In a case decided on Wednesday, US District Judge Milton Pollack ruled against investors who accused the investment bank of having a conflict of interest because its Global Technology Fund invested in stocks whose prices were allegedly artificially inflated by misleading reports from Merrill's analyst division. This conflict was blamed for the sudden slump in the value of the mutual fund.
Judge Pollack decided that the management of the fund was a separate entity from the analyst division and that, even if there was an apparent conflict, it was public knowledge before the market peaked in 2000 – so there was an opportunity to sell before the crash.
On Monday, Judge Pollack dismissed two similar lawsuits accusing Merrill Lynch of defrauding investors for recommending the stocks.
He wrote:
"Seeking to lay the blame for the enormous Internet Bubble solely at the feet of a single actor, Merrill Lynch, plaintiffs would have this Court conclude that the federal securities laws were meant to underwrite, subsidize, and encourage their rash speculation in joining a freewheeling casino that lured thousands obsessed with the fantasy of Olympian riches, but which delivered such riches to only a scant handful of lucky winners."
He continued:
"Those few lucky winners, who are not before the Court, now hold the monies that the unlucky plaintiffs have lost—fair and square—and they will never return those monies to plaintiffs. Had plaintiffs themselves won the game instead of losing, they would have owed not a single penny of their winnings to those they left to hold the bag (or to defendants)."
In another ruling, Judge Harold Baer dismissed a similar lawsuit against rival banks Goldman Sachs, Credit Suisse First Boston and Morgan Stanley Dean Witter.
See: Monday's ruling and Wednesday's ruling
