Jaffe, et al v. Morgan Stanley DW, Inc., No. 3:2006cv03903 - Document 250 (N.D. Cal. 2008)
Court Description: ORDER GRANTING RECONSIDERATION OF COURT'S JULY 7, 2008 ORDER CONFIRMING FINAL CLASS CERTIFICATION AND GRANTING FINAL APPROVAL TO CLASS ACTION SETTLEMENT. Signed by Judge Thelton E. Henderson on 10/22/08. (Attachments: # 1 Exhibit Revised Settlement Agreement, # 2 Exhibit Exhibits to Revised Settlement Agreement)(tehlc4, COURT STAFF) (Filed on 10/22/2008)
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Jaffe, et al v. Morgan Stanley DW, Inc. Doc. 250 1 IN THE UNITED STATES DISTRICT COURT 2 FOR THE NORTHERN DISTRICT OF CALIFORNIA 3 4 5 NO. C 06-3903 TEH MARGARET BENAY CURTISBAUER, et al., 6 Plaintiffs, 7 v. 8 MORGAN STANLEY & CO., INC., 9 Defendant. ORDER GRANTING RECONSIDERATION OF COURT’S JULY 7, 2008 ORDER, CONFIRMING FINAL CLASS CERTIFICATION, AND GRANTING FINAL APPROVAL TO CLASS ACTION SETTLEMENT 11 For the Northern District of California United States District Court 10 12 Plaintiffs move for reconsideration of this Court’s July 7, 2008 Order, which declined 13 to grant final approval to the parties’ settlement and instead referred this matter to a 14 15 Magistrate Judge for an evidentiary hearing. For the reasons set out below, the Court grants 16 reconsideration, withdraws its July 7, 2008 Order, and grants final class certification and 17 approval of the settlement. 18 19 20 The relevant factual and procedural background are by now familiar. This action was 21 22 originally filed in June of 2006 as a Title VII gender discrimination class action against 23 Morgan Stanley. A competing gender class action, Augst-Johnson v. Morgan Stanley DW, 24 Inc., Case No. 06-C-01142 RWR, was filed in the United States District Court for the District 25 26 of Columbia on the same day. In October, 2006, the Plaintiffs amended the Complaint, 27 28 Dockets.Justia.com 1 adding named plaintiff Denise Williams, an African-American financial advisor at Morgan 2 Stanley who also asserted individual race claims. 3 In January, 2007, this Court stayed this action pending resolution of Augst-Johnson. 4 5 In February, 2007, the Augst-Johnson parties announced they had reached a settlement, 6 which the court preliminarily approved in July, 2007. 7 In the interim, the Plaintiffs had informed Morgan Stanley of their intent to add class 8 9 race discrimination claims to this action. The parties began negotiating a possible settlement 11 For the Northern District of California United States District Court 10 of race claims. On July 23, 2007, the parties reached agreement in principle on settlement. 12 On August 2, 2007, the Parties sought to file a Second Amended Complaint, adding Margaret 13 Benay Curtis-Bauer as a named plaintiff and asserting class discrimination claims on behalf 14 15 of a “minority” class of African-American and Latino current and former financial advisors 16 (“FAs”) and financial advisor trainees at Morgan Stanley. They simultaneously announced 17 settlement of those claims. 18 In October, 2007, the Parties sought provisional class certification and preliminary 19 20 approval of the settlement. The Court was aware that Ms. Williams was dissatisfied with the 21 settlement and planned to opt out, but found that Ms. Curtis-Bauer adequately represented 22 23 the plaintiffs, even though she had become involved late in the settlement process. Order 24 Preliminarily Approving Class Action Settlement, filed February 7, 2008 (“2/7/08 Order”), at 25 26 5-9. 27 28 2 1 Objectors opposed final approval of the settlement. They submitted, for the first time, 2 a declaration that Denise Williams, the sole African-American named Plaintiff in the suit 3 4 until August, 2007, had never been involved in advising class counsel on Plaintiffs’ class 5 race discrimination claims. Declaration of Denise Williams, Exh. A to Objector's Objections 6 to Approval of Proposed Class Settlement, filed April 28, 2008. As this Court observed, her 7 8 declaration suggested that 9 11 For the Northern District of California United States District Court 10 12 13 14 15 16 17 she had no opportunity to offer her “opinions and experiences” in negotiating settlement of the race claims. Id. ¶ 10. She was never “invited to attend any mediation sessions or allowed to participate in the negotiations of the class settlement,” id. ¶ 5, even though Plaintiffs’ counsel were negotiating a settlement of race claims with Morgan Stanley from March, 2007 until they reached settlement in July, 2007. At the time the settlement was announced to the Court on August 2, 2007, she was unaware of its terms, and was “furious” when she learned the details of the settlement. Id. ¶¶ 6-7. She received the settlement documents only in October, 2007. Id. ¶ 9. She says she was pressured to serve as a class representative. Id. ¶ 12. She rejected the settlement because she believed “the monetary relief was insufficient and that there was not any chance that the programs would fix the problems facing African-Americans at Morgan Stanley.” ¶ 11. 18 Order of Reference, filed July 7, 2008, at 3. 19 20 The allegation that no named plaintiff had been involved in reaching the settlement 21 raised serious due process and representation concerns for the Court. Noting that there are 22 limits to what actions and decisions class counsel can undertake on behalf of the class 23 without involvement of a class member, the Court held that “there are some cases in which 24 25 having a class representative’s ‘personal knowledge of the factual circumstances, and aid in 26 rendering decisions’ at crucial stages of the litigation is necessary to endure due process and 27 28 adequate representation of absent class members.” Id. at 11:17-20 (citation omitted). The 3 1 Court went on to set out a non-exclusive list of factors relevant to whether due process and 2 representation requirements had been satisfied in a particular case, id. at 12, and referred the 3 4 case to a Magistrate Judge for an evidentiary hearing to explore whether, in light of those 5 factors, there had been sufficient involvement by an adequate representative. Id. at 12-13. 6 On reconsideration, the Court concludes its Order was ill-advised. The unfortunate 7 8 and likely unique procedural history of this case (such as simultaneous expansion of the 9 claims and settlement, and Ms. Curtis-Bauer’s late involvement) had already raised hard 11 For the Northern District of California United States District Court 10 questions extensively catalogued in this Court’s earlier Orders. Ms. Williams’ declaration 12 charged that fact-intensive employment discrimination class claims had been settled by 13 Plaintiffs’ attorneys alone -- before a class complaint had even been filed, let alone before a 14 15 class had been certified. The Court had to investigate whether the Objectors’ allegation was 16 true; as a practical matter, its factual exploration had to be guided by criteria for what could 17 constitute adequate representation. The Court was required to forge into largely uncharted 18 19 doctrinal territory to articulate standards relevant in this unique situation – where claims had 20 shifted, there had been successive named representatives, and there was no concern 21 whatsoever that the plaintiffs’ attorneys were sacrificing the interests of class members to 22 23 their own. 24 The Court’s analysis of what due process and representation requirements demand 25 26 has proved unnecessary, however. As set out more fully below, Plaintiffs have submitted 27 evidence for in camera review which assures the Court that Ms. Williams was involved 28 4 1 litigation and settlement process. Counsel spent many hours communicating with her. Her 2 involvement, and that of Ms. Curtis-Bauer, were adequate by any standard to satisfy 3 4 representation and due process requirements. 5 6 7 Under these circumstances, the Court chooses to withdraw its Order rather than make 8 law where none is needed. The Court’s Order of July 7, 2008 is hereby WITHDRAWN. 9 * * * 11 For the Northern District of California United States District Court 10 12 13 The Parties in this action have entered into a Settlement Agreement attached hereto as Exhibit 1.1 After the Court granted preliminary approval of the settlement and conditional 14 15 class certification, the Court ordered that notice of the settlement, its terms, and applicable 16 procedures be provided to class members. All class members were given an opportunity to 17 comment on the settlement at the final Fairness Hearing held on June 16, 2008. 18 19 The Court now grants final approval to the Settlement Agreement pursuant to Fed. R. 20 of Civil Procedure 23(e). 21 This Court must review the propriety of class certification under Fed. R. Civ. Pro. 22 23 23(a) and (b) in order to preliminarily approve a settlement under Fed. R. Civ. Pro. 23(e). 24 Staton v. Boeing Co., 327 F.3d 938, 952 (9th Cir. 2003). As set out in this Court’s February 25 26 27 7, 2008 Order preliminarily approving the settlement, the proposed classes satisfy the 1 This Settlement Agreement (“SA”) was revised during the pendency of the litigation and is 28 the one submitted to this Court on June 13, 2008. 5 1 numerosity, commonality, and typicality requirements of Rule 23(a)(1), (2), and (3), and are 2 appropriate for certification under Rules 23(b)(2) and (b)(3). See 2/7/08 Order at 4-5, 10-11. 3 4 The Court also finds that the representation requirement of Rule 23(a)(4) has been met here. 5 Margaret Benay Curtis-Bauer is an adequate representative. See 2/7/08 Order at 5-9. 6 Moreover, Plaintiffs presented abundant evidence for in camera review to refute Ms. 7 8 Williams’ allegation that she was not involved in the litigation or settlement. After 9 reviewing the declarations of Plaintiffs’ counsel, their time records, and other supporting 11 For the Northern District of California United States District Court 10 evidence, the Court is satisfied that Plaintiffs’ counsel interviewed Ms. Williams thoroughly 12 about her experiences at Morgan Stanley, gaining knowledge that informed their ability to 13 craft an appropriate settlement. The Court is also convinced that counsel discussed 14 15 settlement terms with Ms. Williams before even entering into settlement discussions. Ms. 16 Williams was kept informed of and consulted about the settlement process; even though the 17 parties contradict each other about her evolving reaction to the settlement terms. Even 18 19 though Ms. Williams ultimately rejected the settlement and her relationship with class 20 counsel broke down, the extent of her involvement was sufficient, particularly given the 21 subsequent review and approval of the settlement by Ms. Curtis-Bauer. 22 23 24 Fed.R.Civ.P. 23(e) also requires the district court to determine whether a proposed class action settlement is fundamentally fair, adequate, and reasonable. Staton, 327 F.3d at 25 26 959, citing Hanlon v. Chrysler Corp., 150 F.3d 1011, 1026 (9th Cir. 1998). In making this 27 determination, the court may consider any or all of the following factors, if applicable: 28 6 1 2 3 4 the strength of plaintiffs’ case; the risk, expense, complexity, and likely duration of further litigation; the risk of maintaining class action status throughout the trial; the amount offered in settlement; the extent of discovery completed, and the stage of the proceedings; the experience and views of counsel; the presence of a governmental participant; and the reaction of the class members to the proposed settlement. 5 Officers for Justice v. Civil Serv. Comm’n, 688 F.2d 615, 625 (9th Cir. 1982); National Rural 6 Telecommunications Cooperative v. DIRECTV, Inc., 221 F.R.D. 523, 525 (C.D.Cal. 2004), 7 8 citing Linney v. Cellular Alaska P’ship, 151 F.3d 1234, 1242 (9th Cir. 1998)(same). This list 9 is not intended to be exhaustive; the court must consider the applicable factors in the context 11 For the Northern District of California United States District Court 10 of the case at hand. See Officers for Justice, 688 F.2d at 625.2 In some cases, one factor 12 alone may prove determinative in finding sufficient grounds for court approval. See, e.g., 13 Torrisi v. Tucson Elec. Power Co., 8 F.3d 1370, 1376 (9th Cir. 1993). 14 15 Where, as here, the parties agree to settle the dispute prior to certification of the class, 16 the court must be particularly vigilant in its scrutiny of the settlement. Hanlon, 150 F.3d at 17 1026. Yet despite the importance of fairness, the court must also be mindful of the Ninth 18 19 Circuit’s policy favoring settlement, particularly in class action law suits. See, e.g., Officers 20 for Justice, 688 F.2d at 625 (“Finally, it must not be overlooked that voluntary conciliation 21 22 23 2 Another list of factors, for example, recently endorsed in In re Lupron Marketing and Sales Practices Litigation, 228 F.R.D. 75, 93 (D.Mass. 2005) comes originally from City of Detroit v. Grinnell Corp., 495 F.2d 448 (2d Cir.1974), overruled on other grounds by Missouri v. Jenkins, 491 U.S. 274 (1989). The Grinnell factors are: 24 25 26 27 (1) the complexity, expense and likely duration of the litigation; (2) the reaction of the class to the settlement; (3) the stage of the proceedings and the amount of discovery completed; (4) the risks of establishing liability; (5) the risks of establishing damages; (6) the risks of maintaining the class action through the trial; (7) the ability of the defendants to withstand a greater judgment; (8) the range of reasonableness of the settlement fund in light of the best possible recovery; (9) the range of reasonableness of the settlement fund to a possible recovery in light of all the attendant risks of litigation. 28 Grinnell, 495 F.2d at 463 (citations omitted). 7 1 and settlement are the preferred means of dispute resolution. This is especially true in 2 complex class action litigation ....”). 3 4 These factors show that the settlement is fair, adequate and reasonable. 5 The Plaintiffs would face considerable risks were they to proceed to trial. Their 6 7 action alleges that Morgan Stanley’s nationwide account distribution policies and practices 8 and other policies and practices denied or restricted the availability of business opportunities, 9 compensation, and other favorable employment conditions on the basis of race. See Second 11 For the Northern District of California United States District Court 10 Amended Complaint, filed August 17, 2007, ¶¶ 2, 5, 37-32. Plaintiffs would likely face a 12 vigorous defense, and difficulties proving that Morgan Stanley’s objectively neutral policies 13 and procedures caused the disparities in compensation and other harm, such as terminations 14 15 based on low production. The uncertainty and complexity of proceeding to trial would be 16 substantial. Settlement avoids the complexity, delay, risk and expense of continuing with the 17 litigation and will produce a prompt, certain, and substantial recovery for the Plaintiff class. 18 19 The settlement was reached after extensive investigation, analysis, and arm’s-length 20 negotiation. See Order, filed December 12, 2007, at 6 n.2, 2/7/08 Order at 12. The Court 21 finds that collectively, Plaintiffs’ counsel have extensive expertise and experience not only 22 23 with class action discrimination cases, but in litigating employment and discrimination cases 24 against defendants in the financial services industry, including Morgan Stanley. Their 25 26 thoughtful assessment of the terms of the settlement – particularly their considered and 27 strong support for the efficacy of the proposed injunctive relief – weighs in favor of 28 approval. See, e.g., Reporter’s Transcript of Preliminary Fairness Hearing (“RT PFH”), 8 1 November 3, 2007, at 11-17, 67-70, and Reporter’s Transcript of Final Fairness Hearing 2 (“RT FFH”), June 16, 2008, at 73-75. Moreover, as the Court observed on preliminary 3 4 approval of the settlement, they arrived at the terms of the settlement after months of active 5 involvement in the case, and after receiving and analyzing compensation data extracted from 6 Morgan Stanley’s human resources database, 2/7/08 Order at 14, and with the involvement 7 8 and advice of class representatives. See discussion, supra, and 2/7/08 Order at 7. 9 The reaction of the class members also weighs in favor of approval. Of the over 1,300 11 For the Northern District of California United States District Court 10 class members, nine have chosen to remain class members but lodge objections, and only 24 12 have opted out. By the close of the claim period, 422 class members had submitted claims, a 13 participation rate of approximately 31%.3 Plaintiffs submitted numerous letters and 14 15 declarations in support of the settlement, both from African-American and Latino class 16 members as well. See Letters of Nathan Lewis, Anthony Baker, Beverly Bishop, Steve 17 Cota, and Eric Berry, Exhs A, B, F, I, and J to Declaration of Heather Wong, filed November 18 19 19, 2007, and Declarations of Daniel Correa, Erick Ibarra, Christian Iglecias, Edward 20 Jiminez, Mark Morales, and Stanley Sykes, filed July 23, 2008. 21 Most important, however, are the strength of the injunctive and monetary relief the 22 23 Settlement provides. This Court has already found, on preliminary approval of the 24 settlement, that the Settlement Agreement provides substantial injunctive relief to the 25 26 27 28 Plaintiff class. 2/7/08 Order at 14-16. The relief represents an expansion of the relief 3 At the Preliminary Fairness Hearing, Objectors’ counsel called the 31% participation rate in a discrimination case against Merrill Lynch, Cremin v. Merrill Lynch, United States District Court for the Northern District of Illinois Case No. 96-C 3773 (“Cremin”) “a very high percentage in our view.” RT PFH at 59. 9 1 provided in the settlement of a parallel gender discrimination case against Morgan Stanley, 2 Augst-Johnson, supra, and is substantive, meaningful, and valuable to the class. 2/7/08 Order 3 4 at 14-16. The Court will not revisit its analysis here. 5 Objectors’ arguments to the contrary are unavailing. They argue that the Settlement is 6 7 inadequate because it does not include Court supervision or actually require Morgan Stanley 8 to remedy racial disparities in compensation, retention, hiring, teaming or promotion by 9 setting goals and timetables for decreasing those disparities (Objections No. 1 and 2). But 11 For the Northern District of California United States District Court 10 the Parties explained at the Preliminary Fairness Hearing that goals and timetables can 12 backfire, because employers quickly hire minorities to meet goals, and then they “just fall out 13 of the system again.” RT PFH at 68, 80. Instead, the parties have chosen to stress 14 15 programmatic change and diversity and inclusion programs that will encourage managers to 16 attract and retain individuals who are likely to succeed. Id.4 The Settlement provides 17 ongoing monitoring, analysis, and review by an independent Diversity Monitor who will 18 19 report to both Morgan Stanley and class counsel. Monitoring will allow Plaintiffs’ counsel to 20 track the effectiveness of the Settlement, and provide data which Plaintiffs can use to enforce 21 the general nondiscrimination provision of the Settlement Agreement. SA § VII.H (African 22 23 24 25 26 27 28 4 The Court also rejects Objectors’ unsupported claim that the industrial psychologist chosen to study race issues and make proposals, Kathleen Lundquist, is inappropriate because she has been a defense expert on numerous occasions. Although Objectors state that Lundquist was a defense expert in “McReynolds v. Sodexho,” (no citation) referred to in a web article, and Employees Committed For Justice v. Eastman Kodak Co., 407 F.Supp.2d 423 (W.D.N.Y. 2005), a case where the EEOC found rampant discrimination, Objections, filed April 28, 2008, at 10-11, neither source mentions Lundquist. Objectors state she was a defense expert “supporting employer’s policies and culture” in Employees Committed for Justice and “Puffer v. Allstate, Case No. 04-5764 (N.D. Ill),” id., without proffering a declaration, document, or even docket number of a filing in support. Lundquist declares that she was not a defense expert in McReynolds, testified about limited matters in Employees Committed for Justice, and did not testify about company culture in Puffer. Lundquist Declaration, filed June 3, 2008; see also RT FFH at 38-39. 10 1 American and Latino financial advisors and trainees “will enjoy terms and conditions of 2 employment comparable to” those of their white counterparts); RT FFH at 72-73. 3 4 Particularly where Plaintiffs’ counsel can turn to the Court to enforce the nondiscrimination 5 provision, the absence of Court monitoring does not render the settlement inadequate.5 6 Objectors’ also argue that the Settlement Agreement improperly strips the Court of 7 8 jurisdiction, forces the parties into confidential, binding arbitration, and unfairly precludes 9 “third parties” other than class counsel – including class members – from enforcing the 11 For the Northern District of California United States District Court 10 terms of the Settlement Agreement. (Objections Nos. 1 and 13). The parties revised the 12 Settlement Agreement to reflect their shared understanding that although disputes about the 13 settlement initially go to arbitration, the Court retains jurisdiction to review the arbitrator’s 14 15 decisions. SA § X at 47. No other claims are precluded or forced into arbitration by the 16 Settlement Agreement. Finally, the provision limiting enforcement of the Settlement 17 Agreement to class counsel is not unusual; in fact, the settlements that Stowell and Friedman 18 19 negotiated in two financial services discrimination cases, Martens, supra, and Cremin, supra, 20 contain the same limitation. See Supplemental Declaration of Mark S. Dichter, filed June 3, 21 2008, Exh. A and B (settlement agreements). 22 23 24 25 26 5 The Court notes that although Objectors argue reporting and monitoring are crucial, 27 neither the Cremin settlement nor that negotiated by Objectors’ counsel in Martens v. Smith Barney, United States District Court for the Southern District of New York Case No. 96 Civ. 3779 28 (“Martens”) require reporting to or monitoring by the court. See Supplemental Declaration of Mark S. Dichter, filed June 3, 2008, Exh. A and B (settlement agreements). 11 1 Objectors next argue that because the Power Ranking6 system rewards those who 2 already have bigger books of business as a result of discrimination, it perpetuates and 3 4 institutionalizes existing bias (Objection No. 4). The Power Ranking formula is already in 5 place as part of the Augst-Johnson settlement. As a result of concerns raised by counsel for 6 the Plaintiffs in this action, Morgan Stanley changed the Power Ranking formula to de7 8 emphasize past performance, tested the revised Power Ranking formula to see if it would 9 have an adverse impact on minorities, and found that it did not. Declaration of Mark Dichter, 11 For the Northern District of California United States District Court 10 filed November 19, 2007, ¶ 19; RT PFH at 65. Moreover, the Settlement Agreement 12 provides for annual review of the Power Ranking formula so that it can be adjusted if the 13 revised version turns out to have a disparate impact. SA § VII.D.2.d, at 22-23; RT FFH at 14 15 31-32. 16 17 Objectors also contend the Settlement will not bring about meaningful change because it allows minorities to be excluded from teams and partnerships. There is no real dispute that 18 19 partnerships provide important financial benefits for their members. When a member of the 20 partnership or team leaves Morgan Stanley, that member’s accounts pass to other members; 21 moreover, brokers get credit in the Power Ranking system (and therefore the ability to get 22 23 even more business) for assets they accrue as part of partnerships. Although the Settlement 24 provides that the Industrial Psychologists will try to increase minority representation in 25 26 27 28 6 The Power Ranking formula is the algorithm used to distribute accounts to financial advisors. 12 1 partnerships, SA § VII.D.4 and 5, at 25, it continues to allow financial advisors to transfer 2 assets and accrue credit through partnerships and teams. SA § VII.D.5, 5.c, at 25. 3 4 Objectors contend that the policy creates an end-run around any transparent, equitable 5 account distribution system (Objection No. 5). They contend that African-American FAs are 6 routinely excluded from teams, and because teams are either formed with the express 7 8 approval of management or the direct involvement of managers, Morgan Stanley’s “policy of 9 allowing established financial advisors to choose partners for lucrative agreements” should 11 For the Northern District of California United States District Court 10 have been treated as an employment practice and addressed in the Settlement. Class counsel, 12 relying on explanations from counsel for Morgan Stanley, apparently concluded that team 13 formation was a practice of individual brokers beyond the reach of this lawsuit. See RT PFH 14 15 at 69, 73 (Plaintiffs’ counsel James Finberg); 81 (Morgan Stanley counsel Mark Dichter). 16 17 Even if the exclusion of minorities from teams and partnerships were attributable to Morgan Stanley, the fact that the Settlement Agreement still allows assets to transfer and 18 19 credits to accrue through partnership is not fatal to the settlement. Again, the standard is not 20 whether the settlement “could be better,” but whether it is fair, reasonable, and adequate. 21 Hanlon v. Chrysler Corp., 150 F.3d 1011, 1027 (9th Cir. 1998). The Settlement Agreement 22 23 provides for some efforts to increase minority representation on teams and partnerships. 24 Given the extensive programmatic and monetary relief the settlement provides to class 25 26 27 28 members, the Parties’ decision to focus on other issues is acceptable. The monetary relief provided by the settlement is also fair, adequate, and reasonable. As set out in the Court’s Order preliminarily approving the settlement, the monetary relief 13 1 represents over 40% of the predicted disparity in compensation which Plaintiffs sought as 2 damages. 2/7/08 Order at 13-14. The Settlement Agreement provides for a fund of 3 4 approximately $16,000,000, approximately $14,000,000 of which is to be distributed to 5 claiming class members – a per class member average of approximately $12,000. The 6 monetary relief is comparable to that approved by the District Court for the District of 7 8 Columbia in settlement of the parallel Augst-Johnson case, which called for distribution of 9 approximately $32 million of a $46 million monetary fund to claimants in a class of over 11 For the Northern District of California United States District Court 10 2,800 people (a per capita average of less than $12,000). See Declaration of James M. 12 Finberg in Support of Reply Memorandum, filed November 19, 2007, Exh. A Augst13 Johnson Second Revised Settlement Agreement (“Augst-Johnson SRSA”); Exh. C (October 14 15 26, 2007 Order finally approving Augst-Johnson settlement); see also Augst-Johnson, Docket 16 No. 33-3, Declaration of Cyrus Mehri In Support of Joint Motion for Final Approval of Class 17 Action Settlement, filed October 1, 2007, at ¶ 34 ($32 million of fund goes to class)). The 18 19 Court also takes judicial notice of the settlement in another parallel gender discrimination 20 case against brokerage firm Smith Barney, Amochaev et al. v. Citigroup Global Markets Inc., 21 United States District Court for the Northern District of California Case No. C-05-1298-PJH. 22 23 The district court recently found that the settlement agreement there, which provided similar 24 injunctive relief and a monetary fund of approximately $25 million to a class of 25 26 approximately 2,400 plaintiffs, was fair, adequate, and reasonable. See Id., Docket Nos. 194, 27 filed August 13, 2008 (final approval) and 186, filed July 24, 2008 (memorandum in support 28 of final approval). 14 1 Objectors again argue that the monetary relief is inadequate, both in absolute terms, 2 and to the extent that it compensates Plaintiffs for “compensation shortfall” alone, rather than 3 4 all recoverable damages (such as emotional distress, punitive damages, front pay, fringe 5 benefits, and damages stemming from termination or constructive termination). (Objections 6 7, 8 and 12). The Court has already rejected these arguments. See 2/7/08 Order at 12-14. 7 8 Again, the settlement is not unfair, either overall or to African-Americans as a subgroup, 9 because it chooses to compensate class members primarily on the basis of their tenure at 11 For the Northern District of California United States District Court 10 Morgan Stanley during the class period, with added compensation for termination. 12 Compensation shortfalls can be readily calculated, and the Parties can choose to have 13 monetary relief focus on pay disparities rather than on constructive or actual terminations as 14 15 a means of compromising a complex set of claims. Id. 16 17 Objectors again argue that African-American and Latino class members should be represented by different subclasses and should not receive compensation according to a 18 19 common formula. (Objection 11). The Court rejected the argument that a single class was 20 inappropriate in its December 12, 2007 Order, finding that the central discriminatory practice 21 at issue (account distribution) affected both groups in the same way, and there was no 22 23 obvious conflict between the two. Id. at 4-5. After in camera inspection of data provided by 24 Plaintiffs, the Court also concluded that the differences in compensation were not so great 25 26 that compensating African Americans and Latinos according to the same formula was unfair. 27 2/7/08 Order at 13-14. 28 15 1 Next, Objectors contend the monetary compensation is inadequate in light of the 2 Supreme Court’s decision in Ledbetter v. Goodyear Tire, __U.S.__, 127 S.Ct. 2162 (2007). 3 4 (Objection 15). They argue that now, Morgan Stanley will argue that class members are 5 releasing all discrimination claims that arose during the class period, even if that 6 discrimination results in lower wages in the future. 7 8 9 But Ledbetter, which came down while the parties were negotiating the settlement, actually makes the settlement more favorable. The Settlement Agreement gives class 11 For the Northern District of California United States District Court 10 members approximately 43% of the calculated “compensation shortfall” between minority 12 FAs and white FAs. Even assuming that the entire disparity in compensation is due to 13 discriminatory acts such as discriminatory account distribution (a fact that has not been 14 7 15 proven), many of those acts likely took place outside of the limitations period. After 16 Ledbetter, complaints about compensation disparities that stem from acts outside the 17 limitations period are no longer actionable. So, in effect, the settlement is likely greater than 18 19 43% of the recoverable compensation shortfall. Plaintiffs will release claims for any 20 discriminatory conditions occurring during the class period, but that is the nature of any 21 release. Moreover, the injunctive relief (including changes to the account distribution 22 23 formula) will mitigate any future harm stemming from discrimination during the class period. 24 25 26 27 28 7 Objectors argued that account distribution and access to resources early in a financial advisor’s career can make an enormous difference in later compensation, as the FA’s book of business grows exponentially through referrals and asset growth. See, e.g., RT PFH at 42, 46-47 (testimony of Marian Tucker). 16 1 The remaining objections to the settlement as a whole have no merit.8 Objectors 2 argue that class members have been denied the opportunity to review key components of the 3 4 settlement because the proposed Account Distribution Policy and Power Ranking formula 5 have been filed under seal in this case. (Objection No. 3). The formula was filed under seal 6 because the parties agreed it was confidential, proprietary business information. See 7 8 10/24/07 Motion to File Under Seal. The Power Ranking was reformulated as part of the 9 Augst-Johnson case; Plaintiffs’ counsel were already negotiating with Morgan Stanley while 11 For the Northern District of California United States District Court 10 that case was being settled, and they were able to suggest changes to the formula so that it 12 would not adversely affect minority FAs. 13 Like the Settlement Agreement in this action, the Augst-Johnson settlement, approved 14 15 in October, 2007 required Morgan Stanley to provide each Financial Advisor with “the 16 methodology for calculating the Power Rankings... including the name of each factor, an 17 explanation of each factor, and how each factor is weighted” and to “inform each Financial 18 19 Advisor of her or his individual ranking at the time any distribution is made,” along with 20 information about the actual distribution of each account, and the number of accounts and 21 assets distributed to each ranked Financial Advisor. Augst Johnson SRSA at 21, § VII.C.2.b 22 23 and c. As of late April, 2008, the Account Distribution Policy and Power Ranking System 24 have been available to all current Morgan Stanley employees. RT FFH at 39-42. Although 25 26 Objectors argue that the policy was disclosed too late to allow the Plaintiffs here to evaluate 27 28 8 The Court further finds that objections raised by class member Billy Manning and Marilyn White raise arguments that have already been considered and rejected by this Court. 17 1 the settlement, they offered no additional arguments based on the formula that could show 2 that class members were prejudiced. 3 4 Objectors next argue generally that they – as African American FAs with a broad 5 range of experiences with Morgan Stanley – would have been “more empathetic to the 6 plight” of African-American class members and crafted a settlement more sensitive to their 7 8 day-to-day experience. (Objection No. 6). This Court has found, however, that class 9 members were appropriately and adequately represented, and that Plaintiffs’ counsel received 11 For the Northern District of California United States District Court 10 input and advice about conditions of employment at Morgan Stanley throughout the 12 settlement negotiations. 13 Objectors next contend that the settlement improperly requires class members to 14 15 release claims for which they are not being compensated, including termination and 16 promotion claims. (Objection No. 9). But the settlement does give additional monetary 17 relief to class members who were terminated or suffered extraordinary emotional distress. SA 18 19 § VIII.D.2 at 39. Moreover, class members release only termination, promotion, constructive 20 discharge and harassment claims “arising from” “low production, failure to satisfy position 21 requirements, failure to satisfy requirements of the training program, production related 22 23 reductions in force, or other production based performance related terminations.” Id. § V.A 24 at 15. They do not, for example, release harassment claims arising from use of racial 25 26 epithets. RT PFH at 20. The Augst-Johnson court approved a settlement in which the 27 plaintiffs released all termination and sexual harassment claims. Augst-Johnson SRSA at 15, 28 § V.A. The release is not overly broad. 18 1 Objectors reassert their argument that payments to named representative Ms. Curtis- 2 Bauer in settlement of her individual claims and as an incentive payment are improper. 3 4 (Objection No. 10). The Court previously rejected this argument, 2/7/08 Order at 5-6, 8-9, 5 and will not revisit it here. 6 Finally, Objectors argue that notice to class members was flawed and inadequate 7 8 because the web site listed in the notice malfunctioned and class members were not explicitly 9 informed about the Moore Group Objectors and their arguments against settlement. 11 For the Northern District of California United States District Court 10 (Objection No. 14). Notice was adequate. Notice was sent to class members in accordance 12 with this Court’s orders, and access to the web site is not required to make notice adequate. 13 In any case, although the “racecaseagainstmorganstanley.com” website, to which the notice 14 15 referred, was not active until near the end of the claim period, counsel for Plaintiffs explained 16 that a website was set up under a similar name (“morganstanleyracesettlement”) and that 17 website was accessed even more times than the site listed in the notice. FFH at 76-78. 18 19 Moreover, approximately 33% of the class responded in some way to the notice, and 20 approximately 31% filed claims – a rate that even Objectors’ counsel considers “very high.” 21 RT PFH at 59. 22 23 24 In sum, the Court finds that the settlement is fair, adequate, and reasonable under the 25 26 criteria set out in Officers for Justice, 688 F.2d at 625. 27 28 19 1 THEREFORE, IT IS HEREBY ORDERED, on consideration of the Settlement 2 Agreement attached hereto as Exhibit 1, the briefs, declarations, and oral arguments in 3 4 support thereof, the submissions of the Objectors, evidence and argument submitted to the 5 Court for in camera review, and the proceedings in this action to date, 6 1. Except as otherwise specified herein, the Court for the purposes of this Order 7 8 adopts all defined terms set forth in the Settlement Agreement, attached hereto as Exhibit 1. 9 2. This Court has jurisdiction over the subject matter of this litigation and all 11 For the Northern District of California United States District Court 10 12 13 matters relating thereto, and over the Representative Plaintiff and the Defendant. 3. The Court confirms as final its conditional certification for the purposes of settlement of the injunctive-relief Settlement Class defined in the Settlement Agreement and 14 15 in Section IV of the Court’s February 7, 2008 Order as “All African Americans and Latinos 16 employed as Financial Advisors or Registered Financial Advisor Trainees in the Global 17 Wealth Management Group of Morgan Stanley & Co. Incorporated or its predecessor at any 18 19 time between October 12, 2002 and December 3, 2007” and the monetary relief Settlement 20 Class consisting of “All African Americans and Latinos employed as Financial Advisors or 21 Registered Financial Advisor Trainees in the Global Wealth Management Group of Morgan 22 23 Stanley & Co. Incorporated or its predecessor at any time between October 12, 2002 and 24 December 3, 2007 who did not timely opt out.” 25 26 4. At their request, twenty-four (24) Class Members initially opted out of the 27 28 20 1 monetary settlement class9 and one (1) has since rescinded his opt-out. The Parties 2 acknowledged at the final fairness hearing that an additional class member opted out on the 3 4 last day of the opt-out period. RT FFH at 10-11. Therefore twenty-four (24) Class Members 5 have been permitted to opt-out of the monetary settlement class without releasing any of their 6 monetary claims. They are listed on Appendix A to this Order. 7 8 9 5. The Court confirms as final the appointment of Margaret Benay Curtis-Bauer as class representative as stated in Section V of the February 7, 2008 Order. 11 For the Northern District of California United States District Court 10 6. The Court confirms as final the appointment of the following as Class 12 Counsel: Lieff, Cabraser, Heimann & Bernstein, LLP; Outten & Golden, LLP; and Altshuler 13 Berzon LLP. 14 15 7. The distribution of the Class Notice and Claim Form to Class members by 16 mail delivery, pursuant to this Court’s orders, constituted the best notice practicable under 17 the circumstances, were accomplished in all material respects, and fully met the requirements 18 19 of Rule 23 of the Federal Rules of Civil Procedure, due process, the United States 20 Constitution and any other applicable law. 21 8. Notice was sent on February 26, 2008 to the United States Attorney 22 23 General and the Attorneys General of all 50 states and the District of Columbia pursuant to 24 the Class Action Fairness Act. No objections were received from any federal or state 25 26 27 officials. 9 An additional opt-out was submitted, but Morgan Stanley’s employment records establish that, although he was employed by Morgan Stanley, he was neither a Registered 28 Financial Advisor Trainee nor Financial Advisor. Thus, he is not a Class Member and his opt-out is immaterial. 21 1 9. Pursuant to Rule 23(e) of the Federal Rules of Civil Procedure, this Court 2 grants final approval to the Settlement Agreement attached hereto as Exhibit 1 and to the 3 4 terms of the settlement set forth therein. The Court finds that the Settlement Agreement is 5 fair, reasonable, and adequate in all respects. The Court finds that the Settlement Agreement, 6 revised after Court review and a hearing on December 3, 2007, was the culmination of more 7 8 than a year of ongoing discussions and negotiations between the parties. This Court also 9 finds that the Settlement Agreement is the result of arms-length negotiations between 11 For the Northern District of California United States District Court 10 experienced counsel representing the interests of the Plaintiff and Defendant, after thorough 12 factual and legal investigation, with the assistance of an experienced, professional mediator. 13 Staton, 327 F.3d at 960; Class Plaintiffs v. City of Seattle, 955 F.2d 1268,1291 (9th Cir. 14 15 1992). The Court specifically finds that the settlement is rationally related to the strength of 16 Plaintiff’s and Class members’ claims given the risk, expense, complexity, and duration of 17 further litigation. The mechanisms and procedures set forth in the Settlement Agreement by 18 19 which payments are to be calculated and made to class members filing timely claims are fair, 20 reasonable and adequate. Individual Class Members’ monetary awards shall be determined 21 in accord with the procedures set forth in the Settlement Agreement. 22 23 24 10. By operation of this Order and the Final Judgment, all released Class member and named Plaintiff claims are fully, finally and forever released, relinquished and 25 26 discharged, pursuant to the terms of the Settlement Agreement, as to all monetary-relief 27 Settlement Class members other than those listed in Appendix A hereto, who timely opted 28 out pursuant to the terms of the Court’s February 7, 2008 Order and the Settlement 22 1 Agreement. The Court has reviewed the release provisions in the Settlement Agreement, and 2 the Court finds the releases to be fair, reasonable, and enforceable under applicable law. Each 3 4 member of the Settlement Class, including any member who makes an irrevocable election to 5 exclude himself or herself from the monetary relief Settlement Class, is hereby enjoined from 6 commencing, prosecuting or maintaining in any Court other than this Court any claim, action 7 8 or other proceeding that challenges or seeks review of or relief from any order, judgment, 9 act, decision or ruling of this Court in connection with the Settlement Agreement. The Court 11 For the Northern District of California United States District Court 10 further enjoins all members of this Settlement Class except those listed in Appendix A, who 12 have timely opted out of the monetary-relief Settlement Class, from commencing, 13 prosecuting or maintaining, either directly, representatively or in any other capacity, any 14 15 claim that is subsumed within the Settlement Agreement and from asserting any and all class 16 and other claims that were released pursuant to the Settlement Agreement. 17 11. The Settlement Agreement attached hereto as Exhibit 1 is hereby approved 18 19 and incorporated herein and shall become effective according to its terms. The allocation 20 plan for individual Class Members’ monetary awards procedures as set forth in the 21 Settlement Agreement is approved. 22 23 24 12. The Second Amended Complaint shall automatically be dismissed with prejudice ten business days after the Effective Date, as that term is defined in the Settlement 25 26 Agreement, except that the Court shall retain continuing jurisdiction, pursuant to the terms of 27 the Settlement Agreement. 28 13. Neither the Settlement Agreement, nor this Order, nor the certification of 23 1 the Class, nor any communication or action by the parties in connection with the Settlement 2 constitutes or shall be deemed to constitute an admission by Morgan Stanley of any liability 3 4 or wrongdoing whatsoever, or to constitute a finding by this Court as to the merits of any 5 claim or defense asserted or that could have been asserted in this action, or as to any 6 wrongdoing by Morgan Stanley. Neither the Settlement Agreement nor this Order is or shall 7 8 be used or deemed to be an admission in any action or proceeding of any fault, liability or 9 wrongdoing by any person or entity; and neither the Settlement Agreement, nor any 11 For the Northern District of California United States District Court 10 negotiations or proceedings related thereto, nor this Order, nor any related document or 12 communication, shall be offered or received in evidence against any person or entity in any 13 action or proceeding as an admission, concession, presumption or inference as to the merits 14 15 of any claim or defense; however, the Settlement Agreement or this Order may be received in 16 evidence in any proceeding in this Court as may be necessary to consummate or enforce the 17 Settlement Agreement or this Order. 18 14. 19 The Court hereby enjoins disclosure to third parties of the documents and 20 information discussed or exchanged during the parties’ confidential settlement negotiations 21 and mediation to any third party not specified in the Parties’ confidentiality agreements. 22 23 // 24 // 25 26 // 27 // 28 24 1 2 15. The Court retains jurisdiction over this matter, pursuant to the terms of the Settlement Agreement. 3 4 5 IT IS SO ORDERED. 6 7 8 Dated: October 22, 2008 THELTON E. HENDERSON, JUDGE UNITED STATES DISTRICT COURT 9 11 For the Northern District of California United States District Court 10 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 25 1 2 Last Name First Name 3 Rivera Cruz Juan Luis 4 Tucker Marion J 5 Roy Brian Keith 6 Moore Ronald Eugene Mcdowell Carlton Thomas Mabon Maurice Gene 7 For the Northern District of California 8 United States District Court Appendix A Timely Opt-Out Requests Lewers Mark 9 Grant Janice 10 Evans Lanta Larnett 11 Carter Patrick Eugene 12 Bell Anthony T Barnett Michael Leon Allen Jr. Morris Owens James Dewitt Stalling Hubert 16 Howard Jacqueline D 17 Montes Joseph F. 18 Gordillo Oscar Jose 19 Williams Denise Lavern Lowell Carlos Nyamuswa Sarah Sarayi Cyrus Theron Dixon Martin Griffin Vincent 13 14 15 20 21 22 23 24 25 Rescinded Opt-Out Request John Peter Greer, III 26 27 28 26
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