Brokerage firm Merrill Lynch has agreed to pay $160 million to settle a class-action race discrimination lawsuit brought by a longtime U.S. employee, an attorney for the plaintiffs confirmed on Wednesday.
More than 1,200 current and former Merrill Lynch employees could be eligible to take part in the settlement, one of the largest sums obtained from an employer in a race bias lawsuit.
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Since the lawsuit was filed in 2005, Merrill Lynch was acquired by Bank of America Corp , where it is now the bank's wealth management unit.
Preliminary settlement terms will be presented to a federal judge at a hearing on September 3, said Suzanne Bish, one of the Stowell & Friedman attorneys representing the workers.
"We are working toward a very positive resolution of a lawsuit filed in 2005 and enhancing opportunities for African American financial advisers," Bank of America spokesman Bill Halldin said, declining to comment further on the status or specifics of the case.
Lead plaintiff George McReynolds, a black broker who has worked for Merrill Lynch for 30 years, sued his employer, saying it had a segregated workforce, including policies that steered black brokers into clerical positions and reassigned their accounts to white workers.
At the time McReynolds filed the lawsuit, 2 percent of the brokers at Merrill Lynch were black, despite a 30-year-old consent decree it had signed with the U.S. Equal Employment Opportunity Commission that required the brokerage to increase its proportion of black brokers to 6.5 percent.
Though the Nashville, Tennessee office where McReynolds worked had grown to employ 65 to 70 brokers, there were never more than three black brokers at any time, the lawsuit stated.
Office mangers resisted McReynolds' attempts to recruit and retain diverse candidates and forced him into a partnership with a "white rookie" that was "highly detrimental" to his career, McReynolds reported.
McReynolds suffered a series of early setbacks in bringing the lawsuit. The federal judge in Chicago handling the case denied a motion to certify it as a class action, a ruling that was affirmed by the 7th U.S. Circuit Court of Appeals and the U.S. Supreme Court. The Stowell & Friedman attorneys representing McReynolds tried again after the high court's 2011 ruling in Wal-Mart Stores Inc v. Betty Dukes, et al.
Though the justices in that case said the Wal-Mart workers bringing a gender discrimination lawsuit against the retailer could not move forward as a class, Stowell & Friedman's Bish said she and her partners saw an opportunity to differentiate the Merrill Lynch matter.
"Factually, our case was much different," Bish said. "We read the Wal-Mart decision and our legal team said, 'Hey, we have to go back to the court.'"
Seventh Circuit Judge Richard Posner agreed, citing Wal-Mart v. Dukes in his decision to certify a class of current and former Merrill Lynch brokers. The Supreme Court declined to hear the brokerage's appeal of that decision, leaving Posner's determination intact.
Bish credited the "tenacity" of McReynolds and other plaintiffs in arriving at the proposed settlement. She said they would work with Merrill Lynch to improve the advancement opportunities available to minority brokers.
"Giving class representatives a seat at the table is rather unheard of, and we are hopeful it will make all the difference and credit Merrill Lynch for taking that bold step," Bish said.
Stowell & Friedman previously negotiated the 1998 settlement of a class-action gender discrimination lawsuit against Merrill Lynch that resulted in class-wide diversity initiatives at the brokerage. It also ended the brokerage's policy of mandatory arbitration for civil rights claims brought by employees.
More than $250 million has been paid out to date to current and former female brokers who were eligible to participate in the settlement, according to the firm's website.
The case is McReynolds v. Merrill Lynch & Co Inc, U.S. District Court Northern District of Illinois, No. 1:05-cv-06583.
(Additional reporting by Ashley Lau and Suzanne Barlyn in New York; Editing by Kevin Drawbaugh and Leslie Gevirtz)