Skadden secured an important dismissal for firm client Merrill Lynch in a suit filed by plaintiffs against five brokerage firms – Merrill Lynch, Morgan Stanley, Citigroup, Charles Schwab and Wachovia – alleging that $186 billion in customer-invested funds had been impacted by deceptively made changes to the firms' respective "Cash Sweep Programs." A Cash Sweep Program offers investors the option of having uninvested funds in their brokerage accounts placed in, or "swept," into other types of investments, such as money market mutual funds.
Plaintiffs alleged that the brokerage firms had deceptively made changes to direct the sweeps to firm-affiliated banks as opposed to money market funds, without providing proper disclosures. In his 47-page opinion issued on July 27, Judge Richard J. Sullivan of the U.S. District Court for the Southern District of New York disagreed, finding that "plaintiffs have failed to articulate a plausible theory under which the . . . statements they have identified could be materially misleading to a reasonable investor."