This problem happens when the Classification Code record in question is marked as unique (UNIQUE_FLAG = 'Y').  This problem will not be an issue at all if the Classification Code is not required to be unique.

To fix the problem:

The record in the Duplicate_Merge_Class table needs to be set to D (from the Merge Classifications screen) before running the Merge job.  You will find that there is a Status on the deleted Account Classification record.  If it is set to 'D' or 'O', then it should not merge and it will allow Merge Processing to finish.

Here are the steps to follow:
1.  Go to the Merge Entry screen for the 2 accounts in question:
2.  Set the Status for the Merge to be O (for Possible Duplicate Accounts):
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3.  Click Continue on the Forms dialog that appears:
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4.  Then set it to me M (for Merge Accounts):
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5.  Click on the Classification field under the Deleted Account:
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6.  Hit Alt + F10 to access the Merge Classifications screen:
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7.  Click in the Sts field and press F9:
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8.  Select D or O and click OK:
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9.  Click on the Merge button to begin the Merge process.