Cash sweep
In re Merrill Lynch Cash Sweep Programs
Date: Sept. 30, 2026
Issue: Whether the district court should dismiss a class action alleging that Merrill Lynch and its affiliates breached contractual and fiduciary duties and violated New York law by paying unreasonably low interest rates through their cash sweep programs.
Case Summary: A New York federal court dismissed a class action against Bank of America Corporation (BAC), Bank of America, N.A. (BANA), and Managed Account Advisors LLC (MAA) but allowed claims against Merrill Lynch to proceed in a lawsuit alleging unreasonably low interest rates through its cash sweep programs.
In December 2023, Margaret McCrary filed a class action against Merrill Lynch, alleging it paid unreasonably low interest rates on uninvested customer funds through its automatic cash sweep programs. The court later consolidated the lawsuit with claims brought by James Bertonis and Robert J. Campton Jr. (collectively, plaintiffs) against Merrill Lynch, BAC, BANA, and MAA (collectively, defendants). Plaintiffs alleged Merrill Lynch transferred uninvested cash from customers’ brokerage and retirement accounts into interest-bearing accounts at affiliated banks while paying customers rates as low as 0.01%, `despite higher market rates. Plaintiffs asserted claims including breach of contract, breach of fiduciary duty, negligence, unjust enrichment, and violations of New York consumer protection law. On April 8, 2025, the court consolidated the cases, and plaintiffs filed an amended consolidated class action complaint on May 22, 2025.
On July 3, 2025, defendants moved to dismiss the amended consolidated class action complaint. Defendants argued plaintiffs failed to state valid claims against BAC, BANA, and MAA and lacked standing to bring claims on behalf of customers with employer-sponsored retirement accounts. Defendants also argued that Merrill Lynch did not breach its contracts because the agreements did not require it to negotiate higher interest rates or pay rates beyond their terms. Defendants maintained that Merrill Lynch owed no fiduciary duty to self-directed customers and that its account agreements disclosed its relationship with BANA. Defendants further argued that plaintiffs’ remaining claims either repeated their contract claims or failed to state valid claims for relief. Finally, defendants asked the court to strike allegations comparing Merrill Lynch’s cash sweep programs with other financial products, arguing that the comparisons were irrelevant and would unfairly prejudice Merrill Lynch.
Judge Margaret Garnett of the Southern District of New York began by dismissing all claims against BAC, BANA, and MAA. The court ruled that plaintiffs failed to show any contractual or legal relationship with BAC or provide enough facts to hold BAC liable for Merrill Lynch’s actions solely because BAC was its parent company. The court also dismissed the claims against BANA because it received funds through Merrill Lynch’s cash sweep programs and had no contractual or legal relationship with plaintiffs. Finally, the court dismissed the claims against MAA because plaintiffs failed to establish a contractual relationship or link MAA’s alleged fiduciary duties to the cash sweep programs. The court concluded that Merrill Lynch was the proper defendant and that corporate affiliation alone did not justify holding BAC, BANA, or MAA liable.
The court denied defendants’ motion to strike comparisons between Merrill Lynch’s cash sweep rates and other financial products, finding that the challenge was premature. The court also rejected defendants’ standing challenge involving employer-sponsored retirement accounts but allowed them to raise both issues later in the case.
The court dismissed plaintiffs’ negligence and unjust enrichment claims because they repeated allegations covered by their other claims. The court also dismissed fiduciary duty claims involving self-directed customers, finding that Merrill Lynch owed them only limited duties. However, the court allowed fiduciary duty claims involving advised customers to proceed because Merrill Lynch had agreed to act in their best interests. The court also allowed claims for breach of contract, breach of the implied covenant of good faith and fair dealing, negligent misrepresentation, and violations of New York’s consumer protection law to proceed. The court found that plaintiffs presented sufficient allegations that Merrill Lynch paid unreasonable interest rates, failed to meet its contractual obligations, and misled customers about its cash sweep programs.
Bottom Line: Judge Garnett emphasized that Merrill Lynch was the proper defendant and that additional defendants could not be added based solely on their affiliation with Merrill Lynch without specific allegations supporting legal claims against them.
Document: Opinion
