How African-American Brokers At Merrill Lynch Won A Massive Discrimination Settlement

Merrill lynch stanley stan o'nealAP ImagesFormer Merrill Lynch CEO Stan O’Neal

Bloomberg Businessweek has a
new behind-the-scenes lookat a huge Merrill Lynch racial discrimination lawsuit brought by black brokers that ended with a $US160 million settlement.

“The Man Who Took On Merrill” by Karen Weise reveals the litigation strategy that convinced the Seventh Circuit Court of Appeals to issue the landmark ruling finding that the case brought by a broker named George McReynolds could move forward as a class action.

This decision was crucial to getting Merrill to settle, since a class-action lawsuit representing 1,200 plaintiffs is much more high-stakes than a case filed on behalf of a single plaintiff. The class action alleged Merrill prevented black brokers from succeeding by giving them less assistance earlier on in their careers than whites and by socially ostracizing them.

The Seventh Circuit’s decision to let McReynolds’ case move forward as a class action actually came after the U.S. Supreme Court made it more difficult to bring employee class actions.

So, how did McReynolds’ lawyers convince the Seventh Circuit to let their class action move forward? Here was plaintiffs’ lawyer Linda Friedman’s strategy, from the Bloomberg Businessweek story.

Friedman drew on a trick she’d learned over years of working on civil rights cases. White people, even judges, sometimes seemed to understand gender discrimination better than racial bias, so she likened Merrill’s teaming policy [in which preexisting “teams” of brokers get to pick new members] to when police departments first allowed women into the force.

If departments allowed veteran officers to pick their own partners, the force would never have been integrated, she reasoned. This, Friedman argued, is what was happening to black brokers at Merrill. Judge Richard Posner, one of the leading conservative jurists in the country, pounced on the analogy, posing a series of additional questions. “Is it like a fraternity? They’re not picked?” he asked.

“When Judge Posner related it to a fraternity, we felt somebody finally got what we were trying to say,” McReynolds says. “It wasn’t clear that he would rule our way, but at least he understood our perspective.”

Judge Posner really seemed to buy that argument in his decision last year finding the case should be a class action.

“The teams, they say, are little fraternities (our term but their meaning), and as in fraternities the brokers choose as team members people who are like themselves,” he wrote. “If they are white, they, or some of them anyway, are more comfortable teaming with other white brokers.”

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