An article in the July 7 Business section incorrectly identified the Equal Employment Opportunity Commission's biggest victory in a sex-discrimination complaint as a $34 million settlement with Mitsubishi Motor Manufacturing of America Inc. In 1997, the EEOC settled a sex-discrimination case with Publix Super Markets Inc. for $81.5 million. (Published 7/13/04)
The 340 women who held top positions in Morgan Stanley's institutional equities division include some of Wall Street's highest flyers. Some made millions of dollars a year as executives, saleswomen and administrators.
But the Equal Employment Opportunity Commission goes to court Wednesday to contend that as a class, they were paid less and promoted less often than their male counterparts. And as part of their efforts to prove "a pattern and practice" of discrimination, EEOC lawyers plan to introduce evidence of lewd behavior and sexist comments that could provide a new black eye for an industry struggling to regain investor trust after allegations of biased research and predatory mutual fund trading.
Such allegations have been heard before. Wall Street has been home to numerous sex discrimination and harassment claims in recent years, and both Salomon Smith Barney -- now part of Citigroup Inc. -- and Merrill Lynch & Co. have paid millions of dollars to settle class-action sex discrimination cases.
But two things make Wednesday's court date unusual -- the high rank of the women involved and Morgan Stanley's decision to fight back. Employment lawyers and EEOC officials cannot remember another Wall Street case of this size that went to trial.
"Women on Wall Street, the higher up they are, the more reluctant they are to complain," said Pearl Zuchlewski, an employment lawyer who represents securities industry professionals. "What's extraordinary about this case is the level of women and the amounts of compensation. . . . The EEOC is doing a very noteworthy litigation."
Morgan Stanley officials say the firm has done nothing wrong. "We are confident the evidence will show that Morgan Stanley does not discriminate in matters of pay, promotions and conditions of employment," said Melissa Stonberg, a spokeswoman.
According to the firm's Web site, 48 percent of U.S. employees are female, as are 35 percent of "officials and managers." A survey by the Securities Industry Association found that 37 percent of industry employees and 19 percent of managing directors (the rank at issue in the EEOC case) are women.
Thousands of employees file discrimination charges with the EEOC each year, but the agency does extensive research and is quite selective about the cases it chooses to bring directly. In 2003, the EEOC received 81,293 charges of discrimination but filed only 393 lawsuits. EEOC's biggest victory on the sex-discrimination front was a 1998 settlement with Mitsubishi Motor Manufacturing of America Inc., which agreed to pay $34 million to settle a sexual harassment case at its Normal, Ill., assembly plant in 1998. The settlement also included the creation of a three-person monitoring panel. The EEOC also reached $10 million settlements with Ford Motor Co. (1999) and Dial Corp. (2003).
But some of the highest-profile discrimination cases come to court without the help of the EEOC. These lawsuits are filed directly by individual employees who then must convince a judge to certify that their claims are representative of a larger class. Such a class-action lawsuit led Home Depot Inc. to pay $104 million in 1997 to settle sex-discrimination claims.
That route got an enormous boost last month when a federal judge in San Francisco allowed a sex-discrimination suit against Wal-Mart Stores Inc., involving 1.6 million current and former employees, to proceed. Wal-Mart is appealing the certification of the women as a class.
"You can't talk about this without [mentioning] Wal-Mart," said John P. Relman, founding director of District-based civil rights law firm Relman & Associates. "Wal-Mart has just changed the landscape completely. In the world of gender discrimination, there was before Wal-Mart and after Wal-Mart."
The current EEOC lawsuit against Morgan Stanley started in 1998, when bond saleswoman Allison Schieffelin filed a discrimination complaint with the agency, complaining that she had been passed over for promotion. The EEOC then filed a suit on Sept. 10, 2001, on behalf of Schieffelin and all women who had worked in the top four employment tiers in her division since 1995. By that time, Schieffelin had been fired -- she says her termination was retaliatory; the company contends she was verbally abusive and insubordinate to her boss, another woman.
U.S. District Judge Richard M. Berman has since split off Schieffelin's case from the larger suit, and it will be heard later. But Schieffelin is scheduled to be one of the EEOC's first witnesses.
The EEOC and Schieffelin's lawyer declined to discuss the case on the eve of trial, but the bond seller was outspoken at the EEOC's 2001 press conference announcing the lawsuit, saying, "Morgan Stanley destroyed my career. They destroyed everything I had put my heart and soul into for 15 years."
Much of the case will focus on statistics and whether the EEOC can show that Morgan Stanley had a practice of paying women less and promoting them less often.
But legal experts say that statistics about the relative pay and positions of women are not enough. The EEOC "also has to show motive," that Morgan Stanley failed to promote women fairly because managers condoned attitudes that stereotyped or diminished women, said Jeffrey Wortman, a Los Angeles employment lawyer who specializes in defense.
That's where the testimony of more than 20 female current and former Morgan Stanley employees is expected to come in. They are expected to tell the jury about their experiences at the firm, including descriptions of breast-shaped cakes, workplace stripteases and sexist comments.
Even if the EEOC prevails, individual members of the group would still have to make their own case for damages.
The firm, meanwhile, is expected to attack the EEOC's statistics and argue that individual promotion and compensation decisions were made for legitimate reasons. Lawyers who specialize in defending employment claims also caution that individual stories of misbehavior may be sensational, but that they may not add up to firm-wide discrimination.
The high rank of many of the women on whose behalf the EEOC is suing may work against their claims of discrimination, said Amy Oppenheimer, an attorney and workplace harassment expert based in Berkeley, Calif. "The more power somebody has in the workplace, the more hiring decisions can be subjective and the more difficult it is to compare a skill base," she said.
And jurors may find it hard to sympathize with a woman who was making more than a million dollars a year, other lawyers said. But "the fact that a woman was making a million dollars should not preclude sexual discrimination," said Joan Williams, director of American University's WorkLife Law program. "Because men in the same industry can often make more." The salaries of the women covered by the EEOC's suit ranged from approximately $100,000 to millions.
No matter how it turns out, the case is likely to have significant ramifications. The EEOC rarely takes large cases to trial, and a Morgan Stanley win could make the commission gun shy, said Joseph M. Sellers, a D.C. attorney who represents the Wal-Mart plaintiffs.
And if Morgan Stanley loses, "it clearly is going to send a loud and clear message to every financial services firm that they must get their houses in order, enhancing diversity and breaking glass ceilings for women," said Victor Schachter, a San Francisco lawyer who represents employers.