On February 17, 2011, the Honorable Richard M. Berman of the United States District Court for the Southern District of New York dismissed claims under Section 10(b) of the Exchange Act of 1934 against Shearman & Sterling's client, Merrill Lynch & Co., Inc., in a litigation arising from alleged misrepresentations by MRU Holdings, Inc. ("MRU") regarding its issuance of auction rate securities ("ARS"). (The case is In re MRU Holdings Securities Litigation.) MRU, which is now bankrupt, bought, sold and originated student loans. Merrill Lynch managed auctions for MRU's ARS.

The plaintiffs, who were purchasers of MRU's common stock, alleged that MRU and Merrill Lynch concealed the fact that MRU relied on ARS to securitize its student loan pools and that the use of ARS was risky. The plaintiffs also alleged that Merrill Lynch failed to disclose that it sometimes intervened in ARS auctions to prevent them from failing.

In dismissing the claims against Merrill Lynch, Judge Berman held that Merrill Lynch did not owe a duty to disclose information regarding MRU's ARS to purchasers of MRU's common stock, that the plaintiffs' complaint failed to satisfy the particularity requirements of Rule 9(b), that Merrill Lynch could not be held secondarily liable for MRU's alleged misrepresentations, and that the plaintiffs' factual allegations failed to give rise to a strong inference of scienter. Judge Berman also dismissed claims that Merrill Lynch manipulated the ARS market.

The Shearman & Sterling litigation team consisted of partners Herbert S. Washer (New York-Litigation) and Kirsten Nelson Cunha (New York-Litigation) and associates Daniel Lewis (New York-Litigation), Nicholas M. Menasché (New York-Litigation) and Marina Moon (New York-Litigation).