Complaint Against Merrill Lynch for Sale of Mainsail and Victoria Commercial Paper Survives Motion to Dismiss

On February 18, 2011, Judge Martinez of the U.S. District Court for the Western District of Washington denied Merrill Lynch’s motion to dismiss, holding that plaintiffs had pleaded sufficient facts to state claims under the Washington State Securities Act (“WSSA”) for primary and control person liability and for breach of contract. Plaintiff, King Country, Washington, invested county cash reserves in RMBS and alleges that defendants omitted to disclose significant and foreseeable risks in the underlying mortgage pools. Plaintiff further alleges that defendants knew the credit ratings associated with the securities were not reliable and that they were in fact trying to rid themselves of the same securities they held out as prudent investments. The Court found these allegations sufficient to survive the motion to dismiss. Decision.