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Second Circuit to Consider Proper Forum for Employer Based Discrimination Claims

The United States Court of Appeals for the Second Circuit (“Second Circuit”) is currently considering whether a gender based discrimination suit filed by former executives of Goldman, Sachs & Co. (“Goldman”) is required to be adjudicated before an arbitration panel or in federal court. See Chen-Oster v. Goldman, Sachs & Co., 785 F. Supp.2d 394 (S.D.N.Y. 2011), appeal docketed, No. 11-cv-5229 (2d Cir. Dec. 13, 2011). In September 2010, three (3) female Goldman employees, H. Cristina Chen-Oster, a former Vice President in Goldman’s Convertible Bonds Department, Lisa Parisi, a former Managing Director in Goldman’s Value Group and Shanna Orlich, a former Analyst in Goldman’s Capital Structure Franchise Trading Department (collectively referred to herein as “Plaintiffs”) commenced a class action suit against Goldman under Title VII of the Civil Rights Act of 1964 (“Title VII”), 42 U.S.C. §§ 2000e et seq., and the New York City Human Rights Law (“NYCHRL”), N.Y.C. Admin. Code §§ 8-107 et seq. Plaintiffs alleged that it is within Goldman’s corporate culture to discriminate against its female professional employees by: (1) paying its female professionals less than similarly situated males; (2) disproportionately promoting male employees over equally or more qualified female employees; and (3) offering better business opportunities and professional support to its male professionals. In addition to bringing this action on their own behalf, the Plaintiffs also sought to represent a class of current and former female Associates, Vice Presidents, and Managing Directors employed by Goldman in order to end Goldman’s discriminatory policies and practices entirely.

Shortly after this action was commenced, Goldman petitioned the court to stay the Plaintiffs’ action and to compel Ms. Parisi’s to individual arbitration by enforcing an arbitration clause contained in a November 4, 2003 employment letter (“Employment Agreement”). In April 2011, United States Magistrate Judge James Francis denied Goldman’s petitions and held that Ms. Parisi is entitled to litigate her case since compelling her to arbitration would preclude her from enforcing a substantive federal statutory right. In November 2011, United States District Court Judge Leonard Sand affirmed the Magistrate Judge’s ruling and Goldman appealed. During a hearing last Wednesday before the Second Circuit, Goldman argued that the lower court was incorrect in its decision to withhold Ms. Parisi’s case from being decided in arbitration. In support of its argument, Goldman cited the arbitration clause contained in the Employment Agreement and asserted that this compulsory arbitration clause preemptively requires all claims arising from the scope of Ms. Parisi’s employment with Goldman to be adjudicated before an arbitration panel. Ms. Parisi’s lawyer argued that the arbitration clause does not necessarily prohibit employees from bringing claims that concern a “practice-or-pattern” of discriminatory practices under Title VII and that Ms. Parisi has a substantive right to adjudicate her claim before a court of competent jurisdiction. The Second Circuit’s precedential decision will not only set the stage for future discrimination and wage-and-hour litigation, but may also relinquish some of the tensions created between the National Labor Relations Board and the judicial system as a result of the Court’s blurred stance on this issue.

Interestingly, both parties in this dispute have rallied the support of prominent national factions. On one hand, the U.S. Chamber of Commerce and the Securities Industry and Financial Markets Association have urged the Second Circuit to uphold Goldman’s arbitration right. On the other hand, organizations such as the National Association for the Advancement of Colored People Legal Defense and Education Fund (“NAACP”), the National Women’s Law Center, the National Employment Lawyers Association and Public Citizen have expressed support in favor of an employee’s interest in asserting a class action claim against discriminating employer and argue that arbitration agreements should be unenforceable if they preclude plaintiffs from vindicating claims that arise under Title VII. At Lax & Neville LLP, we represent individuals, securities industry employees, financial services professionals and securities industry companies seeking representation in employment matters and securities-related and commercial litigation, including discrimination claims. Please contact our team of attorneys for a consultation at (212) 696-1999.