Joint Declaration of Lynn L. Sarko and Marc I ... - Cohen Milstein

64. As a consequence, we developed a comprehensive understanding of the key legal
and factual issues in the case, have a clear view of the strengths and weaknesses of this case, and
are keenly aware of the range of possible outcomes at trial. While this understanding was partial
at the time the Settlement was entered into, it was no longer so when Plaintiffs determined
finally to recommend the approval of the Settlement to the Court.
D. The Risk of Establishing Liability
65. In Plaintiffs’ view, the Defendants were Plan fiduciaries who, as a result of their
inattention, failed to protect the participants from preventable losses. Nonetheless, this case is
fraught with risk at every turn.
66. First, ERISA company stock cases involving 401(k) plans are quite new. The
first pioneering cases were not filed until the late 1990s. While a substantial body of cases
decided on motions to dismiss, as well as cases on class certification have been decided, the
results of these cases are decidedly mixed. See 49 above.
67. Second, Defendants have raised and (if the case continued in litigation) can be
expected to raise a host of defenses, any one of which, if successful, might end or severely limit
Plaintiffs’ case. A brief review of some of Defendants’ major contentions, without fully
rehearsing Plaintiffs’ rebuttal, suffices to illuminate the serious litigation risks faced by the
Class:
a. Defendants maintained, with great vigor, that Merrill stock was “hardwired” into
Merrill’s Plans as a matter of plan design, required to be offered as an investment
alternative, and that because the Defendant fiduciaries had no power to remove or
restrict it, they could have no liability. While Plaintiffs disagree with the reading of
the Plans’ documents and argue, with substantial support from the case law, that plan
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