Merrill Lynch Can't Stop Class of Black Bankers
CHICAGO (CN) - A class of Merrill Lynch financial advisers who claim the firm denied them pay and promotions because they are black won another legal victory when the 7th Circuit declined to review its earlier order to certify the class.
The 700-person class, led by Nashville financial advisor George McReynolds, alleged that Merrill Lynch's company policies result in unintentional discrimination, known as disparate effect, against black bankers. Specifically, the class challenged the company's "teaming" and "account distribution" policies under Title VII of the Civil Rights Act.
At each Merrill Lynch branch, brokers are encouraged, but not required, to divide themselves into client-sharing teams. Teaming up allegedly presents substantial benefits. White brokers tend to form all-white teams, according to the complaint, so black brokers were left out to dry.
Merrill Lynch's system of account distribution, the process by which Merrill Lynch assigns accounts after the departure of a broker, allegedly compounded the teaming policy's discriminatory effects. Because accounts are distributed based on the past financial success of the competing brokers, the policy favors those who are able to join successful teams, creating a "vicious cycle" of low performance.
U.S. District Judge Robert Gettleman initially denied the proposed class, but the 7th Circuit revived its certification. The appellate panel granted certification in the wake of the Supreme Court's decision in Wal-Mart Stores v. Dukes, surprisingly drawing on the language of the case, which is widely considered employer-friendly, as grounds for certifying the class.
"We have trouble seeing the downside of the limited class action treatment that we think would be appropriate in this case," Judge Richard Posner wrote in the earlier opinion.
Merrill Lynch petitioned for a rehearing en banc by the full 7th Circuit Court of Appeals. But the court denied the request because the original panel - comprised of Judges Richard Posner, Diane Wood, and David Hamilton - voted against the petition, and no other judge called for a full-circuit vote.
The plaintiffs presented evidence they said supported their claim that black Merrill Lynch brokers earn less on average than their white counterparts.
Because most Merrill Lynch brokers earn at least $100,000 per year, any award of backpay could place a substantial financial burden on the investment firm.