Merrill Lynch Trial Moved to L.A. County

A federal judge on Monday moved the county’s $2-billion lawsuit against Merrill Lynch & Co. to Los Angeles and barred residents from Orange County and a large portion of Los Angeles County from serving on the jury.

The decision comes eight months after the Wall Street giant asked U.S. District Judge Gary L. Taylor to move the case from Santa Ana to Arizona, saying it would be “impossible” for the brokerage firm to get a fair trial in Orange County.

Attorneys for Merrill Lynch and the county agreed to the change of venue and said the decision clears a major hurdle in efforts to begin the trial in September.

“We think this is an appropriate resolution,” said Merrill Lynch spokesman Bill Halldin. “It limits the jury pool to those people who have not been subjected to the intense publicity of the bankruptcy and have no personal financial interest in the case there.”

J. Michael Hennigan, an attorney representing the county, said he didn’t see a problem with holding the trial in Santa Ana. Holding it in downtown Los Angeles shouldn’t change the outcome, he said.

Merrill Lynch is the prime target in the county’s legal campaign to recoup the $1.64 billion in investment losses that triggered the largest municipal bankruptcy in U.S. history 3 1/2 years ago.

The suit accuses Merrill Lynch of duping then-county Treasurer-Tax Collector Robert L. Citron into purchasing risky securities in violation of state law. The firm has repeatedly denied any wrongdoing.

Under Taylor’s ruling, no jurors will be selected from Orange County or from a large section of Los Angeles County, roughly up to the Santa Monica Mountains. Taylor said residents living in that area “have the greatest interchange with Orange County [and] make the greatest use of Orange County public services.”

Legal experts such as New York University law professor John Coffee, who has closely followed the county bankruptcy, said the venue change is a modest boost for Merrill Lynch.

“It’s likely that a jury pool in Orange County has a much clearer sense of what happened than the population in L.A. County, which would have observed this but not with the level of self-interest as taxpayers in Orange County,” Coffee said.

Judy Sloan, a professor of law at Southwestern University School of Law in Los Angeles, said the move probably will make for a fairer trial.

“When the bankruptcy hit, people in Orange County worried about schools suffering and public services being cut,” she said. “There is a greater self-interest in Orange County.”

Merrill Lynch attorneys argued that newspaper coverage of the bankruptcy would make it “impossible” to get a fair trial in Orange County. The attorneys pointed specifically to coverage last June of the $30-million settlement Merrill Lynch paid the county in a deal with Dist. Atty. Michael R. Capizzi to end his criminal investigation of the financial collapse.

* TENTATIVE SETTLEMENT: KPMG Peat Marwick agrees to pay $75 million to settle lawsuits. A1