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

turmoil experienced in the financial system, made continuing the litigation a doubtful gamble on
Merrill’s future. Indeed, revelations that began appearing shortly after the term sheet was
executed on January 7, 2009 showed that Merrill teetered on extinction even as the Settlement
was being negotiated. Without pressure from the federal government (as reported by Bank of
America) and a new commitment of enormous federal resources to stand behind Merrill, the
Bank of America merger would not have closed and Merrill would likely not have survived
January.
71. While Plaintiffs assert that Merrill posed an extraordinary risk throughout the
Class Period, Merrill will undoubtedly claim that the risk was particularly acute during a short
window leading to its sale to Bank of America, thus suggesting that there was no risk of
“imminent collapse” except during that limited time period. Were the case litigated, the Parties
would present dueling experts on the question of when the stock became too risky or ceased
being too risky to serve appropriately as an investment vehicle. This defense would proceed
separately from Defendants’ legal argument that risk is simply irrelevant.
72. In addition to the specific issues discussed above, Plaintiffs would, of course, face
the host of risks presented in any complex litigation of this type if the case were to go forward.
E. The Risk of Establishing Damages
73. As discussed in Section IV(C)(4)(b) of the Final Approval Memo, ERISA
requires breaching fiduciaries to make good to the plan the difference between prudent plan
alternatives and the challenged imprudent investment. No company stock ERISA case has been
tried to a successful conclusion, however, and, accordingly, no court has definitively applied a
damage measure to a case such as this after trial. This void, coupled with the Defendants’
vigorous and creative defense of the damage aspects of the case, created risk for the Plaintiffs.
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