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DONALDSON v. MERRILL LYNCH & CO.

May 18, 1992

JUDITH DONALDSON, Plaintiff,
v.
MERRILL LYNCH & CO., INC., Defendant.


SWEET


The opinion of the court was delivered by: ROBERT W. SWEET

Sweet, D. J.

 The Parties

 Judith Donaldson is a female who resides in New Jersey. Prior to June 28, 1989, Donaldson was employed as an Associate in the Institutional Marketing Group of the Institutional Sales Division of the Capital Markets Sector of Merrill Lynch & Co. Merrill is a Delaware corporation licensed to do business in New York as a brokerage firm.

 Prior Proceedings

 After exhausting her administrative remedies, Donaldson filed a timely complaint on December 17, 1990. Merrill filed the present motion for summary judgment on November 1, 1991. Oral argument was heard, and the motion considered fully submitted on February 6, 1992.

 Background

 Donaldson was hired by Merrill in August 1987 for the position of Associate in the Business Analysis Group of the Strategic Development and Marketing Department in the Capital Markets Sector of Merrill. At the time she was hired, Donaldson was a doctoral candidate in biology at Harvard University, with an undergraduate degree in biology and a master's degree in Zoology. Prior to her employment by Merrill, Donaldson had been employed as a wildlife biologist for the Northwest Territories Wildlife Service, as director of research for an Eskimo organization in the Northwest Territories and as an expediter for a mining company. It is undisputed that Donaldson at no time has held an MBA degree. In fact, Merrill recruited Donaldson out of Harvard pursuant to a program instituted in the fall of 1986 to recruit graduate students from non-MBA programs. Donaldson admits that she had no experience in the securities industry, had never performed financial analytical work and had not received training in this area prior to joining Merrill. Her only business education was an accounting course.

 In or about June 1988, Donaldson became an Associate in the Institutional Marketing Group of the Institutional Sales Division of Merrill's Capital Markets Sector. At that time, the Institutional Marketing Group, at all relevant times headed by Hans Hawrysz ("Hawrysz"), was subdivided into seven sub-departments: EIS/Securities Pricing, Marketing Information Systems, Professional Training and Development, Research and Market Development, International Marketing, Taxable Fixed Income Sales and Institutional Sales. Relevant here are the Marketing Information Systems Department, headed by Christopher Kuehne ("Kuehne") and the Research and Market Development Department, headed by Craig Cadmus ("Cadmus") as of March 1988. The function of the former department was to provide "internal" support to the different divisions of the Capital Markets Group; the function of the latter was to provide "external" support. As described by Merrill, "internal" support entails improving the quality of Merrill's data base management and internal reporting system for the financial consultants selling Merrill products to the institutional marketplace; "external" support entails the identification of potential institutional clients and the expansion of existing institutional business through marketing research and analysis of different products offered and industries serviced by Merrill Lynch Capital Markets.

 Initially, Donaldson was positioned in the Marketing Information Systems Department under Kuehne. Although Donaldson was Kuehne's direct report, she received project assignments from Hawrysz, Cadmus and the other department managers in the Institutional Marketing Group during the latter half of 1988. The one formal evaluation of Donaldson submitted on this motion, prepared by Kuehne for the year 1988, assessed her work as "excellent," while indicating that knowledge of products was an area for "performance improvement."

 In January of 1989, Donaldson was transferred into the Research and Market Development Department because her analytical and statistical skills were viewed as more appropriate for that department. A Jan Moran simultaneously transferred from the Research and Market Development Department to the Marketing Information Services Department. As of Donaldson's transfer, the Research and Market Development Department was staffed by Donaldson, Josephine Dekkers ("Dekkers") and Rafael Berber ("Berber"), all associates, Danielle Gallina, a secretary, and Cadmus, a Vice President and the manager of the department.

 According to Cadmus, at all times Donaldson's direct supervisor in the Research and Market Development Department, Donaldson performed, and indeed was only "capable" of performing "secondary" research. As defined by Merrill, such research involves statistical analysis of data generated by another source, such as Merrill's own data base or an outside marketing research firm. By contrast, "primary research," as defined by Merrill, involves the development of the surveys and questionnaires used to elicit the data to be analyzed. According to Merrill, a good deal of Donaldson's time was devoted to analyzing data from the outside marketing research firm of Greenwich Research Company ("Greenwich"). Cadmus concedes that Donaldson also performed primary research functions on at least one project during the six- month period in which she worked for him. Specifically, he admits that she designed "from scratch" the surveys and questionnaires used in an internal study of Account Executives in the Equity Markets Division.

 Due to financial pressures resulting from the stock market crash in October 1987 and a $ 370 million trading loss in April 1987, Merrill implemented a series of cost containment measures between 1988 and the present. Among those measures was a hiring freeze beginning in 1988 that has continued and a reduction-in-force program ("RIF") in the Capital Markets Sector implemented in late December 1988 or early January 1989. As part of this program, the Capital Markets Sector was to reduce its headcount by approximately 500 employees from January 1989 through June 1989. Each division within the Capital Markets Sector was assigned a target headcount level to be reached by the end of June 1989. Over the first half of 1989, the Institutional Sales Division was to reduce its total headcount from 922 to 855. By July 17, 1989, Institutional Sales had lowered its headcount to 847. According to both Cadmus and James Baker ("Baker"), then Manager of Human Resource Services for the Capital Markets Sector, the "mandate" during the RIF was to "consolidate and upgrade the organization." Baker Aff. P16 (emphasis in original).

 According to Cadmus, in June 1989, Hawrysz directed him to do his part in the RIF by reducing his staff by one Associate. Kuehne was directed to reduce the headcount in the Marketing Information Services Department by two members. As manager of his department, it was within Cadmus's discretion to decide which of his Associates to terminate. Although Merrill imposed no specific criteria for making this determination, the voluntary "Staff Reduction Guidelines" (the "Guidelines") published by Capital Markets Human Resources Department provided that the first step in the termination process was for the "manager [to] review staff and make termination decisions based on assigned targets and employee's individual performance relative to the rest of the group." Cadmus Aff. Ex. C. The Guidelines then set forth an approval process for reviewing termination decisions prior to their execution.

 Meanwhile, Cadmus contends that the shifting needs of the departments Research and Market Development served warranted a deemphasis on secondary research (such as Greenwich) and the development of primary research capabilities in his department. In July, 1988, before Donaldson joined the department, Cadmus reported in a memorandum to Hawrysz that there was a "gap" in primary research skills in his department. Again in January 1989, after Donaldson joined the department, he stated in a memorandum to Hawrysz that a position remained "open" in the department for an Associate with primary research capabilities. Prior to writing the latter memorandum, Cadmus had sponsored an attempt to hire his former colleague Robert Ryan ("Ryan") into his department to fill this position. Subsequently, Hawrysz refused Cadmus authorization to extend the offer because of the hiring freeze. Previously, Cadmus had offered Ryan an position in March 1988, which Ryan declined.

 Unable to select one Associate for layoff, Cadmus decided that the only way to maintain, if not upgrade, the performance level of the department would be to terminate both Donaldson and Dekkers and hire Ryan, who could assume that portion of their duties that continued to be relevant while at the same time bringing primary research capabilities to the department. *fn1" Cadmus candidly admits that he specifically had Ryan in mind in devising how to achieve the headcount reduction. Ryan was experienced in performing both primary and secondary market research in a private industry setting, had an MBA degree and strong analytical, written and oral skills. Cadmus was familiar with Ryan's skills and capabilities because he had worked closely with Ryan in another department at Merrill for two years prior to becoming the manager of Research and Market Development. Cadmus thus eliminated two Marketing Research Associate positions and created the position of "Marketing Research Strategist." The job description, admittedly tailor-made to Ryan's qualifications, provided that the candidate should be:

 
Experienced in managing primary research studies on financial services in the Institutional market; conducting secondary research; developing marketing strategies. Must possess strong analytical, ...

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