US District Court Judge Richard W. Roberts of the District of Columbia gave final approval to a $46 million settlement of a sex bias class action filed by current and former female Morgan Stanley financial advisors and registered trainees (plaintiffs) employed from August 5, 2003 through June 30, 2007. The plaintiffs alleged that the New York-based brokerage firm engaged in "systemic company-wide discriminatory treatment" with respect to their compensation and promotion opportunities and other terms and conditions of their employment (Augst-Johnson v Morgan Stanley & Co, DDC, No 1:06-CV-1142. Final approval October 26, 2007).
Judge Robert's final order, which was granted on October 26, 2007, confirmed that 31 of the 2,867 potential class opted out of the monetary portion of the settlement agreement without releasing any of their claims. In addition, Morgan Stanley will spend approximately $7.5 million on diversity efforts during the period of the settlement, which is for five years. Neither the final settlement, nor the court's order will constitute an admission by Morgan Stanley of any "liability or wrongdoing whatsoever," or to constitute a finding by the court as to the merits of any claim or defense asserted in the action.
While one class member submitted a timely objection to the settlement agreement, contending that the: (a) monetary relief was inadequate; (b) class was too narrowly defined; (c) notice was inadequate; and (d) injunctive relief was inadequate and discriminatory, the court rejected those claims. "The objection to the adequacy of the monetary awards reflects a misunderstanding of the potential size of an individual award and the means by which an individual's award will be determined," wrote Roberts. "It also attempts to measure the monetary award in this case against awards in cases that are not fairly comparable, and differ in critical ways as to facts, time periods, types and numbers of employees, claims, legal issues, and ease of proof."
As to the definition of the class, Roberts explained that the objection did not "take account of the fact that including management personnel would present possible conflicts of interest with Class Members." Regarding adequacy, the court explained that the problem had already been remedied by granting the class members' late requests to opt-out. Finally, the objector's concerns about the injunctive relief were belied by "Morgan Stanley's uncontradicted response that revised factors for account distributions were examined for such adverse impact and that no such adverse impact was shown." Accordingly, the court found that the objections did not demonstrate that the terms of the settlement agreement were not "fair, adequate, or reasonable."
"After a long journey, our named plaintiffs have succeeded in creating a substantial and powerful settlement," said plaintiffs' attorney Steven Sprenger of Sprenger & Lang in Washington, DC. "This is a bellwether settlement that not only will bring about genuine change at Morgan Stanley, but will also influence the entire industry," said plaintiffs' attorney Cyrus Mehri of Mehri & Skalet in Washington, DC. "We are pleased with final approval of the settlement, which is designed to increase diversity and the professional success of our women Financial Advisors," said Morgan Stanley spokesperson, Christy Pollak.
Of note, on October 22, under a proposed settlement filed in the Northern District of California, Morgan Stanley has agreed to establish a $16 million fund settling claims challenging inequities in opportunities that occurred against approximately 1,200 African-American and Latino financial advisors and registered financial advisor trainees related to the distribution of accounts and other business opportunities. A Special Master is expected to determine the allocation of monies among the class (Jaffe v Morgan Stanley & Co, NDCal, No C-06-3903 TEH. Proposed settlement filed October 22, 2007).
The settlement can be viewed at the following website.
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