Key Ruling in BofA Securities Class Action Gives Plaintiffs Access to Treasure Trove of Documents

Ruling in BofA Class Action Opens Treasure Trove of Documents

Susan Beck

The American Lawyer

Let's hope the plaintiffs lawyers in the Bank of America securities class action suit have some big wheelbarrows, or at least terabytes of computer hard drive space. On Tuesday, in a huge win for shareholders, Manhattan federal district court Judge Denny Chin took the unusual step of lifting the statutory discovery stay in the securities fraud case. His order will give the plaintiffs access to the mountains of documents that BofA and related defendants have already turned over to Congress, the Securities and Exchange Commission, the New York attorney general and other government entities scrutinizing BofA's acquisition of Merrill Lynch. In addition, lawyers for the shareholders will be able to use transcripts of depositions taken by other investigators.

They will also probably get access to communications between BofA and its lawyers that the bank turned over to various government agencies after it waived the attorney-client privilege in October. Chin's ruling does not carve out an exception for privileged materials. The protective order issued by Manhattan federal district court Judge Jed Rakoff in the SEC's case against Bank of America states that BofA is not deemed to be waiving its privilege "regarding other information that may be of interest in related private lawsuits." That language can be construed to mean that BofA can still claim privilege over materials government investigators didn't ask for -- not necessarily that plaintiffs in private lawsuits can't have access to the documents the bank did turn over.

The class action plaintiffs asked Judge Chin to lift the discovery stay automatically imposed by the Private Securities Litigation Reform Act in an Oct. 6 letter to Chin. The three-page letter -- signed by co-lead counsel from Kaplan Fox & Kilsheimer; Bernstein Litowitz Berger & Grossmann; and Barroway Topaz Kessler Meltzer & Check -- argues that the discovery stay, which typically remains in place until after motions to dismiss have been decided -- placed the class at a disadvantage compared to others investigating BofA's merger with Merrill.

Wachtell, Lipton, Rosen & Katz, representing BofA, immediately objected to lifting the stay in an Oct. 8 letter. A furious exchange of letters ensued: from the plaintiffs on Oct. 14 and Nov. 13; and from Wachtell on Oct. 15, Nov. 13 and Nov. 16.

The securities class action plaintiffs were itching to get the stay lifted in part because of a competing derivative case against BofA in Delaware Chancery Court, in which the plaintiffs have already survived a motion to dismiss and have begun discovery. The federal plaintiffs argued to Chin that because such defendants as former BofA CEO Kenneth Lewis have finite resources, the class's discovery should not be delayed. They reiterated that position at oral arguments before Judge Chin on Oct. 16. Wachtell maintained there was no compelling reason to lift the stay. (Here's the transcript of oral arguments.)

As our colleague Zach Lowe at The Am Law Daily noted earlier this month, the Delaware plaintiffs have received permission to subpoena documents from BofA's lawyers at Wachtell and Cleary Gottlieb Steen & Hamilton. They have demanded "all documents concerning the merger."

In his ruling Tuesday in the federal securities case, Chin concluded that the BofA securities fraud plaintiffs would be unduly prejudiced if they didn't have access to documents that have already been turned over. Without them, he wrote, the shareholders "will be less able to make informed decisions about litigation strategy." He added that this discovery won't overly burden the defendants since they've already given the documents to others.

Ohio Attorney General Richard Cordray, the lead plaintiff in the shareholder class action, offered this statement: "[Tuesday's] ruling by Judge Chin in the Bank of America litigation will allow our case to proceed more rapidly."

Bank of America offered us this comment via e-mail: "It's a step in the court process. We continue to believe that we disclosed all that we were required to disclose."

There was one final bit of interest in Chin's ruling: the list of defense counsel at the end of the document, many of whom haven't yet entered appearances on the court docket. Wachtell continues to represents BofA and its outside directors in the securities class action, ERISA class action and federal derivative suit. Davis Polk & Wardwell represents BofA inside directors and officers. Shearman & Sterling represents Merrill Lynch. Cravath, Swaine & Moore represents Merrill's outside directors. Dechert represents former Merrill CEO John Thain. Debevoise & Plimpton and Sullivan & Cromwell represent financial advisers in the merger. Paul, Weiss, Rifkind, Wharton & Garrison -- which is now advising BofA in some matters -- is on the service list, but that's because it represents Deloitte, not because it's counsel to BofA in the securities case.

This article first appeared on The Am Law Litigation Daily blog on AmericanLawyer.com.