Morgan Stanley Private Bank has moved to vacate a $1.6 million arbitration award it was forced to pay a former employee for age and sexual discrimination, arguing, among other things, that the case’s arbitrator had a conflict of interest and slept through some of the proceedings. Morgan Stanley also claims that the attorney’s fees in the case were egregiously high, at nearly $1 million of the award.
The ex-employee’s attorney, meanwhile, said that Morgan Stanley is using misdirection to distract from the main point of the case: that the private bank showed a provable pattern of discrimination over the years against older white males, favoring females and people of color.
“In my view it’s probably one of the more impactful arbitrations recently on the topic of discriminatory policies in the financial sector,” said Josh Van Kampen, the attorney for Charles Randall, a private bank employee who was fired from Morgan Stanley in 2018.
Randall won $373,180 in back pay as well as $250,000 in punitive damages.
“It was an individual discrimination case; however, we put on evidence of what we considered to be a pattern in practice of Morgan Stanley having policies that were provided unlawful preferential treatment in certain groups,” Van Kampen said.
The arbitration was filed through JAMS, a dispute resolution service, and the arbitrator was Terrence Lee Croft, who, according to the JAMS website, has resolved more than 3,500 disputes. Croft conducted the hearing via Zoom, through Atlanta.
According to Morgan Stanley, Croft had a conflict of interest since he had previously filed fraud claims against Shearson Lehman Brothers, a Morgan Stanley predecessor, for an investment of more than $50,000 and sought punitive damages for fraud and conspiracy, the bank’s complaint says.
“The misconduct included, but was not limited to, the arbitrator having been observed sleeping through critical portions of the hearing, always during respondent’s witnesses,” Morgan Stanley claims in its petition. “For example, the arbitrator was observed sleeping at least four times during the testimony of a critical witness for [Morgan Stanley Private Bank] and then made a finding adverse to MSPB regarding that witness’s role in the matter.”
Croft did not return a call for comment.
Randall, who also goes by “Chip,” started with a Long Island complex of Morgan Stanley in 2010, where he partnered with branch managers and financial advisors to provide bank products to wealth management clients. Three years later, the court documents said, he moved to the bank’s Carolina complex, which Randall said was more troubled and under-resourced and faced “myriad” competitive challenges. He eventually came under new bosses and the leadership was focused on improving diversity metrics. He said that in his original complaint that he received positive evaluations and had good relationships with them, but that eventually the relationship soured, and that one of his superiors used underwhelming revenue performance metrics as an excuse for his termination. Randall said in his complaint that these numbers held him to a disparate standard.
He said that members of the female leadership team described one branch’s problems as “too old, too white and too male.”
“This evidence cumulatively establishes a pattern of behavior by [Randall’s boss] exhibiting bias in favor of women over men, which dovetails with the institutional evidence to present a compelling case that had claimant been a female, he more likely than not would have been treated much more favorably,” Randall’s complaint said.
Van Kampen, Randall’s attorney, points to other things he said created a discriminatory corporate culture, including a 2012 parody in-house video of the Hunger Games in which his boss appears to kill two white older males while sparing a female African-American and a female Asian-American. Van Kampen also points to the company’s decision “to limit the prestigious MAKERS Award to women only; and [a] corporate commissioned study—H.E.R.S.—promulgating research concluding that advancing women generated more profit.” And he said that the company had devised a “facially discriminatory” bonus plan that “incentivized the advancement of women over men.”
Morgan Stanley had also argued against the $993,732 in fees, costs and expenses awarded to the client and that the counsel had requested a rate of $550 per hour for himself, $350 per hour for associates and $100 per hour for staff. The arbitrator said he found the argument for these costs persuasive because of the extensive work done for years on the case, while Morgan Stanley called it too much money for too much redundant work by unnecessary people and that the costs should be half that.
Van Kampen didn’t want to comment on his costs. He said the bigger picture was Morgan Stanley’s discrimination:
“Over several years of litigation and a nine-day hearing, Morgan Stanley had no issue with arbitrator Croft’s adjudication of hearing,” the attorney said. “It was only after it lost that MS hired a private investigator in search of a conflict of interest, and even then all it found was a 30-year-old lawsuit against a distant corporate predecessor.”
A report by McKinsey & Co. said that there’s a lack of gender diversity in banking that “reflects the reality in financial services overall, with an even split between men and women at entry level that declines with each rung up the ladder.
“Women make up 53% of the entry-level banking workforce but less than one-third at the SVP and C-suite levels,” McKinsey said. “Notably, nearly one in four employees at the entry level is a woman of color, though this falls to one in 20 at the C-suite level—on par with both the financial-services and cross-industry average.”
Morgan Stanley said it "strongly disagrees with the decision in this matter. The firm sees no conflict between its commitment to diversity and inclusion and the law, and believes the arbitrator evaluating this employee’s claims got it wrong." The bank had said in other reports that Randall was simply fired for poor performance and that he was replaced by another male over 40.