LEGAL NEWSLINE

CHICAGO (Legal Newsline) -- African-American brokers employed by Merrill Lynch can pursue racial discrimination claims in a class action.

The United States Court of Appeals for the Seventh Circuit, Chicago, on Feb. 24 reversed a District Court ruling, permitting the class action.

The plaintiffs say there were two companywide policies that are alleged to cause racial bias. One was the authorization of brokers instead of managers to form and staff teams. The other was distributing the established accounts of brokers who left Merrill Lynch on the past success of the brokers who are competing for these accounts. Such accounts are potentially more lucrative because they are established customers who will continue giving business to brokers rather than the brokers needing to locate and persuade a new customer to give them business.

Also, performance appraisals are a factor of team participation and account distribution. This influences the brokers' pay and promotion.

The plaintiffs argue that these company-wide policies exacerbate racial discrimination by brokers.

Judge Richard Posner writing for the three-judge panel said, "If the teaming policy causes racial discrimination and is not justified by business necessity, then it violates Title VII as "disparate impact" employment discrimination-and whether it causes racial discrimination and whether it nonetheless is justified by business necessity are issues common to the entire class and therefore appropriate for class-wide determination. And likewise with regard to account distributions: if as a result of racial preference at the team level black brokers employed by Merrill Lynch find it hard to join teams, or at least good teams, and as a result don't generate as much revenue or attract and retain as many clients as white brokers do, then they will not do well in the competition for account distributions either; and a kind of vicious cycle will set in."

These considerations convinced the judges to move forward with the litigation. As Judge Posner wrote, "We have trouble seeing the downside of the limited class action treatment that we think would be appropriate in this case, and we conclude that the district judge erred in deciding to the contrary (with evident misgivings, however). The denial of class certification under Rules 23(b)(2) and (c)(4) is therefore reversed."

Merrill Lynch was purchased by Bank of America in 2009. A spokeswoman for the company has been quoted commenting that the "allegations lack merit."

George McReynolds, an African-American Merrill Lynch broker from Nashville, originally filed the suit as lone action in 2005. He was quoted in the Wall Street Journal as saying, "I haven't seen any big change" on how African-American advisers are treated at Merrill."

The Charlotte-based Bank of America recently settled a large racial discrimination case that was filed against another acquisition Countrywide Financial. The company paid $335 million last December.

Bank of America announced in 2008 a one trillion dollar, 10-year, affordable housing program aimed at minority individuals and families across the country.