Class Action Lawsuits Maybe Not so Dead After Wal-Mart Decision

March 8, 2012 - 4 minute read

While many legal analysts have predicted the “death of class actions” because of the United States Supreme Court decisions in Wal-Mart Stores Inc. v. Dukes, the class action and contracts litigation firm, Rodney & Etter, LLC, believes the recent decision in a discrimination lawsuit brought by 700 African-American stock brokers against Merrill Lynch offers hope to anti-discrimination advocates.

As reported in the Wall Street Journal on Feb 24, 2011, the Merrill Lynch lawsuit was allowed to go forward, 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. “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 the practices weren’t necessarily discriminatory on their face.

A lower-court judge, Robert Gettleman, denied class-action status for the case in 2010.  But on Friday February 24, 2011, Judge Posner, joined by Judges Diane Wood and David Hamilton, reversed Judge Gettleman and sent the case back down for further proceedings.  Judge Posner is a recognized and widely published scholar of the “Chicago School”, and a founder of the law and economics approach to judging.  Judge Posner’s opinions are widely viewed as business oriented.

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 as a class action.

“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 (which purchased Merrill Lynch in 2009), said in an e-mail. “Diversity and inclusion are part of Bank of America and Merrill Lynch’s culture and core values.”

 

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