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BofA, Merrill Lynch Trainees Denied Class Cert But Can Refile

Law360—John Kennedy

A New York federal judge denied class certification Monday to former Bank of America Corp. and Merrill Lynch & Co. Inc. employees who claim they were misclassified as exempt from overtime, but the plaintiffs are confident that he'll grant the certification when their motion is renewed.

U.S. District Judge George B. Daniels said in his order that given the plaintiffs' pending motion to intervene and oppose the proposed class action settlement in a similar California case and the potential for that settlement to affect the plaintiffs' right to class certification in the New York suit, he must deny their motion without prejudice. He said the plaintiffs can renew their motion after June 17.

Justin M. Swartz of Outten & Golden LLP, a lawyer for the plaintiffs, Andrew Blum and Zaq Harrison, said that the denial was merely procedural and that once the judge sees the merits of his clients' case, class certification should be approved.

Blum and Harrison, along with two other plaintiffs from a third similar case moved in late March to intervene in the California case — Christopher M. Litty v. Merrill Lynch — because the proposed settlement is a “fire sale” that offers “shockingly low value” and has the appearance of a “reverse auction” that will benefit the defendants and Litty's lawyers, but hurt the 16,000-member class.

The motion to intervene says that because Litty had lost his bid to represent a Fair Labor Standards Act collective or a Rule 23 class, he was in a weakened position when he entered mediation with Merrill Lynch.

“These unfavorable events effectively left Litty with an individual case and no real chance to resuscitate his failed class action,” the motion says.

The intervenors say that Litty is in no position to broker a class settlement of any kind, let alone a global deal that swept in distinct and more valuable claims than those Litty had originally alleged, and that Merrill Lynch had been attempting to settle with the intervenors.

The intervenors say that the class is too broad to be represented by Litty alone, especially since he has not held some of the positions that have been recently included in the settlement, and that little detail has been provided to justify the settlement amount.

The proposed settlement is for $5 million, or about $250 per class member after attorneys' fees, the motion says. The intervenors calculate that Merrill Lynch owes at least $364.5 million for unpaid overtime alone, about $22,500 per person, but that the amount could be as high as $1 billion if class members worked 15 hours of overtime per week for 47 work weeks.

“The proposed settlement is 0.5 to 1.5 percent of that,” the intervenors said earlier this month in support of their motion. “A 99 percent discount requires explanation.”

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Merrill Lynch and Bank of America moved to dismiss Blum and Harrison's action earlier this month, saying that Litty's case was filed first and makes the same claims during the same time period while encompassing the same class of financial adviser trainee. They want Blum's case dismissed, transferred to Litty, or stayed pending Litty's final outcome.

The intervenors say that they didn't watch and wait while Litty was litigated, but had no reason to believe that he would agree to an inadequate settlement contrary to their interests and that he didn't represent their claims until they were swept into the settlement at the last minute.

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The intervenors are represented by Swartz, Jahan C. Sagafi and Katrina L. Eiland of Outten & Golden and Gregg I. Shavitz and Paolo C. Meireles of Shavitz Law Group PA.

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The cases are Blum et al v. Merrill Lynch & Co. Inc. et al., case number 1:15-cv-01636 in the U.S. District Court for the Southern District of New York, Christopher M. Litty v. Merrill Lynch & Co. Inc. et al., case number 2:14-cv-00425 in the U.S. District Court for the Central District of California, and Celeste Orozco et al v. Merrill Lynch & Co. Inc. et al., case number 2:15-cv-02213, in the U.S. District Court for the Central District of California.