Two years ago, top class-action lawyers who had made a mint suing corporations for defective products, including breast implants and diet drugs, set strategy at Las Vegas's Bellagio Hotel on their next potential jackpot: Wall Street's faulty stock research.

So far the big bet hasn't paid off. Now, one of the nation's largest class-action law firms has settled all its cases against Merrill Lynch & Co. for far less than it had hoped, according to people familiar with the matter.

The law firm, Levin, Papantonio, Thomas, Mitchell, Echsner & Proctor, settled about 300 or so investor claims for approximately three cents on the dollar. The total payout is estimated to be about $2 million, these people say. It isn't known exactly how much of the settlement the law firm is keeping; lawyers who handle these types of cases often take one-third of the total, which would be almost $700,000 in this situation.

Robert Blanchard, the Levin lawyer who handled many of the cases, confirmed his firm had settled the matter but declined to comment further.

Merrill Lynch spokesman Mark Herr applauded the settlement. "After all the apocalyptic predictions, we have overwhelmingly prevailed in these cases because the plaintiffs' lawyers could not show their clients saw misleading reports or relied on them," he said. "At the end of the day, losses were not caused by research. Losses were caused by the worst bear market in more than two generations."

For more than two years, Wall Street has mostly come out ahead in fighting claims alleging faulty research led to big investor losses. The claims flooded in after Wall Street firms collectively agreed to pay regulators $1.4 billion in 2003 for issuing questionable stock research in a bid to get more lucrative investment-banking business from the companies they were writing about. As part of the settlement, the brokerage houses neither admitted nor denied guilt.

In the research settlement, $80 million was earmarked for investor education. In order to recoup individual losses, investors were told they would have to head to arbitration, the main forum for hearing investors' complaints against Wall Street firms.

Class-action lawyers smelled blood and acted quickly. At the conference in Las Vegas one lawyer boasted: "This is not brain surgery. This is a car accident. It just happens that your grandmotherly client was rear-ended by a Mack truck being driven by a CEO."

These firms spent millions of dollars in advertisements seeking people who had posted losses on stocks mentioned in the settlement. Unlike many cases brought by plaintiffs' attorneys, these complaints ended up in arbitration, rather than in court. Arbitration panels operate on rules designed by the National Association of Securities Dealers and the New York Stock Exchange, two of Wall Street's self-regulatory organizations. Panels don't have to follow precedent and they can rule different ways on nearly identical cases.

Still, New York attorney Robert Weiss says he isn't willing to throw in the towel just yet. In recent months, his firm has held settlement talks with Citigroup Inc., but the two sides haven't reached an agreement, according to people familiar with the talks. "I am disappointed with how things are going, but we are not doing too badly," he says.

A Citigroup spokeswoman declined to comment.

Mr. Weiss's law firm, Hooper & Weiss LLC, has filed approximately 1,000 cases, all against Citigroup and its Smith Barney brokerage unit, alleging Citigroup issued faulty research on WorldCom Inc., which resulted in stock losses. So far, Mr. Weiss has received decisions on 232 of his cases. He has had 76 wins, receiving either partial or full awards.

Not included in these statistics is a recent big win. One of Mr. Weiss's clients, a Boston couple who say they relied on Citigroup's research on WorldCom, won $913,000 in compensatory damages and $1.5 million in punitive damages against the firm. He said a key factor in winning the case was the use of a confidential Citigroup memo that was only recently unearthed in unrelated WorldCom litigation. The memo shows a senior Citigroup official discussing how instituting a more accurate and balanced stock-rating system could hurt the firm's investment-banking relationships.