

    In terms of speculation i think Loyd Blankfien summed it up perfectly in his response at the hearings, when asked if he thought it was wrong to short a product they were selling to customers he basically said there are two sides to every transaction, we wouldnt be selling something if we thought it was undervalued, just as the customer wouldnt buy it if they thought it was overvalued, basically any time a market maker or investment bank sells you something you should assume that it is because they dont like it. That is how the entire game of speculation works, every time there is a transaction in the market both sides think they are going to be the winner in advance, otherwise why would you take the trade?