CLIENT ALERT: Please read this special message.

EEOC/Schieffelin v. Morgan Stanley – The Inside Track

Wayne N. Outten

On July 12, 2004, Morgan Stanley agreed to pay $54.0 million to settle a gender discrimination case brought by the United States Equal Employment Opportunity Commission (“EEOC”) and by Allison Schieffelin.

The case started in November 1998 when Ms. Schieffelin filed a charge against Morgan Stanley with the EEOC alleging that she was discriminated against based on her gender in promotion, compensation, and terms, conditions and privileges of employment. Her charge was filed on behalf of herself and other similarly situated women. Ms. Schieffelin later filed supplemental charges of discrimination and retaliation, including a charge of retaliation based on Morgan Stanley’s termination of her employment in October 2000.

The EEOC investigated the charges and then issued letters of determination finding discrimination against Ms. Schieffelin and other professional women worldwide in Morgan Stanley’s Institutional Equity Division (“IED”) and finding retaliation against Ms. Schieffelin. In September 2001, the EEOC and Ms. Schieffelin sued Morgan Stanley in federal court, alleging a pattern and practice of discrimination against professional women in Morgan Stanley’s IED and alleging discrimination and retaliation against Ms. Schieffelin.

After extensive discovery and substantial motion practice, the trial of the EEOC’s pattern-and-practice case was scheduled to start on July 12, 2004. The part of the EEOC’s case dealing with individual determinations of liability and damages was adjourned for later proceedings. Ms. Schieffelin’s part of the case was severed for later trial.

The EEOC intended to show at trial that women in the IED were promoted slower and less often than similarly-situated male colleagues, were paid less than such male colleagues, and were subjected to adverse terms, conditions, and privileges of employment. To prove its case, the EEOC intended to introduce statistical evidence of gender discrimination, supported by anecdotal evidence from more than 20 women. The EEOC planned to introduce evidence of men-only sports outings and trips to strip clubs, which allowed male employees in the IED to have greater opportunities to mingle with company clients and with senior company executives. The EEOC also intended to introduce evidence of subjective decision-making processes that allowed stereotypical assumptions to affect promotion and compensation decisions. Of course, Morgan Stanley planned to introduce evidence and to make arguments to rebut the EEOC’s case.

On the eve of the trial, the entire case was settled. Morgan Stanley agreed to pay $54 million : $2.0 million to fund diversity programs; $12.0 million to Ms. Schieffelin for her retaliatory discharge claim; and $40.0 million into a pool to be allocated among women in the class pursuant to a claims process.

A former federal judge, Abner Mikva, will serve as the Special Master for the claims process. He will allocate the $40.0 million among the class members after receiving written submissions from the EEOC and the class members and from Morgan Stanley. Ms. Schieffelin is eligible to participate in the claims process for her pre-termination claims of discrimination and retaliation. Any money left undistributed after that process will be used for scholarships for women interested in pursuing careers on Wall Street.

In addition, Morgan Stanley agreed to make extensive changes to its policies and practices and to institute comprehensive diversity education and training programs. An internal ombudsperson and an outside monitor will supervise Morgan Stanley’s compliance for three years.