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McReynolds v. Lynch

August 5, 2010

GEORGE MCREYNOLDS, MAROC HOWARD, LARUE GIBSON, JENNIFER MADRID, FRANKIE ROSS, MARVA YORK, LESLIE BROWNE, HENRY WILSON, LEROY BROWN, GLENN CAPEL, CHRISTINA COLEMAN, J. YVES LABORDE, MARSHELL MILLER, CARNELL MOORE, MARK JOHNSON, CATHY BENDER-JACKSON, AND STEPHEN SMARTT, INDIVIDUALLY ON BEHALF OF THEMSELVES AND ALL OTHERS SIMILARLY SITUATED, PLAINTIFFS,
v.
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED, DEFENDANT.



The opinion of the court was delivered by: Judge Robert W. Gettleman

MEMORANDUM OPINION AND ORDER

Plaintiffs George McReynolds, Maroc Howard, Larue Gibson, Jennifer Madrid, Frankie Ross, Marva York, Leslie Browne, Henry Wilson, Leroy Brown, Glenn Capel, Christina Coleman, J. Yves Laborde, Marshell Miller, Carnell Moore, Mark Johnson, Cathy Bender-Jackson, and Stephen Smartt, individually and on behalf of all others similarly situated, have brought a two count second amended putative class action complaint against defendant Merrill Lynch, Pierce, Fenner & Smith, Inc., alleging racial discrimination in violation of Title VII of the Civil Rights Act of 1964 as amended, 42 U.S.C. § 2000(e) et seq. (Count I), and 42 U.S.C. § 1981 (Count II). Plaintiffs have moved pursuant to Fed. R. Civ. P. 23 to certify a class, defined as:

African-American financial advisors ("FAs") and FA Trainees ("Trainees") who are or were employed in the retail brokerage unit, referred to as Global Private Client ("GPC") of defendant Merrill Lynch, Pierce, Fenner & Smith, Inc., from January 2001 to the present.

The parties have engaged in lengthy and often contentious discovery proceedings including both factual and expert discovery. Not surprisingly, this has resulted in overly lengthy briefs with countless unnecessary citations and footnotes.*fn1 For the reasons discussed below, the motion is denied.

FACTS

Defendant is the largest provider of brokerage and brokerage related services in the United States. It employs over approximately 15,000 FAs to aid clients in identifying and reaching their financial goals. The company employs 135 Complex Directors ("Directors") each of whom manages the operation of a number of branch offices within his or her complex. There are over 600 branch offices within the 135 complexes, employing the approximate 15,000 FAs. The Directors report to 30 Regional Managing Directors, most of whom are also Directors themselves, and who in turn report to 5 Divisional Managing Directors ("DMDs"). The five DMDs report to a Senior Vice-President ("SVP") for the Advisory Division, who reports to the President of defendant's Global Wealth Management ("GWM") business.

Each Director manages his or her complex as a stand alone business. The Directors monitor profits and losses of their complexes and make individualized employment decisions regarding FAs, constrained only by national policies. Each FA basically operates his or her own business within a business. Each FA is responsible for building a book of business by soliciting clients in the community, although some accounts are distributed by management. Each FA is paid based on an objective grid. Compensation is increased based on increased production. In addition, defendant's compensation plan pays different rates based on the size of the customer's "household," which is not a single client but includes all related individuals. For example, the adult children of a client are grouped in a "household" even if they do not live under one roof or have joint investment accounts. Since 2001 FAs received compensation for accounts under $100,000 only if those accounts belong to a "household" with wealth in excess of $100,000.

As each FA reaches increased length of service levels ("LOS"), the FA must meet certain production hurdles or else earn a lower rate of payout. This requirement is referred to as the "penalty box." Once in the penalty box the FA remains in until he or she meets certain minimum production or revenue requirements. Thus, the longer an FA is employed at defendant, the more business that FA is expected to generate.

DISCUSSION

"The class-action device was designed as `an exception to the usual rule that litigation is conducted by and on behalf of the individual named parties only.'" General Telephone Co. of Southwest v. Falcon, 457 U.S. 147, 155 (1982) (quoting Califano v. Yamasaki, 442 U.S. 682, 700-01 (1979)). Class relief is particularly appropriate when the issues involved are common to the class as a whole and when the issues turn on questions of law applicable in the same manner to each member of the class. Id. The court has broad discretion in determining whether to certify a class, and the proponent bears the burden of showing that certification is warranted. Sandoval v. City of Chicago, 2007 WL 3087136 (N.D. Ill. 2007).

Fed. R. Civ. P. 23, which governs class actions, requires a two step analysis to determine whether class certification is appropriate. First, plaintiffs must satisfy all four requirements of Rule 23(a): (1) numerosity; (2) commonality; (3) typicality; and (4) adequacy of representation. Martinez v. Haleas, 2009 WL 2916852 at *2 (N.D. Ill. 2009); Harriston v. Chicago Tribune Co., 992 F.2d 697, 703 (7th Cir. 1993). These requirements are prerequisites to certification, and failure to meet any one of them precludes certification of the class. Parker v. Risk Management Alternatives, Inc., 206 F.R.D. 211, 212 (N.D. Ill. 2002). Additionally, plaintiffs must satisfy one of the conditions of Fed. R. Civ. P. 23(b).

When evaluating whether a party has met its burden of proving that a class should be certified, the court should not consider the merits of the underlying claim, Eisen v. Carlisle and Jacqueline, 417 U.S. 156, 166 (1974), but may "probe behind the pleadings" to determine whether the named plaintiffs' claims fairly encompass those of the class they seek to represent. Falcon, 457 U.S. at 160; Szabo v. Bridgeport Machines, Inc., 249 F.3d 672, 673 (7th Cir. 2001). Where factual and legal questions that "would strongly influence the wisdom of class treatment" are disputed, the court will not merely accept plaintiffs' assertions as true, but will require some evidence before making a decision. Szabo, 249 F.3d at 675-76. That decision, may, at times, require inquiry into any preliminary resolution of disputed issues of fact, even if those same factual issues are also relevant to the merits of the case. Id.

Rule 23(a) Requirements

1. Numerosity

Under Rule 23(a)(1), plaintiffs must show that the class is so numerous that joinder of all members is impracticable. The exact number of class members need not be pleaded or proved, but impracticability of joinder must be positively shown and cannot be speculative. Parker, 206 F.R.D. at 212. Plaintiffs define the proposed class as African-American FAs and FA Trainees who are or were employed in a retail brokerage unit referred to as Global Private Client, from January 1, 2001 to the present. In a footnote, plaintiffs indicate that the class includes brokers, broker trainees and persons hired with intent to enter defendant's broker training program, even if they never received a broker production number, persons who had production numbers but also performed managerial duties, including sales or producing ...


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