Countywide : O.C. Argues Its Right to Sue Merrill Lynch

Lawyers for Orange County on Monday asserted that the county was the appropriate party to file a lawsuit accusing Merrill Lynch & Co. of causing a $2-billion loss that plunged the local government into bankruptcy.

In their latest filing in U.S. Bankruptcy Court in Santa Ana, county lawyers contended that the county owned the securities in its ill-fated investment pool.

The county’s arguments were in response to the brokerage firm’s motion to dismiss the lawsuit. Merrill Lynch lawyers, who have insisted that the firm acted appropriately in dealings with the county, have contended that the securities belonged to the 187 government agencies that invested in the pool, and it should be up to those agencies to file any lawsuit.

The county filed its Merrill Lynch lawsuit for the second time Oct. 26. Eight days earlier, U.S. Bankruptcy Judge John E. Ryan had dismissed the action on technical grounds, ruling that the county needed to prove that it was the proper party to bring a claim against the Wall Street firm.

Merrill Lynch has until next Tuesday to respond to the county’s latest arguments.

“We believe the county is on the right side of the law,” said Bruce Bennett, the county’s bankruptcy attorney. “We therefore believe that the court should not dismiss our complaint, but only the court knows what it is going to do.”

Ryan is expected to rule on Merrill Lynch’s motion Dec. 1.