Fernandez v. Merrill Lynch


Frequently Asked Questions

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General Information:

1. What is this lawsuit about?

The case is known as Benjamin Fernandez et al., v. Merrill Lynch, Pierce, Fenner & Smith Incorporated also referred to as the Fernandez v. Merrill Lynch Settlement. The persons who brought the lawsuit are the Plaintiffs, and the company they sued is called the Defendant, sometimes also referred to as “Merrill Lynch.” The court in charge of this case is the United States District Court for the Southern District of Florida.

Before Plaintiffs filed this lawsuit, Merrill Lynch entered into a Letter of Acceptance, Waiver and Consent (“AWC”) with the Financial Industry Regulatory Authority (“FINRA”), in which FINRA alleged that Merrill Lynch did not provide appropriate sales charge waivers for mutual fund purchases by small business retirement accounts held by certain retirement plans. As stated in the AWC, Merrill Lynch made two sets of remediation payments, one voluntary and another pursuant to the AWC (collectively, the “Remediation”), to the accounts that comprise the Settlement Class, which totaled about $79 million. Plaintiffs, believing the Remediation to be insufficient, filed this lawsuit alleging breaches of fiduciary duty under the Employee Retirement Income Security Act (“ERISA”).

Plaintiffs alleged that Merrill Lynch was a “fiduciary” under ERISA and brought two claims for breach of fiduciary duty. The first alleged that Merrill Lynch violated its fiduciary duties by failing to discharge its duties solely in the interest of the plan participants and beneficiaries. The second claim alleged that Merrill Lynch dealt with plan assets in its own interest or for its own account. Plaintiffs sought both damages, or additional remediation, and disgorgement of profits that they contended Merrill Lynch earned as a result of its conduct.

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2. What is a class action?

In a class action, one or more persons called Class Representatives sue on behalf of people who have similar claims. All of these people are the Settlement Class or Settlement Class Members. One court resolves the issues for all Settlement Class Members, and all Settlement Class Members are bound by the court’s decision or settlement.

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3. Why is there a settlement?

Plaintiffs believe that settlement is in the best interest of the Settlement Class Members because it will provide them with full repayment of the sales charges for mutual funds purchased without sales charge waivers. It also provides significant, although not full, payment of the amount of additional profits that Plaintiffs contend Merrill Lynch earned as a result of the sales charges. If the case is not settled and goes to trial, the court could determine, as Defendant has argued, that Defendant did not have a fiduciary duty to the Settlement Class Members or, even if it did, Defendant did not breach that duty; or that Plaintiffs filed the case too late under the governing law. The Court could also agree with Defendant that they have already repaid their profit or that Plaintiffs’ calculation of Defendant’s profits is wrong. The settlement avoids the risk of an unfavorable result for Settlement Class Members, which could mean no recovery at all.

In addition, the settlement will provide compensation more promptly than continuing with the litigation, which, as currently scheduled, will require a trial. There may also be one or more appeals by the unsuccessful party. Continuing this litigation would result in considerable delay and the expenditure of more resources.

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4. How do I know if I am part of the settlement?

The Court approved the certification of a class for settlement purposes. Settlement Class Members include the trustees and named fiduciaries of each employee benefit plan that, at any time between January 1, 2006 and July 13, 2012, held any interest in one or more Retirement Cash Management Accounts classified by Defendant as an “05” or “retail pricing” Account product, which was a subject of the FINRA Letter of Acceptance, Waiver, and Consent No. 20111029999301, whether (1) in the name of the plan, or (2) in the name of a trustee or named fiduciary on behalf of the plan, or (3) for the benefit of a participant in the plan; and that either (1) received, or was issued, whether for the benefit of the plan or a participant in the plan, a Remediation Payment in any amount, or (2) held an interest in an Omitted Remediation Account, meaning an account to which Merrill Lynch should have originally issued a Remediation Payment but did not.

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5. Did I need to do anything to join the class and share in the settlement?

No. You did not need to take any action to join the class. If you are a member of the Settlement Class, you will participate in the Plan of Allocation in accordance with its terms and will receive a payment in accordance with the provisions of the Settlement Agreement.

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Exclusion and Objection:

6. Can I exclude myself from the settlement?

No, you did not have the option to exclude yourself (or “opt out”) of the Class. You will be bound by any judgments or orders that the court enters in this case, you will be deemed to have released Defendant Merrill Lynch from any and all claims that were asserted in this case, and you will not be able to sue Defendant Merrill Lynch on those claims.

Although you could not exclude yourself from the class, you could have objected to the settlement and asked the court not to approve it.

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7. What does it mean to object?

Objecting is simply telling the court that you do not like something about the settlement.

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8. How can I object to the Settlement?

In order to object, your written objection must have been filed with the court on or before December 13, 2017.

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9. What happens if I did nothing?

If you are a Class Member and you did nothing, you will participate in the Settlement and receive your Settlement benefit pursuant to the terms of the Plan of Allocation and the Settlement Agreement.

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Representation of the Class

10. Who is representing the Class?

The court has appointed the following lawyers to represent the Class, who are called Class Counsel:

Lawrence A. Kellogg Jason Kellogg Levine Kellogg Lehman Schneider + Grossman LLP 201 South Biscayne Boulevard, 22nd Floor Miami, FL 33131 Frank R. Rodriguez Paulino A. Núñez Rodriguez Tramont & Núñez, P.A. 255 Alhambra Circle, Suite 1150 Coral Gables, FL 33134

You will not be charged fees or expenses by these lawyers. If you wanted to be represented by your own lawyer, you may have hired one at your own expense.

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11. How will the lawyers be paid?

Under the settlement, Class Counsel filed a petition for attorneys’ fees and expenses. Merrill Lynch did not oppose Class Counsel’s application for attorneys’ fees as Class Counsel sought no more than 35% of the settlement amount, to be paid out of the $25 million settlement payment. In addition to attorneys’ fees, Class Counsel have incurred and requested reimbursement for out of pocket litigation expenses including fees for filing the action, expert fees, deposition transcripts, travel expenses, and similar expenses. These amounts did not exceed $300,000.

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12. How will the Class Representatives be paid?

Under the settlement, the Class Representatives requested a Case Contribution Fee. Merrill Lynch did not oppose Class Representatives’ request as Class Representatives collectively sought no more than $150,000. Class Representatives are retirement plan trustees who pursued this litigation vigorously in an effort to obtain the maximum recovery, both for themselves and for you and the other Settlement Class Members. Class Representatives actively investigated and uncovered potential overcharges to their accounts, sought counsel, participated in and monitored the lawsuit, sat for depositions and otherwise responded to discovery about their own Plans and participated in mediation.

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The Final Approval (“Fairness”) Hearing:

13. What is a Fairness Hearing?

It is a hearing that the Court will hold to decide whether to approve the settlement. You may attend and you may ask to speak, but you are not required to.

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14. When and where will the Court decide whether to approve the Settlement?

The court held a Fairness Hearing on December 13, 2017 to consider whether the settlement was fair, reasonable, and adequate, and to decide the amount of Class Counsel’s fees and expenses. Following the hearing, the court approved the settlement.

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Settlement Benefits:

15. What does the settlement provide and how will funds be allocated to Settlement Class Members?

The settlement provides a payment by Defendant Merrill Lynch of $25,000,000 which will be distributed according to a Plan of Allocation, which was filed with the court and is described in section IX of the Settlement Agreement. Once you receive that money, it will be your responsibility as a fiduciary to determine how that money should or must be used to benefit your plan. You should consult with your own accountant or lawyer to determine what obligations you may have in that regard.

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16. What am I giving up in the settlement?

Under this settlement, Settlement Class Members will give up or “release” the right to sue Merrill Lynch over any claim at issue in the lawsuit. This includes any claims about the same events and subject matter, including whether Merrill Lynch had a fiduciary duty and breached its fiduciary duty in connection with the Remediation payments, and any similar claims under state or federal law.

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17. What are Released Claims?

As explained in the Settlement Agreement, “Released Claims” means all claims that were or could have been pleaded in the Complaint against any one or more of Defendant’s Released Parties by reason of: (a) any Claim or facts pleaded in the Complaint,; and (b) any Claims that could have been pleaded in the Complaint based on the same factual predicate, including, but not limited to, any Claims relating directly or indirectly to the fees and sales charges charged to the RCMA 05 Account, which is a “Retirement Cash Management Account” classified by Merrill Lynch as an “05,” or “retail pricing” Account product that was one of the subjects of the AWC.

A full description of the Release provisions of the Settlement are at Section VI of the Settlement Agreement.

This means that even if you discover facts in the future that were not known at the time of the settlement which you think demonstrate further violations related to this case, you may not sue Merrill Lynch. Even if new information is discovered, the settlement will be binding.

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18. How much will my Settlement payment be?

Pursuant to the Plan of Allocation, which can be found in Section IX of the Settlement Agreement, the Settlement Payment for each Settlement Class Member is the sum of the Corrective Remediation Payment plus interest to the date of payment and a pro rata Disgorgement Payment.

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19. When did distribution of Settlement benefits occur?

The distribution for the Fernandez v. Merrill Lynch Settlement occurred on or about September 14, 2018. Checks were mailed to former Merrill Lynch account holders and credits were posted to the accounts of current Merrill Lynch account holders.

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20. What tax implications will I have if I receive a payment?

None of Garden City Group, LLC, Merrill Lynch, or Class Counsel can provide you with legal, tax or accounting advice regarding this payment. Please consult your tax advisor concerning this payment. Please make sure that the entity that completed the tax reporting for your retirement plan is notified of this reimbursement check so that any required tax reporting is completed.

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21. I received a check on behalf of a deceased individual. How can I have this check reissued?

If you are the plan administrator, plan trustee, or other authorized fiduciary of the Retirement Cash Management Account entitled to act on the deceased account holder’s behalf, please submit the Letter of Authorization that was mailed along with the check and provide a copy of the death certificate and a letter detailing who you are and your relationship to the decedent along with the check you received.

Please also provide documentation which supports your right to act on behalf of the decedent or to accept funds on behalf of the estate.

Acceptable documentation includes but is not limited to Probate Order, Last Will and Testament, an Order appointing you as the Administrator or Executor of the Estate and a Small Estate Affidavit.

Please mail these items to:

Fernandez v. Merrill Lynch Settlement C/O GCG PO Box 10465 Dublin, OH 43017-4065

If your request is complete your check will be reissued as soon as possible.

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More Information:

22. How do I get more information?

The Settlement Notice summarizes the settlement, but more details are set forth in the Parties’ Settlement Agreement. To obtain more information regarding the settlement, including Class Counsel’s fee application once it is filed, you may do the following:

  • Review the Parties’ Settlement Agreement by clicking here;
  • Contact Class Counsel to request documents;
  • Inspect any of the documents filed in this case by visiting the office of the Clerk of Court, U.S. Courthouse, 400 North Miami Avenue, Miami, FL 33128, during regular business hours, where you can review the filings or purchase copies of those documents.

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23. How do I update my address?

All requests to update your information must be received in writing. Please send a letter including your full name, current and former mailing address with the specific request to update your mailing address to:

Fernandez v. Merrill Lynch Settlement c/o GCG PO Box 10465 Dublin, OH 43017-4065

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