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

77. With respect to breaches in 2008, Defendants contend that only during a tiny
window of a few days in September 2008 could it plausibly be argued that Merrill’s survival was
understood to be at risk so that maintenance of employer stock in the Plans could be viewed as
imprudent.
78. They further argue that the post-sale rebound in the shares destroys any argument
that fiduciary failure to take action in this window caused any loss.
79. Another argument that could significantly reduce damages is the contention that
“holder” damages are unavailable. The lion’s share of damages sought in this case is for claims
that the Plans should not have continued to hold Merrill stock. ERISA defendants often dispute
the availability of relief for “holder” losses because, in their view, the securities laws would have
prevented them from divesting the plans of the stock without first publicly disclosing the adverse
information making the stock imprudent, and had such disclosure been made, the stock price
would have dropped, and the plans would have suffered the same loss that occurred when the
allegedly improper practices came to light. Plaintiffs strongly disagree with this analysis as it
presumes that ERISA (and the securities laws) countenance the Plans’ fiduciaries taking no
action to protect the Plans where the shares remain inappropriately risky even after disclosure.
Nonetheless, Plaintiffs recognize that holder damages are sharply attacked by the defense bar,
including Defense Counsel in this case, and that the law is unsettled in this area.
80. Additionally, Plaintiffs face arguments that damages should be measured using an
alternative to the Donovan best plan alternative measure – one based on the “price inflation” of
Merrill stock in the Class Period, which could reduce significantly or eliminate damages. See
Final Approval Memo § IV(C)(4)(b).
26