By Ashby Jones
A discrimination lawsuit brought by 700 African-American stock brokers against Merrill Lynch was allowed to go forward on Friday, the result of a ruling by a federal appeals court in Chicago.
In a unanimous opinion, a three-judge panel of the Seventh Circuit Court of Appeals reversed a lower-court ruling that the case should not go forward as a class action. Click here for a Reuters story; here for a Bloomberg story; here for the opinion.
The panel ruled that the question of whether the practices challenged by the plaintiffs had discriminatory effects would be best handled in a single case.
“The stakes in each of the plaintiffs’ claims are great enough to make individual suits feasible,” wrote the opinion’s author, Judge Richard Posner (pictured). “But the lawsuits will be more complex if . . . the question whether Merrill Lynch has violated the antidiscrimination statutes must be determined anew in each case. We have trouble seeing the downside of the limited class action treatment that we think would be appropriate in this case.”
Nashville broker George McReynolds filed the suit in 2005 on behalf of a group of brokers and trainees that worked in the firm’s global private client unit. He alleged that certain practices at Merrill — like allowing brokers to form teams and the method of distributing accounts upon a broker’s departure — had a discriminatory impact on African-American brokers and trainees, even if they weren’t necessarily discriminatory on their face.
Bank of America purchased Merrill Lynch in 2009.
A lower-court judge, Robert Gettleman, denied class-action status for the case in 2010.
But on Friday, Judge Posner, joined by judges Diane Wood and David Hamilton, reversed Gettleman and sent the case back down for further proceedings.
Interestingly, the court relied in part on a landmark opinion handed down by the U.S. Supreme Court last year called Wal-Mart Stores Inc. v. Dukes. In Wal-Mart, the Court denied class certification for a group of female Wal-Mart workers who alleged discrimination against the retailer.
The Supreme Court based its ruling in part on a finding that Wal-Mart did not have a single allegedly discriminatory policy that could be challenged in a class action. Rather, held the court, the discrimination that allegedly affected thousands of women came at the hands of individual managers, who each had wide discretion over hiring and firing and promotions.
In contrast, wrote Judge Posner, the practices challenged at Merrill were, in fact, “practices of Merrill Lynch, rather than practices that local managers can choose or not at their whim.” Therefore, ruled Judge Posner, the case was distinguishable and allowed to move forward.
“We disagree with the ruling and we are still evaluating the decision but believe that the ruling does not fundamentally change our views that the allegations lack merit,” Shirley Norton, a spokeswoman for Bank of America, said in an e-mail to the Law Blog. “Diversity and inclusion are part of Bank of America and Merrill Lynch’s culture and core values.”