(Reuters) - Black brokers who accused Bank of America Corp’s Merrill Lynch unit of bias can pursue their lawsuit in a class action, a federal appeals court said, reversing a lower-court ruling.
The decision by the 7th U.S. Circuit Court of Appeals in Chicago came eight months after the U.S. Supreme Court, in a case involving Wal-Mart Stores Inc, made it significantly harder to pursue class-action cases.
Writing for a three-judge panel of the 7th Circuit, Judge Richard Posner said that “we have trouble seeing the downside” of letting roughly 700 current and former brokers collectively sue Merrill over alleged discrimination that kept their pay down and impeded their career growth.
The lawsuit accused the brokerage of steering blacks into clerical positions, diverting lucrative accounts to white brokers and creating a hostile work environment.
While recognizing that individual managers’ discretion played a big role in career development — a key reason the Wal-Mart class was struck down — Posner said common issues made it more efficient to handle the brokers’ cases as a group.
“There is no indication that the corporate level of Merrill Lynch (or its parent, Bank of America) wants to discriminate against black brokers. Probably it just wants to maximize profits,” Posner wrote. “But in a disparate impact case the presence or absence of discriminatory intent is irrelevant.”
Class-action cases can result in higher recoveries and lower costs than when plaintiffs sue individually. The Merrill case now returns to the federal district court in Chicago.
“I’m tickled to death the Court of Appeals agreed with us, and that we’ll be able to go to trial,” said George McReynolds, a 28-year Merrill veteran in Nashville, Tennessee, who brought the lawsuit in 2005, in a phone interview.
Bank of America bought Merrill on January 1, 2009, and is the second-largest U.S. bank by assets.
Spokeswoman Shirley Norton said the Charlotte, North Carolina-based lender disagrees with the ruling, and still believes the case lacks merit. She also said Bank of America has “progressive workplace practices,” and diversity and inclusion are part of its culture and core values.
In the Wal-Mart case, Wal-Mart Stores Inc v. Dukes, a divided Supreme Court threw out a class-action lawsuit on behalf of as many as 1.5 million female workers who claimed the retailer gave them lower pay and fewer promotions than men.
It found that the proposed class raised too many different claims, often based on decisions at the local store level.
The Merrill case was brought on behalf of brokers and trainees who had worked in the Global Private Client unit since January 1, 2001.
“We’re thrilled,” Linda Friedman, a partner at Stowell & Friedman representing the brokers, said in an interview.
“It is a wonderful victory for the plaintiffs who have for more than a decade zealously worked to bring change to Merrill and Wall Street,” she continued. “The Seventh Circuit recognized there is utility to class treatment where the challenge is to the policy and the relief sought is reforms.”
McReynolds, 67, said more reform is needed at Merrill.
“I think people from above are directing the managers, and managers are just doing things the way they are directed to do,” he said. “I’m confident that things can get better ... It’s going to take a little bit of a culture change.”
The brokers’ case is McReynolds et al v. Merrill Lynch, Pierce, Fenner & Smith Inc, 7th U.S. Circuit Court of Appeals, No. 11-3639.
Reporting By Jonathan Stempel in New York; Editing by Gerald E. McCormick and John Wallace