Merrill Lynch is sticking to its counterpunching strategy in its federal court battle with an investor suing the wirehouse for alleged deceptive and misleading marketing.

The investor, Thomas Baldwin, alleges in a proposed class action that the wirehouse “deceptively and misleadingly” markets its Maine college savings 529 plan in its online marketing material.

Baldwin alleges specifically that Merrill Lynch’s website erroneously marketed the Maine 529 plan as providing the same benefits to New York state income tax payers as those enrolled in its New York 529 program.

But Baldwin, when signing up for the plan, clicked on an agreement online that confirmed he had consulted with a tax advisor, according to Merrill Lynch, which filed on Nov. 22 a brief to support a counterclaim it made against him.

The specific language to which Baldwin agreed by clicking on the online form, according to Merrill Lynch’s counterclaim, states that the participant “consulted with your tax advisor regarding the state tax consequences of investing in the Program if realizing state or local income tax or other benefits is important to you.”

Merrill Lynch “seeks to hold Baldwin to his express, narrow, and carefully tailored, factual representations that he was not relying on [Merrill Lynch] with respect to the tax consequences of his investment” — which are “the very subject” of his lawsuit, the wirehouse’s lawyers argue in the recent brief.


Merrill Lynch asked the judge to declare that Baldwin misrepresented his tax advice circumstances, noting that its employees would have not allowed him to open a 529 account if he had not clicked on that agreement.

The case highlights the potential complexities of online disclaimers, and challenges that can arise from marketing similar products in several states.

A Merrill Lynch spokesperson declined to comment for this story beyond the arguments in the wirehouse’s brief.

Baldwin’s lawyer did not return a request for comment.

In October, Baldwin asked the court to toss Merrill Lynch’s counterclaim, arguing that the wirehouse is trying to avoid its obligations under the Maine Unfair Trade Practices Act “by relying on boilerplate language” in the college savings 529 plan’s customer agreement.

Merrill Lynch is trying to argue that its documentation waived any obligation it had “to be truthful in its statements to Baldwin on Merrill’s own website,” Baldwin argues.

In August, U.S. District Judge Jon Levy in Maine rejected Merrill Lynch’s request to toss Baldwin’s lawsuit.

Baldwin invested in the college savings program without consulting a Merrill Lynch financial advisor. He opened his account directly online.

Both Baldwin and Merrill Lynch also this month jointly asked the court to issue a confidentiality order that would cover most of the evidence and depositions created when the two sides begin the discovery process in the civil litigation.

In separate litigation earlier this month, Merrill Lynch, Raymond James & Associates and Raymond James Financial Services agreed to pay a total of $12 million in restitution to customers for 529 savings plan-related violations, according to Finra.

According to FA-IQ’s previous reporting, Finra said the customers incurred excess fees on their investments in the tax-advantaged 529 savings plans, designed to encourage saving for future education costs.

The payment of excess fees resulted from the failure of the three firms to “reasonably supervise” 529 plan share-class recommendations, according to Finra.

Merrill Lynch agreed to pay at least $4 million in restitution relating to the sale of Class C shares to 529 plan accounts with young beneficiaries.

RJA has agreed to pay more than $3.8 million in restitution, while RJFS has agreed to pay $4.2 million.