Finra panel dismisses $100 million case involving drop in Merrill Lynch stock

Former brokers bringing charges related to stock losses during financial crisis have had 15 cases proceed, 4 stopped so far

Mar 18, 2019 @ 5:29 pm

By Mark Schoeff Jr.

A Finra arbitration panel has dismissed a $100 million claim by the estate of a former Merrill Lynch broker in a case involving losses tied to the sales of mortgage-based securities during the financial crisis.

Three Financial Industry Regulatory Authority Inc. arbitrators ruled in a March 14 decision that Christina Billington, the trustee for the James A. Billington Trust, brought her case too long after Mr. Billington sold his Bank of America stock at a substantial loss in January 2009. Merrill Lynch & Co. was acquired by Bank of America in the midst of the financial crisis in 2009.

The claim was filed on June 23, 2017. The arbitrators said a claim cannot be filed more than six years after the events that caused the claim. Mr. Billington died on Sept. 7, 2014.

"Any damages [Mr.] Billington allegedly sustained became fixed upon the sale of his BAC stock in January 2009," the arbitrators wrote.

An attorney for Ms. Billington criticized the decision.

"There are glaring problems with the award that was issued," said Mike Taaffe, partner at Shumaker Loop & Kendrick. "They appeared to take factual findings based on argument, not testimony or evidence."

Mr. Taaffe said he and his co-counsel, Paul W. Thomas, could try the case in court or file in court to vacate the arbitrators' dismissal.

Bill Halldin, a Merrill Lynch spokesman, declined to comment.

Ms. Billington's case is one of the highest-profile of more than six dozen involving former Merrill executives who claim they lost about $400 million in their brokerage accounts when the stock of Merrill Lynch & Co. took a nosedive in 2007-08 due to the firm's exposure to subprime mortgages and mortgage-related securities.

Merrill reached a $17 billion settlement with the Department of Justice in 2014 and admitted wrongdoing in the original case. Plaintiffs argue the Finra statute of limitations should begin in 2014 rather than 2009.

So far, 15 arbitration panels have denied Merrill's motions to dismiss, while four have granted it. More cases will be heard this summer. Cases that are proceeding may take months to adjudicate.

"When you have 77 cases proceeding, some you're going to lose, some you're going to win," Mr. Taaffe said. "We're comfortable with where we are. We fully intend to move forward and look forward to positive results."

The plaintiffs' loss in Ms. Billington's case doesn't necessarily portend a tough road ahead for all the cases, according to Andrew Stoltmann, a Chicago securities lawyer who is not involved in the actions.

"In reality, it's the second pitch of the first inning," Mr. Stoltmann said. "Clearly, this isn't a good result for the claimants or their lawyers. But you can't read too much into [an early] decision in what will likely be a large number of cases tried."


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