Goodman v. Merrill Lynch & Co. Inc.

• Court: U.S. District Court — Southern District of New York
• Writing for the Court: SHIRA A. SCHEINDLIN, District Judge:
• Citation: Goodman v. Merrill Lynch & Co., 716 F.Supp.2d 253 (S.D. N.Y. 2010)
• Decision Date: 06 April 2010
• Docket Number: No. 09 Civ. 5841(SAS).,09 Civ. 5841(SAS).
• Parties: Jaime GOODMAN, Plaintiff, v. MERRILL LYNCH & CO., INC., Merrill Lynch, Pierce, Fenner & Smith and Bank of America Corp., Defendants.

716 F.Supp.2d 253

Jaime GOODMAN, Plaintiff,

v.MERRILL LYNCH & CO., INC., Merrill Lynch, Pierce, Fenner & Smith and Bank of America Corp., Defendants.

No. 09 Civ. 5841(SAS).

United States District Court,S.D. New York.

April 6, 2010.

Shona B. Glink, Esq., Meites, Mulder, Mollica & Glink, Linda D. Friedman, Esq., George S. Robot, Esq., Suzanne E. Bish, Esq., Jennifer S. Gilbert, Esq., Patricia A. Bronte, Esq., Stowell & Friedman, Ltd., Chicago, IL, for Plaintiff.

Carole G. Miller, Esq., Jeffrey A. Lee, Esq., Audrey Y. Dupont, Esq., Maynard, Cooper & Gale, P.C., Birmingham, AL, Allan Dinkoff, Esq., Jeffrey S. Klein, Esq., Weil, Gotshal & Manges LLP, New York, NY, for Defendants.

OPINION AND ORDER

SHIRA A. SCHEINDLIN, District Judge:

I. INTRODUCTION

Jaime Goodman brings this action against Merrill Lynch & Co., Inc., Merrill Lynch, Pierce, Fenner & Smith, and Bank of America Corporation (collectively “defendants”), claiming gender discrimination and retaliation in violation of Title VII of the Civil Rights Act of 1964 (“Title VII”), the Equal Pay Act (“EPA”), the New York State Human Rights Law (“NYSHRL”), and the New York City Human Rights Law (“NYCHRL”). Defendants move for partial judgment on the pleadings pursuant to Rule 12(c) of the Federal Rules of Civil Procedure. Specifically, defendants seek judgment on the pleadings as to all of Goodman's claims relating to defendants' Advisor Transition Program (“ATP”), asserting that the ATP is a production-based payment program of the type expressly sanctioned by section 703(h) of Title VII (“section 703(h)”). For the reasons that follow, plaintiff's claims related to the ATP are dismissed with leave to replead.

II. BACKGROUND ¹ A. In General

Jaime Goodman is currently a Financial Advisor (“FA”) at Merrill Lynch, where she has been employed since August 1992. ² Throughout her employment, Merrill Lynch has compensated and distributed resources and business opportunities to its FA's based on a “ ‘quintile system’ that measures and ranks and segregates brokers based on ‘production’ ” and “length of service.” ³ Production is measured in “production credits,” which are essentially “commissions earned on client assets managed by [each] FA.” ⁴ Pursuant to the quintile system, FA's with the highest twenty percent of production are in the top quintile, FA's with the lowest twenty percent of production are in the bottom quintile, and the remaining FA's are ranked in the three middle quintiles. ⁵ Based on this system, Merrill Lynch determines eligibility for, inter alia, titles, offices, sales assistance, distribution of accounts of departing brokers, walk-ins, leads, and referrals. ⁶ Under this system, “success breeds success,” and favorable treatment garners additional production credits which in turn lead to even more favorable treatment and more production credits. ⁷

Female FA's in general are underrepresented in the top quintiles of production and overrepresented in the bottom quintiles of production. ⁸ Nonetheless, Goodman herself has consistently scored in the top quintiles. ⁹ However, Goodman's production score is still “considerably lower” than it would be absent Merrill Lynch's historic and ongoing “nationwide pattern and practice” of “systematic and pervasive sex discrimination,” and she claims to have suffered “substantial compensation losses” as a result. ¹⁰

B. Historic and Ongoing Discrimination

Goodman identifies a long history of systematic discrimination against women by Merrill Lynch. ¹¹ In 1974, the Equal Opportunity Employment Commission sued Merrill Lynch over its alleged refusal to hire women and minorities as FA's. ¹² In resolution of the lawsuit, Merrill Lynch agreed to the entry of a Consent Decree (“O'Bannon Consent Decree”) requiring it to increase the number of women as an overall percentage of its FA's to twenty-five percent. ¹³ Goodman alleges that Merrill Lynch has never fulfilled the requirements of the O'Bannon Consent Decree. ¹⁴

In 1996, a class of female FA's sued Merrill Lynch for “systematic sex discrimination.” ¹⁵ Under a court approved settlement, an alternative dispute resolution process-the Claim Resolution Process (“Cremin CRP”)-was established for class members to pursue their individual and class claims. ¹⁶ Every Cremin CRP arbitration panel has found that Merrill Lynch had engaged in a “pattern and practice of sex discrimination against female FA's.” ¹⁷ As recently as 2004, an arbitration panel awarded a class member over two million dollars in damages, including punitive damages. ¹⁸ In reaching this award, the panel held:

Having considered the class-wide statistical evidence ... the Panel finds that the disparate earnings of females and males were the result of Merrill's discriminatory practices including, but not limited to an unequal distribution of accounts to female [FA's] ... and a male-dominated organizational structure at Merrill which created an environment in which managerial discretion was influenced by gender stereotypes adversely

affecting female [FA'S] .... ¹⁹

Beginning in the mid-1990's, Merrill Lynch developed a system of “partnership models” for its FA's that were designed to “manipulate the account distribution policy to the benefit of male [FA's] and to the detriment of female [FA's].” ²⁰ Unlike partnerships solely between male FA's, coed partnerships had “inequitable terms,” were not formed “using standardized Merrill Lynch ‘team’ policies,” and were not “formalized in writing.” ²¹ When partnerships involving women were dissolved, female FA's did not receive the same equitable distribution of accounts that their male counterparts received. ²²

In January 2003, Goodman joined the existing partnership of two male FA's, Robert Sabel and James Schwantner. ²³ At the time Goodman joined this partnership, Sabel's share of the partnership exceeded ninety percent based on the larger share of assets he had contributed as compared to Schwantner. ²⁴ When Goodman joined the partnership, she contributed assets equal in size to Sabel's contribution and assumed a partnership share equal to that of Sabel. ²⁵ However, when Sabel left the partnership in 2003, although Goodman's assets were three times the size of those held by Schwantner, Schwantner's share of the remaining partnership assets doubled to thirty percent. ²⁶ Merrill Lynch management and Schwantner then pressured Goodman into further increasing the size of Schwantner's share of the partnership to fifty percent. ²⁷

When the Goodman-Schwantner partnership finally dissolved in 2006 with the defection of Schwantner to a rival brokerage firm, Goodman's manager distributed Schwantner's remaining assets to the office at large despite official Merrill Lynch policy directing that the remaining assets should have been distributed to Goodman alone. ²⁸ When Goodman complained to Merrill Lynch management, she was “retaliated against and her performance and achievements [were] ignored.” ²⁹

Goodman alleges an ongoing “pattern and practice of gender discrimination” as well. ³⁰ Merrill Lynch “maintains companywide employment and compensation policies and practices that deny female FA's the same income-generating opportunities and resources as male FA's.” ³¹ Merrill Lynch's “gender-based hostile corporate culture and policies and practices” accomplish this by steering “business opportunities and resources” to male FA's and away from female FA's. ³² Merrill Lynch managers employ “various mechanisms” to “circumvent” corrective measures and funnel “productive assets and other income-generating opportunities to male [FA's], and away from female [FA's].” ³³ C. The ATP

On January 1, 2009, Bank of America acquired Merrill Lynch in a fifty-billion dollar all-stock transaction, and Merrill Lynch now operates as a subsidiary of Bank of America. ³⁴ As part of the acquisition, both companies announced that they would be paying retention awards under the ATP to Merrill Lynch FA's. ³⁵ Merrill Lynch executives explained in a companywide broadcast that the ATP retention awards would be based on “projections of FAs' future contributions or ‘production,’ in essence, future commissions earned on client assets managed by the FA.” ³⁶ Under the “formula” used by the ATP, FA's would receive retention awards based on “annualized production” through September 2008. ³⁷

Goodman alleges that Bank of America was well aware of Merrill Lynch's past and present discriminatory practices and the role they played in depressing female FAs' production scores, suggesting that Bank of America knew that the ATP would have a disparate impact on the retention of female FA's. ³⁸ Goodman further alleges that defendants “intentionally designed and implemented retention bonuses based largely on production that had a disparate impact on and intentionally discriminated against women.” ³⁹ “Defendants identified and selected for retention and higher compensation and knew that they were offering more generous retention packages to white men than women.” ⁴⁰ “Simply put, defendants intended to retain and more generously compensate white men rather than female FA's.” ⁴¹ Goodman alleges that “but for defendants' intentional gender discrimination,” she would have received a higher retention award under the ATP. ⁴²

III. APPLICABLE LAWA. Rule 12(c)

Under Rule 12(c), after the pleadings close, but before the trial begins, a party may move for judgment on the pleadings, provided that the motion is made early enough so as not to delay the trial. ⁴³ Judgment on the pleadings should be granted if it is clear from the pleadings that the moving party is entitled to judgment as a matter of law. ⁴⁴ In evaluating a motion for judgment on the pleadings, the court applies the same standard as that applicable to Rule 12(b)(6) motions to dismiss for failure to state a claim. ⁴⁵ As in the context of a motion to dismiss, the court “must accept as true all of the factual allegations contained in the complaint” ⁴⁶ and “draw all...