Bank of America Wins Motions to Dismiss Derivative Actions

Paul, Weiss client Bank of America Corporation (BofA) and several of its directors and officers achieved a victory in the United States District Court, Southern District of New York. Judge P. Kevin Castel granted the defendants' motions to dismiss two derivative actions alleging, among other things, that BofA's directors and officers breached their fiduciary duties and were unjustly enriched in connection with BofA's 2008 acquisitions of Countrywide Financial Corporation and Merrill Lynch & Co.

In separate derivative actions, two shareholders alleged that BofA and its directors and officers withheld material information and made materially misleading statements regarding BofA's 2008 acquisitions of Countrywide and Merrill, including Merrill's mounting losses throughout the process of the acquisition by BofA and the amount of bonuses paid to Merrill executives around the time of the acquisition.

In a single order, Judge Castel granted BofA's motions to dismiss both derivative actions in their entirety. As BofA argued and Judge Castel agreed, the shareholders did not adequately allege in their derivative complaints that BofA's board refused the plaintiffs' litigation demands in violation of the Delaware business judgment rule. Judge Castel held that this alone warranted the dismissal of each action, but he further explained that both cases should be dismissed on separate and independent grounds. In a related consolidated derivative action brought on behalf of BofA, Judge Castel had recently issued an order finally approving a settlement between the parties, which included a release of derivative claims relating to BofA's acquisition of Merrill. Judge Castel held that his prior order and the underlying release precluded the plaintiffs from pursuing independent derivative actions on behalf of BofA concerning the Merrill acquisition.

The Paul, Weiss team included litigation partners Daniel Kramer, Brad Karp and Audra Soloway.