Former Merrill “International” Brokers Drop Class-Action Claim
Merrill Lynch brokers who had sued the company for allegedly deceiving them over its commitment to doing business with customers located outside the U.S. have withdrawn their claims and will instead file arbitration complaints, their lawyer said on Tuesday.
The change in strategy acknowledges the success of Merrill’s maneuvers to defeat the attempt of three former brokers to have their claims certified as a class-action on behalf of the firm’s current and former “international” brokers.
“Merrill Lynch…was basically delaying things with lots of motions and motions to compel arbitration and dismiss and this and that,” Michael Taafe, the plaintiffs’ lawyer said in an interview. “We realized we could get a quicker and more friendly result through arbitration than an extended motion in federal court.”
Taafe’s firm Shumaker, Loop & Kendrick in Sarasota, Fla. filed its first lawsuit in April and amended it in November with claims for triple damages under the Racketeer Influenced and Corrupt Organizations Act. The amended claim said that hundreds of brokers were “severely damaged due to the criminal enterprise instituted and perpetuated” by Merrill.
In arguing against the class-action motions, Merrill repeatedly argued that the various claims of brokers on how they were injured by the firms’ policies were too individualized to be brought as a unified action and under Financial Industry Regulatory Authority rules should be made in arbitration.
“We have denied the allegations when they were first brought and when they brought the amended complaint two months ago,” said Merrill spokesman William Halldin. “We have argued that the proper place for these allegations would be the arbitration forum.”
In their lawsuits filed in federal court in North Carolina, the brokers said that Merrill since 2010 recruited and retained them with promises of its commitment to serve non-resident clients while conspiring to end the international business. In 2015, Merrill banned working with clients in 51 of the 80 non-U.S. countries it had been serving, imposed higher account minimums on all accounts and added a requirement that account holders visit the U.S. to verify their accounts annually.
The changes have prompted around two-thirds of the 300 advisors once in the international business unit to leave, Taafe said.
Around 100 former and current brokers will likely file arbitration claims, he said.
The former Florida-based brokers who brought the lawsuit, Graciela Perez, Jorge Perez and Miguel Sosa, declined comment on the strategy shift.