In a July 24, 2025 Opinion and Order, Judge Valerie Caproni of the United States District Court for the Southern District of New York denied, in substantial part, the motion for summary judgment filed by defendant Merrill Lynch, Pierce, Fenner & Smith Inc.
The action alleges that Merrill breached its contractual obligation to pay a “reasonable” rate of interest on cash held in online retirement brokerage accounts. From 2017 to 2020, Merrill defaulted customers into low yielding “sweep accounts” at its affiliate, Bank of America, N.A., which paid an approximate 0.14% yield on cash balances, far below the federal funds rate, which exceeded 2.40%, and the rates of similar products.
The summary judgment decision follows a September 27, 2024 decision in which the Court denied, in substantial part, Merrill’s motion to exclude the testimony of Plaintiff’s expert, Dr. Darius Palia, an economist and banking professor at Rutgers Business School. Dr. Palia opined that the interest rate Merrill paid on its sweep accounts was not reasonable, and that the putative class suffered damages as a result.
In the July 24, 2025 summary judgment ruling, Judge Caproni found that Merrill’s expert’s contention that Merrill’s rate was “in line with the industry” was based on analysis from sweep programs that predominantly “sweep to affiliated institutions,” while Plaintiff’s expert’s analysis, which looked to a broader range of deposit products, found that Merrill’s sweep rates “were generally lower than all of those rates.” “The problem for Defendant,” the Court concluded, “is that the appropriateness of the various possible comparators and the validity vel non of [its expert’s] analysis are all questions of fact that must be decided by a jury.”
The case is now proceeding to class certification and then trial.
The case is Sarah Valelly v. Merrill Lynch, Pierce, Fenner & Smith Inc., Case No. 1:19-cv-07998-VEC (S.D.N.Y.).