BofA Settles Black Advisers’ Bias Suit for $160 MillionJoel Rosenblatt and Hugh Son
Bank of America Corp.’s Merrill Lynch unit agreed to pay $160 million to settle a discrimination lawsuit filed by black financial advisers, a lawyer for the plaintiffs said.
The case, filed in 2005, was brought on behalf of one employee and grew to as many as 1,200 class representatives who “persevered through some long odds in this case,” said Suzanne Bish, a lawyer for the plaintiffs.
The agreement is scheduled to be considered by a federal judge in Chicago on Sept. 3, Bish said yesterday in a phone interview.
“We are working toward a very positive resolution of a lawsuit filed in 2005 and enhancing opportunities for African-American financial advisers,” Bill Halldin, a Bank of America spokesman, said in an e-mail.
Bank of America, the second-biggest U.S. lender by assets, acquired Merrill for $33 billion in 2009. The Charlotte, North Carolina-based bank plans to dissolve the unit as early as the fourth quarter while keeping the Merrill Lynch brand for its retail brokerage and investment bank, according to an Aug. 2 filing.
Merrill Lynch had about 14,000 financial advisers as of June 30, excluding those working at bank branches. Bank of America’s entire staff was 257,158.
The largest previous race-bias settlements were $192.5 million by Coca-Cola Co. in 2001 and $176 million by Texaco Inc. in 1997, according to data complied by Bloomberg News. The value of both those settlements included non-cash consideration.
The lead plaintiff, George McReynolds of Nashville, Tennessee, still works for Merrill Lynch, Bish said. McReynolds and the firm maintained a professional attitude throughout the litigation based on a common “passion for their clients,” she said.
The central claim of the suit was that blacks weren’t given the same business opportunities as whites in participating on investment teams and in account distribution, Bish said. The formation of adviser teams is one of Merrill’s most important business strategies, she said, and black advisers were segregated and excluded from the teams and the benefits and business resources they afforded, she said.
U.S. District Robert Gettleman in Chicago rejected the case as a class action three times before a federal appeals court approved it. Bish said the black advisers won class certification based on a 2011 U.S. Supreme Court ruling that women suing Wal-Mart Stores Inc. for gender bias on behalf of 1.5 million co-workers failed to prove the company had a nationwide policy that led to gender discrimination.
The advisers’ suit was based on claims that the discrimination was due to “very centralized control by Merrill Lynch,” Bish said. Any individual claims permitted to advance would have to be tried repeatedly in federal courts across the U.S., arguing for class certification, she said.
After the February 2012 appeals court ruling, Gettleman issued an order certifying the class of “all African-Americans employed by Merrill Lynch at any time since July 10, 2004, as financial advisers or financial adviser trainees” in the U.S. retail brokerage unit of the firm’s global private client division.
The New York Times reported the settlement earlier.
“Their goal in filing this was to try to make Wall Street a friendlier place where their kids would have the same opportunities to do this job that they love so much,” Bish said. “Our clients are going to help Merrill and help Wall Street be a more open place for everyone.”
The cases are McReynolds v. Merrill Lynch, 11-01957, U.S. Court of Appeals for the Seventh Circuit (Chicago), and McReynolds v. Merrill Lynch Pierce Fenner & Smith Inc., 05-cv-06583, U.S. District Court, Northern District of Illinois (Chicago).