Investor lawsuits based on allegations of faulty stock research may not be as lucrative as plaintiffs’ lawyers had believed, according to The Wall Street Journal.

Levin, Papantonio, Thomas, Mitchell, Echsner & Proctor, one of the nation’s largest class-action law firms, settled approximately 300 claims against Merrill Lynch & Co. for about three cents on the dollar, for a total payout of $2 million, reported the Journal. “After all the apocalyptic prediction, we have overwhelmingly prevailed…because the plaintiffs’ lawyers could not show their clients saw misleading reports or relied on them,” Merrill Lynch spokesman Mark Herr told the paper.

Another law firm, Hooper & Weiss LLC, has reportedly filed about 1,000 cases against Smith Barney, a unit of Citigroup, also charging that the brokerage house issued faulty research. Only 232 cases have been decided so far, and the Hooper & Weiss record stands at just 76 wins and 156 losses, with a total payout of $1.7 million in damages.

Investor lawsuits have been piling up over the last two years, following the so-called global settlement of 2003, in which 10 Wall Street brokerage firms agreed to pay regulators a collective $1.4 billion for issuing dubious equity research in exchange for investment banking business, noted the Journal.

The firms — Citigroup Inc., Merrill Lynch & Co., Credit Suisse First Boston, Morgan Stanley, Goldman Sachs Group Inc., J.P. Morgan Chase & Co., Lehman Brothers Holdings Inc., Bear Stearns Cos., UBS AG, and U.S. Bancorp Piper Jaffray — neither admitted nor denied guilt as part of the settlement, according to the newspaper.

For the most part, the brokerage firms have done well defending against the class-action claims, reported the Journal. According to the settlement, individual losses would have to be recouped via arbitration, rather than in court. The newspaper also noted that since arbitration panels do not have to follow precedent and can rule different ways on similar cases, the outcome for future cases is unpredictable.

In one recent victory for investors, a Boston couple represented by Hooper & Weiss was awarded $913,000 in compensatory damages and $1.5 million in punitive damages in their case against Citigroup. The plaintiffs charged that significant investment losses stemmed from stock research they received on scandal-ridden WorldCom. The thrust of the winning argument, reported the Journal, was a confidential Citigroup memo that discussed how offering a more accurate and balanced stock-rating system could damage the firm’s investment-banking business.

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