McReynolds v. Merrill Lynch, Pierce, Fenner & Smith

672 F.3d 482 (2012)

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McReynolds v. Merrill Lynch, Pierce, Fenner & Smith

United States Court of Appeals for the Seventh Circuit
672 F.3d 482 (2012)

Facts

George McReynolds (plaintiff) filed a proposed class action against Merrill Lynch, Pierce, Fenner & Smith, Inc. (Merrill Lynch) (defendant), alleging that Merrill Lynch had two company-wide policies that had a disparate discriminatory impact on Black brokers: a teaming policy and an account-distribution policy. Under the teaming policy, Merrill Lynch allowed brokers to form their own teams to pool clients and revenue. McReynolds alleged that brokers on teams had an edge in obtaining revenue and that White brokers intentionally or unintentionally tended to choose other White brokers as teammates, causing a disparate discriminatory impact on the performance of Black brokers who were not invited to join a team. Under the account-distribution policy, if a broker left the company, Merrill Lynch distributed that broker’s accounts to brokers or teams in the same office based on performance criteria. According to the proposed class action, using performance criteria compounded the negative impact of the teaming policy to further inhibit Black brokers’ ability to compete, perform well, and receive higher compensation. Both policies were corporate policies that applied to the entire company, although lower-level managers were allowed to veto team choices and to add criteria to the account-distribution formula. McReynolds filed a motion to certify a class of 700 Black brokers solely on the issue of whether Merrill Lynch’s two company-wide policies had a disparate discriminatory impact. The proposed class was seeking only injunctive relief. The district court denied the certification motion, finding that (1) generally, Merrill Lynch delegated decisions about broker compensation to local or regional managers and (2) an employment-discrimination class was likely unmanageable and should not be certified if local managers committed the alleged discrimination. McReynolds appealed the certification denial to the Seventh Circuit.

Rule of Law

Issue

Holding and Reasoning (Posner, J.)

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