On April 9, Judge Constance Baker Motley will hold a fairness hearing in Federal District Court in New York City to hear comments on a settlement proposed by Smith Barney and plaintiffs' attorneys in the sexual harassment and discrimination case brought against the firm in May 1996. The hearing is a prerequisite for the judge to rule on whether the settlement is reasonable. The judge has 60 days from the hearing to make a ruling.
The proposed settlement sets up a three-part dispute resolution process to handle harassment and discrimination claims, and applies to an estimated 23,000 women employed by Smith Barney between May 20, 1993, and Nov. 21, 1997, in retail sales, investment banking or capital markets divisions. The new dispute forums would be run by a unit of Duke University's law school. Women would have to pursue individual claims, or could join claims arising from actions in a single branch office.
If the deal is approved, the two attorneys representing the group of women in the case, Mary Stowell and Linda Friedman of Leng Stowell Friedman & Vernon in Chicago, stand to make $6 million immediately after the ruling, $1.75 million a year later, $1.75 million two years later, plus 10% of the damages recovered by class members through the dispute resolution process--up to $2.5 million. The lawyers also could be reimbursed up to $900,000 in expenses by Smith Barney.
Twenty-three lead plaintiffs would split $1.9 million in incentive payments.
But critics of the deal say it's unusual in that there is no pool of money set aside for all members of the class. Richard McCracken, an attorney with Davis Cowell & Bowe in San Francisco, who consults for the Hotel Employees & Restaurant Employees Union, which is opposing the settlement, says other cases of classwide sexual harassment and discrimination have been settled with "substantial amounts of money" for all class members.
As examples, McCracken points to the Texaco discrimination case (settled for $172 million covering about 1,300 class members), State Farm Insurance ($245 million for 800 women), Shoney's ($132 million for 1,000 employees) and Lucky Stores ($107 million for 14,000 women).
"This [settlement proposal] is distinctly different," he says. "The class members are not getting anything at all, and may be getting less than they had," McCracken says, pointing to the recent Rosenberg case in which a woman broker successfully fought to have a harassment and age discrimination case heard in court (see "Federal Judge Sends Merrill Discrimination Case to Court," OddLots, March '98 RR, Page 36.)
Under terms of the proposed Smith Barney settlement, women who didn't opt out of the case by March 23 would be limited to pursuing claims in the proposed dispute-resolution process--they could not attempt to have a claim heard in court.
Stowell applauds the Rosenberg decision, "but it's not binding anywhere" unless an appeals court upholds it, she says.
Regarding other class-action cases, Stowell claims: "You can have a dazzling amount of money in a fund, but that doesn't amount to a lot of money in the pockets of individuals." She says that in the Smith Barney case, it was impossible to set up a pool and a formula for compensating alleged victims because not all women were discriminated against, and because the case covers a diverse group of employees, from clerical workers to highly compensated brokers and bankers. Potential claimants have "very individualized claims," she says.
Stowell's and Friedman's fees are intended to pay for their continuing efforts to enforce the agreement. Under terms of the proposal, they would be responsible for monitoring Smith Barney's diversity and hiring efforts, handling calls from all class members, counseling women regarding the proposed dispute resolution process, preparing submissions for disputes, locating and training additional counsel for the class and preparing training materials for these attorneys. In addition, they would be charged with setting up seminars for class members, developing statistical evidence for use in claims, selecting panelists to hear claims and handling other administrative details of the dispute process.
Stowell estimates her firm, which now has four attorneys handling discrimination cases, will have to add at least several more lawyers. "It will not be a slap-dash operation," she says.
But one dissenting plaintiff claims: "All of the ideas for the diversity programs are brilliant. But with the aiders and abettors [of discrimination] still in power, nothing's going to change," she says.
Smith Barney CEO James Dimon and former manager of the Garden City, N.Y., branch, Nicholas Cuneo, have been dismissed as individual respondents in the case. Garden City is where the infamous "boom boom" room existed.
"Boom boom" room whistle-blower and original lead plaintiff in the case, Pamela Martens, is no longer represented by Stowell and Friedman. The two lawyers also have filed a motion to end their representation of another plaintiff, Judith Mione. Mione and Martens have disagreed with the attorneys about how the case has been handled, and claim they were not allowed access to key documents and had no input into confidentiality agreements covering the case.
At press time in early March, Martens intended to opt out of the settlement.
"This is one employer [Smith Barney] paying for the judge and the jury," Martens claims.
Stowell defends the proposed settlement, saying, "It's a far better procedure than going to court" or having the case go to industry arbitration. For one thing, two of the three ADR panel members would be knowledgeable in employment discrimination law, she says. Also, the type of evidence that could be used against women would be limited, and the statute of limitations under the proposal is three years--longer than many states. Stowell adds that there would be no caps on damages, and that Smith Barney is presumed to be responsible for conduct of an individual at the firm unlike court where a plaintiff must show that the employer knew, or should have known, about illegal conduct.
Yet Martens and other critics of the deal say the proposed class action doesn't achieve its original goal--to get charges of sexual harassment and discrimination heard in a public courtroom.
The proposed deal would allow only one family member at the initial mediation session. The next step, an "alternative dispute resolution" (ADR) hearing, would be open to the public (unless closed at the request of the claimant). However, only two members of the press could attend an ADR hearing, and no recording devices would be allowed. How members of the press would be selected has not been determined.
A Salomon Smith Barney spokesperson declined to comment, other than to say the firm hopes for approval of the deal.