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February 24, 1999


The opinion of the court was delivered by: Scheindlin, District Judge.


Plaintiff, Elizabeth Sobol, claims that defendant, Kidder, Peabody & Co. ("Kidder Peabody") violated the federal Equal Pay Act, 29 U.S.C. § 206(d)(1) ("EPA"), Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e-2, et seq. ("Title VII"), and the Age Discrimination in Employment Act ("ADEA"), 29 U.S.C. § 623(e)(1). Plaintiff also alleges that Kidder Peabody violated the following state and local statutes: New York Labor Law § 194 (New York State's Equal Pay Act), New York Executive Law § 296 and the New York City Human Rights Law ("NYCHRL") § 8-107.

In March 1992, Sobol and Kidder Peabody executed a Stipulation and Order to arbitrate her claims before the National Association of Securities Dealers ("NASD").*fn1 Sobol reserved her right to appeal the arbitrability of this case and her right to appeal the arbitration award. See Affidavit of Jeffrey Liddle, counsel for plaintiff, dated September 30, 1998 ("Liddle Aff."), Ex. G.

Sobol's NASD arbitration consisted of 62 hearing sessions conducted between October 1994 and May 1998.*fn2 The arbitration panel was chaired by Kenneth Cutler, then general counsel of Lord, Abbett & Co. James Madan and Jerome Levy, both full-time arbitrators who had retired from management positions at Norton-Simon, Inc. and Goldman Sachs respectively, were the two other members of the panel. Both Sobol and Kidder Peabody submitted post-hearing briefs. See briefs attached to Liddle Aff., Ex. E and Affidavit of Rene Johnson, counsel for defendant, dated November 17, 1998 ("Johnson Aff."), Ex. A.

On July 7, 1998, the panel dismissed Sobol's claims in their entirety and divided the $50,400 in forum fees between the parties, assessing $25,650 against Sobol and $24,750 against Kidder Peabody. Kidder Peabody now moves to confirm the arbitration award rendered in its favor. Plaintiff, in turn, seeks to vacate the award and the panel's assessment of forum fees.

I. Background

A. Sobol's Tenure at Kidder Peabody

Sobol joined Kidder Peabody in 1981 as a member of its Utility Finance Department.*fn3 She became the managing director of the Department in 1987 and its head in 1988. Under her leadership, the Department increased its revenue between 1988 and 1990.*fn4 In 1988, Sobol completed the Utah Power & Light deal, generating revenues of $7.5 million, which was, at that time, the largest merger and acquisition transaction ever completed in the utilities industry. See Liddle Aff., Ex. A, SA 560. Sobol was the highest compensated female at the firm throughout her tenure.*fn5

Sobol alleges that she was forced to resign in March 1991, at age 46, because Scott Newquist, head of the Investment Banking Department and her supervisor, made her life unbearable. According to Sobol, Newquist belittled her abilities, undermined her authority, threatened to remove her as head of the Utility Group or to appoint a co-head. Prior to her resignation, Sobol never complained of sex or age discrimination, nor of unequal pay. See Johnson Aff., Vol. II, Arbitration Transcripts: Newquist, 2400; Mike Madden, Head of Investment Banking, 1662; Granville Bowie, Head of Human Resources, 1048; and Michael Carpenter, Chief Executive Officer ("CEO"), 1798. After her resignation, Sobol and Kidder Peabody attempted to negotiate an agreement to permit Sobol to remain with the firm as a consultant. See id: Sobol, 3812.

B. Evidence of Pay Disparities

1. By Sex

During the arbitration, the panel heard evidence of gender-based pay disparities between 1985 and 1991. Sobol compared her pay to the higher compensation of other heads of departments and investment bankers.*fn6 Sobol also offered evidence of unequal pay on an institutional level. Sobol was the only female single-head of an industry group within the investment banking department. Apparently, all other females heading industry groups shared their authority with a male co-head. See Liddle Aff., Ex. A, SA 1435-1437. Michael Carpenter, who became CEO in January 1989, testified that co-head positions were created in situations when "you had two very senior people of equal stature" or "where you had two individuals, one of whom was better at administering, and the other one was better at new business." Id. Ex. B., SA 2019. In all situations in which a male and female co-headed an industry group, the male was compensated more than the female.*fn7 Within the pool of "managing directors", the percentage by which male compensation exceeded female compensation varied from 3% to as much as 55% between the years 1985 and 1991. See id., Ex. A, SA 1306-1314; Ex. C. SA 4396.

2. By Age

When age is taken into account in examining the pool of managing directors, the percentage by which compensation of males under 40 exceeds compensation of females over 40 varied from 20% to as much as 174% between 1985 and 1991.*fn8 See id., SA 1315-1323; Ex. C, SA 4395. Sobol presented evidence indicating that Kidder Peabody took into account employees' ages when conducting the firm's annual Organization and Staffing Reviews for its corporate parent, the General Electric Company. One document entitled "High Potential Future Business Leaders" lists the names, ages, positions, and long term potential for approximately twenty executives. See id., Ex. C, SA 4409. A second document, entitled "1989 Key Talent" lists the names, titles, ages and miscellaneous comments regarding approximately twenty-five managing directors and vice presidents. See id., SA 4409. The comments state that Sobol is: "[s]olid, productive — not a large component manager." A 35 year-old managing director is described as a "[g]ood young banker"; a 31 year-old senior vice president is a "[s]trong young banker"; a 34 year-old vice president is a "very talented young banker"; and a 29 year-old vice president is described as "bright young high potential". Id., SA 4410 (emphasis added). A third document lists the names, ages, titles and comments on the long term potential of "High Contribution Women." Sobol, one of the five women listed, is described as an "[e]ffective banker in male-dominated Utility industry. Not an effective manager; no strong desire to manage vs. produce. No significant managerial growth potential." Id., SA 4412.

3. Kidder Peabody's Compensation Rationale

Kidder Peabody never undertook a wage-parity study regarding age or sex. See id., Ex. B., SA 2177, 2493, 2562. In its defense, Kidder Peabody explains that its compensation is highly individualized. A multitude of factors other than job title or rank justify the pay differences between Sobol and her male counterparts, including profitability, market value, revenue generation, client relationships, product development abilities, product knowledge, leadership abilities and corporate citizenship. See Defendant's Memorandum of Law in Opposition to Plaintiff's Cross-Motion to Vacate Arbitration Award ("Defs.Mem.") at 5. For example, compensation depended, in large part, on the market value of each specialty group. Kidder Peabody characterizes Sobol's Utility group as "a relatively slow-paced, unprofitable industry group," while other groups such as Media, Environmental, Restructuring, and M & A were "busier and more profitable." See Johnson Aff., Vol. II: Blemaster, 6109, 6129-30; Newquist, 2153-54, 2256, 5379, 5383-86, 5394-97; Douglas Tansill, investment banker, 6038; Carpenter, 6340, 6343; Madden 1587-88.

In addition, compensation was related to profitability — M & A deals were highly profitable, utility deals tended to be "loss leaders and unprofitable." Id.: Madden, 5131; Blemaster, 6123-33; Newquist, 5469, 5836-37. Kidder Peabody maintains that during Sobol's tenure, the Utility Group's profitability was sluggish; it lost market share and prestige. See id.: Carpenter, 1822-23, 6343; Newquist, 2414-17, 5443-44; Madden, 5182. Other factors also led to differences in pay between individual investment bankers. A period of unprofitability in 1988 and 1989, followed by the resignation of many talented investment bankers compelled Kidder Peabody to offer attractive multi-year compensation packages to attract new talent. See id.: Newquist, 2270-74; Carpenter, 1800.

C. Sobol's Resignation

Sobol alleges that she was forced to resign by Scott Newquist's "humiliating threats" to appoint a co-head to lead her Group.

  I felt that my relationship with [Newquist] had
  deteriorated so badly that my future position at the
  firm would be so awful that my position and my
  department was very much at question, that I felt I
  had to resign at that point. I didn't think I had a
  choice. . . . I had already been told my all-in
  compensation would be reduced significantly; I felt .
  . . my position at the firm was deteriorating

Liddle Aff., Ex. B, SA 3145.

Sobol had complained many times to Nancy Quinn, co-head of the Natural Resources Group, of Newquist's lack of support and his attempts to undermine her efforts as head of the Utility Group. See id., SA 3515. Quinn characterized Newquist as having a "very combative style of management." Id. According to Don Campbell, an investment banker in the Utilities Group, Newquist "wanted to appear to be very much in control." Id., SA 3557. Newquist was "very combative, very clipped, very curt"; a "difficult personality" who "if you showed any sign of weakness to him he was at ...

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