November 18, 1997

Smith Barney Set to Settle Sex-Bias Lawsuit

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By PETER TRUELL

EW YORK -- Smith Barney Inc. is expected to announce Tuesday a settlement of a class-action lawsuit that accused the firm of denying women promotions and doing nothing while brokers harassed women employees.

Under the settlement, women employees would take their claims to an independent arbitrator outside the securities industry, people involved with the negotiations said.

Such a move is a radical departure for a Wall Street firm. Wall Street firms have typically fought long and hard to have all disputes -- whether with clients or employees -- settled by industry arbitrators. Smith Barney will also institute programs aimed at encouraging fair treatment of women and minority employees.

The settlement does not, however, include any fixed amount of money. A person close to the claimants said Monday that the cost of the settlement might run to hundreds of millions of dollars. But a senior executive at Smith Barney who spoke on the condition of anonymity said that it was unrealistic to talk about such huge sums of money, and said there was no way the amount could be estimated.

Mary Stowell and Linda Friedman, partners at the Chicago law firm of Leng Stowell Friedman & Vernon, who are representing the Smith Barney women, did not return telephone messages left at their offices Monday. Michael E. Schlein, director for development at Smith Barney, declined to comment.

The class action was filed in U.S. District Court in Manhattan in May 1996 by three female employees of Smith Barney, and was later joined by 22 other current and former employees of the brokerage firm, one of the nation's biggest.

The suit contended that Smith Barney, a subsidiary of Travelers Group Inc., had denied women promotions and that male brokers had routinely subjected them to abuse and unwanted sexual advances.

Their complaints, the suit and a related lawsuit filed in California said, were either ignored by Smith Barney managers or investigated in a prejudiced manner in which the identities of the women were disclosed prematurely, exposing them to retaliation.

In one instance, at a Smith Barney branch on Long Island, women were allegedly groped and humiliated by senior male colleagues in what was known as the boom-boom room.

The settlement covers any woman who worked at Smith Barney in the retail, investment banking or capital markets divisions since May 20, 1993. That includes several thousand potential claimants, according to a person involved with the class action.

Wall Street remains in large part a preserve for white males, and has successfully evaded civil rights laws, critics say, by insuring that its employment disputes are settled by industry panels. Women bringing complaints of harassment have said that they feared that they would receive biased treatment from the closed-door deliberations of industry panels.

The settlement that is expected to be announced Tuesday would involve a three-step process for each of the claimants: informal discussions with the firm, mediation overseen by Duke University's dispute resolution group, and then arbitration by three panelists, which would also be overseen by the team from Duke. At least one of the three panelists would be a woman, and the panelists would be selected from a list of names agreed to by both the claimants and Smith Barney.

David Rotman, a mediator with Gregorio Haldeman Piazza, a firm that specializes in resolving disputes, structured the agreement, according to a person involved in the process. Rotman did not return a telephone message late Monday. A spokeswoman for the firm declined to comment.

"It's a good start, because it's the first time a Wall Street firm has agreed to accept a forum that they don't control," said Cliff Palefsky, a co-founder of the National Employment Lawyers Association, who heads that body's committee on securities industry arbitration and who was already familiar with aspects of the settlement. "I think it has symbolic value," he said. "It's important to get the industry and the country focused on the sorry state of the securities industry when it comes to civil rights matters."

Other experts in employment law said the proposed settlement represented a significant change for the securities industry.

Judith P. Vladeck, an employment lawyer at the firm of Vladeck, Waldman, Elias & Engelhard, said when told of the settlement: "It would not be new in the discrimination context. But for Wall Street, it probably is new. The vice of the old system, was the women did not have a choice. They also were forced into a forum that was stacked against them. We are now embarking, it appears, on a better course."

But, many Wall Street firms still shun practices that are common in many American companies, critics say.

"Smith Barney still has in place personnel policies that violate the civil rights laws, and limit the remedies available for violations of the civil rights laws for all their employees, women and minorities alike," Palefsky of the National Employment Lawyers Association.

These violations, he said, particularly include punitive damages and attorney fees. "As long as Wall Street firms insist on maintaining those policies they will remain civil rights outlaws."