Used with permission from Microsoft.

On February 24, 2012, the Court of Appeals for the Seventh Circuit reversed a district court ruling denying class-action certification in an employment discrimination suit against brokerage firm Merrill Lynch. See McReynolds v. Merrill Lynch, Pierce, Fenner, & Smith. Case No. 11-3639, 2012 WL 592745 (7th Cir. Feb. 24, 2012). In doing so, Judge Posner distinguished the firm’s employment practices from those at issue in Wal-Mart v. Dukes. 131 S. Ct. 2541 (2011).

The plaintiffs represent a class of roughly 700 former and current employees who worked as brokers in Merrill Lynch’s branch offices. Plaintiffs claimed that two of Merrill Lynch’s management policies worked to discriminate against black employees in violation of Title VII of the Civil Rights Act of 1964. The first allowed brokers to choose to work on teams and to select their own team members. The second was to distribute accounts to brokers based on past performance, including team performance.

Although managers did not select teams, managers could veto the teams and rely on their performance in evaluating employees. Plaintiffs argued the policies had a disparate negative impact because, taken together, the policies caused black brokers to be excluded from certain business opportunities and to receive lower compensation.

The District Court for the Northern District of Illinois, Eastern Division, denied class certification in August 2010. The plaintiffs filed an amended motion for class certification in July 2011, following the Supreme Court’s decision in Dukes. The district court judge again denied certification. However, he opined that while Dukes was presumed to benefit the defendants, an appeal would help clarify how Dukes should apply to policies at issue in the case. See McReynolds 2012 WL 592745, at 11–12.

After the plaintiffs filed for leave to appeal, Merrill Lynch argued that the Circuit Court should refuse to hear the case because Rule 23(f) requires plaintiffs to file for leave within 14 days of a District Court’s ruling. Merrill Lynch argued that the plaintiffs forfeited their right to an appeal by not filing in August 2010, when the court first rejected class certification. However, the Circuit Court found that it retained jurisdiction over the matter and that it could not hold that “the failure to take a timely appeal from one interlocutory order operates as a forfeiture … of the right to appeal a subsequent order.” Id. at 7.

The Court then turned its attention to whether Dukes barred class-certification. The Supreme Court held in Dukes that discrimination by local managers would not “present a common issue that could be resolved efficiently in a single proceeding” in the absence of a company-wide policy. Id at 12. Merrill Lynch argued that Dukes was controlling in this case because “any discrimination here would result from local, highly-individualized implementation of policies rather than the policies themselves.” Id. at 17.

However, Judge Posner wrote that Merrill Lynch’s interpretation offered “too stark a dichotomy” and that the alleged impact was attributed to company-wide policies. While noting that Merrill Lynch’s policies may not be racially discriminatory, Judge Posner emphasized that the question “is whether the plaintiffs’ claim of disparate impact is most efficiently determined on a class-wide basis rather than in 700 individual lawsuits.” Id. at 18. While each plaintiff must “prove that his compensation had been adversely affected” it is not necessary to determine in each case “whether the challenged practices were unlawful” under Title VII. Id. 18–19.

Nicholas Turner is a third year law student at New York Law School. He is a Notes & Comments editor of Law Review and a John Marshall Harlan Scholar. Mr. Turner came in second in the 2011 ABA Torts, Insurance, and Compensation Law Section Writing contest. He was a 2011 Review Editor of the school’s Global Human Rights Bulletin. Mr. Turner is proficient in French.

Abbey Spanier, LLP, located in New York City, is a well-recognized national class action and complex litigation law firm