A sign for the Bank of America is seen outside a branch in Vienna, Virginia October 16, 2009. REUTERS/Larry Downing

  • A sign for the Bank of America …

(Reuters) – Bank of America Corp directors, who were sued by shareholders for allegedly paying too much for Merrill Lynch & Co in 2008, must defend a proposed $20 million settlement of the claims in federal court in New York, court papers show.

Calling the settlement “grossly inadequate,” lawyers in a similar Delaware case have asked P. Kevin Castel, the judge overseeing theNew York matter, to order the parties agreeing to the deal to justify its terms.

Castel directed that parties submit necessary documents by May 4.

The New York Times first reported that the Delaware plaintiffs objected to the settlement in New York as inadequate.

Damages in the case could reach $5 billion, according to the plaintiffs in the case being handled inDelaware Chancery Court, the paper said.

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