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Seventh Circuit permits class action race discrimination lawsuit against Merrill Lynch to go forward

Today, the Seventh Circuit Court of Appeals, reversing the decision of the trial court, held that a class of black stockbrokers who work, or used to work, for Merrill Lynch could continue to pursue their race discrimination case against Merrill Lynch as a class action. The black stockbrokers allege that Merrill Lynch’s policies and procedures (1) for assigning stockbrokers to teams and (2) for distributing the accounts of stockbrokers who leave Merrill Lynch both have an unlawful disparate impact on them in violation of Title VII of the Civil Rights Act (“Title VII”). The Seventh Circuit held that Merrill Lynch’s policy of allowing stockbrokers, instead of supervisors, to select who to include on their teams could violate Title VII if the policy disadvantages the black stockbrokers at a statistically significant rate and the policy is not justified by “business necessity.” Likewise, it held that Merrill Lynch’s policy and procedure for assigning stockbrokers to teams could adversely affect black stockbrokers’ chances of receiving the accounts of stockbrokers who leave the firm.

The Court noted that this is a “disparate impact” case, which means that the black stockbrokers do not have to prove that Merrill Lynch intentionally discriminated against them because of their race. Instead, they only have to prove that the policies and procedures they’ve challenged adversely affect them at a statistically significant rate. If they meet this burden of proof, they will prevail unless Merrill Lynch can prove that the challenged policies and procedures are justified by business necessity. The Court believed that these issues could be resolved in one case, by one court, on a class-wide basis.

The Court’s decision permits the black stockbrokers’ case to go forward as a class action. Thus, if Merrill Lynch does not now settle the case with the black stockbrokers, the trial court will determine if the challenged policies and procedures adversely affected the black stockbrokers at a statistically significant rate and, if so, whether they are justified by business necessity.