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The Seventh Circuit Court of Appeals denied an en banc rehearing petition this week in the Merrill Lynch class action lawsuit. A three-judge panel had previously ruled that the lawsuit could proceed as a class action in the district court.
All of the judges on the original appellate panel who participated in the en banc rehearing decision voted to deny rehearing, reports The Wall Street Journal.
Plaintiffs in the lawsuit -- more than 700 current and former Merrill Lynch employees -- are accusing the financial management giant of employment discrimination, including steering African-Americans into clerical positions, giving the most lucrative accounts to white brokers, and creating a hostile work environment. A district court denied class certification in the case, but the Seventh Circuit Court of Appeals reversed that decision in February upon the plaintiffs' Rule 23(f) appeal.
Federal Rule of Civil Procedure 23(f) provides, "A court of appeals may permit an appeal from an order granting or denying class-action certification under this rule if a petition for permission to appeal is filed with the circuit clerk within 14 days after the order is entered." Here, the district judge actually encouraged the plaintiffs to pursue a Rule 23(f) appeal of the class certification denial, noting that the Supreme Court's Wal-Mart v. Dukes decision last year strengthened their case.
According to Judge Richard Posner's opinion last month in the appeal, the district judge told the plaintiffs that "Wal-Mart does add a lot to the landscape under Rule 23 ... I think this really cries out for a 23(f) appeal, and I would support it." Judge Posner and the panel agreed, concluding that the Merrill Lynch class action should proceed.
Judge Posner wrote, "We are not suggesting that there is in fact racial discrimination at any level within Merrill Lynch, or that management's teaming and account distribution policies have a racial effect. The fact that black brokers have on average lower earnings than white brokers may have different causes altogether. The only issue at this stage is whether the plaintiffs' claim of disparate impact is most efficiently determined on a class-wide basis rather than in 700 individual lawsuits."
Merrill Lynch could appeal the Seventh Circuit Court of Appeals class certification again to the Supreme Court, and test whether the "glue" that was lacking in the Dukes claims over Walmart policies is present at Merrill Lynch.
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