United States District Court, S.D. New York
H. CRISTINA CHEN-OSTER, LISA PARISI, SHANNA ORLICH, ALLISON GAMBA, and MARY DE LUIS, Plaintiffs,
GOLDMAN, SACHS & CO. and THE GOLDMAN SACHS GROUP, INC., Defendants.
OPINION AND ORDER
ANALISA TORRES United States District Judge.
September 16, 2010, Plaintiffs, a group of women who worked
at Goldman, Sachs & Co. and The Goldman Sachs Group, Inc.
(collectively, “Goldman Sachs” or
“Defendants”), filed this putative class action
alleging gender discrimination under Title VII of the Civil
Rights Act of 1964, 42 U.S.C. § 2000e et seq., and the
New York City Human Rights Law (“NYCHRL”), N.Y.C.
Admin. Code § 8-101 et seq. On March 10, 2015, the
Honorable James C. Francis issued a Memorandum and Order
(“M&O”) excluding some, but not all, expert
testimony submitted in connection with Plaintiffs' motion
for class certification. Francis M&O, ECF No. 363. On the
same day, Judge Francis issued a Report and Recommendation
(“R&R”) recommending that the Court deny
Plaintiffs' motion. Francis R&R, ECF No. 364. The
Court held in abeyance briefing on objections to Judge
Francis' M&O and R&R as to Rule 23(b)(3) class
certification while it addressed other motions. See ECF Nos.
370, 437, 454. On April 28, 2017, the Court set a briefing
schedule for objections to the M&O and R&R, see ECF
No. 488, and briefs were fully submitted on August 1, 2017,
see ECF Nos. 522, 531-35. For the reasons stated below, the
parties' objections on expert testimony are OVERRULED.
Objections on class certification are SUSTAINED in part and
OVERRULED in part. Accordingly, Plaintiffs' motion to
certify the class pursuant to Rule 23(b)(3) is GRANTED in
part and DENIED in part.
H. Chen-Oster joined Goldman Sachs in March 1997. She worked
as a salesperson in the firm's Securities Division-first
in the Convertible Sales Business Unit and later in U.S.
Research Sales. Francis R&R, at 2. She held the title of
Vice President from June 1997 until she resigned in March
2005. Chen-Oster Decl. ¶ 3, ECF No. 253. Chen-Oster
claims she that was constructively discharged as a result of
systemic discrimination at the firm, Id.
¶¶ 3, 13, and that, because of her gender, she was
denied a fair performance review, denied fair pay, and denied
promotion to Managing Director, Id. ¶ 4. At the
time of the R&R, Chen-Oster still worked in the financial
services industry as a Managing Director for Deutsche Bank.
Id. ¶ 16; Class Cert. Hr'g Tr. I, at 113,
ECF No. 343; Francis R&R, at 3.
Shanna Orlich began working at Goldman Sachs in 2006 as a
summer associate, where she rotated through various trading
departments. Orlich Decl. ¶ 2, ECF No. 255. Orlich
returned to the firm in July 2007, working as an Associate in
the Securities Division. Id. ¶ 3. In November
2008, she was laid off. Id. at ¶ 4; Francis
R&R, at 3. Orlich contends that during her time at the
firm she was subjected to an unfair performance review and
lower pay because of her gender. Orlich Decl. ¶¶ 4,
6-8. She also reports a culture that is “hostile to
women.” Id. ¶ 9. She cites examples such
as her male Managing Director hiring scantily clad female
escorts to attend a holiday party, and a Vice President
inviting every man in her department to attend a golf game,
but not Orlich, despite Orlich having played varsity golf in
high school. Id.
Allison Gamba joined Goldman Sachs as a trader in 2001 when
it acquired her then-employer Spear, Leeds & Kellogg,
L.P. Gamba Decl. ¶ 3, ECF No. 254; Second Am. Compl.
¶ 16, ECF No. 411. In 2003, she began working in the
Securities Exchange Equities unit, and in about 2005 or 2006,
she was promoted to Vice President of that unit. Id.
Gamba avers that, because of her gender, she faced
discriminatory performance reviews and compensation, and that
she was passed over in 2008 for a promotion to Managing
Partner- despite earning the firm significant profits during
her tenure as Vice President. Id. ¶¶ 5-9,
11. After she assumed control of her section in 2006, for
example, stock earnings quadrupled to $4 million.
Id. ¶ 11. Likewise, profits rose to $6 million
in 2007 and $9.5 million in 2008. Id. Like Orlich,
Gamba also reports experiencing what she calls a
“boy's club” culture at the firm, such as
exclusion from events such as barbeques and golf outings
organized and attended by her male colleagues. Id.
¶ 18. She left the firm in August 2014, when Goldman
Sachs sold the business unit in which she worked. Second Am.
Compl. ¶ 16; Answer ¶ 16, ECF No. 426.
Mary De Luis began working for Goldman Sachs in 2010 as a
Senior Analyst in the Investment Management Division. Second
Am. Compl. ¶ 137. In 2012, she was promoted to the position
of Associate, and later to Vice President in December 2014.
Id. De Luis believes that her gender influenced
unfair performance evaluations and a smaller bonus.
Id. ¶ 139. For example, De Luis alleges that
when she told her male supervisors that she was
undercompensated compared to the market, they brought up the
career of her male domestic partner, who is an oncologist.
Id. ¶¶ 141-42.
bring this action on behalf of a class of similarly situated
current and former female Associates and Vice Presidents
employed by Goldman Sachs in revenue-generating divisions:
Investment Banking, Investment Management, and Securities.
Id. ¶ 10 n.1. The class covers employees at
Goldman Sachs and its predecessors in the United States from
September 10, 2004 through the resolution of this action,
Id. ¶ 61, and employees working in New York
City from July 7, 2002 through the resolution of this action,
Id. ¶ 62. Although “the precise No. of
female financial-services employees at the Associate and
Vice President levels at Goldman Sachs” is not known,
Id. ¶ 64, the parties estimate the class size
is between approximately 1, 762 and 2, 300 persons.
allege that Goldman Sachs has discriminated against class
members in evaluation, compensation, and promotion. See
generally Second Am. Compl. Specifically, Plaintiffs claim
that Goldman Sachs (1) employs multiple facially neutral
policies that have a disparate impact on women, (2) continues
to employ those policies despite knowledge of their disparate
impact on women, and (3) maintains a “boy's
club” culture that discriminates against women.
Sachs is a leading financial services company headquartered
in New York. The named Plaintiffs have worked in three out of
four of Goldman Sachs' revenue-generating divisions:
Investment Banking, Investment Management, and Securities.
These divisions are ach split into two subdivisions. The
Securities Division is divided into Fixed Income, Currencies
and Commodities (“FICC”) and Equities. Kirk Decl.
¶ 3, ECF No. 279; Levene Decl. ¶ 2, ECF No. 280.
The Investment Banking Division contains Classic Banking and
Financing. Francis R&R, at 5; Packer Decl. ¶ 3, ECF
No. 284; Benz Decl. ¶ 3, ECF No. 266. And the Investment
Management Division is divided into Private Wealth Management
and Goldman Sachs Asset Management. Francis R&R, at 4-5;
Taylor Decl. ¶ 3, ECF No. 291.
each of these subdivisions are even more specialized business
units. See Schematic of Business Units, ECF No. 264-1. For
example, within the Financing subdivision are business units
organized by product, such as Leveraged Finance, Structured
Finance, and Equity Capital Markets. Benz Decl. ¶ 3.
Business units in the Classic Banking Subdivision are
organized by industry, including Industrials, Consumer
Retail, and Technology/Media and Telecommunications.
units are not stable; they move between divisions and
subdivisions and can be eliminated or consolidated. The
Public Sector & Infrastructure business unit, for
instance, which is currently housed in the Investment Banking
Division, Benz Decl. ¶ 2, has moved from the FICC
subdivision (itself housed within a different overall
division, Securities), to the Classic Banking subdivision, to
the Financing subdivision, Id. ¶ 13. In a
similar vein, in 2003, there were as many as 227 business
units, but as few as 94 two years later in 2005. Farber
Rebuttal ¶ 32, ECF No. 314; Class Cert. Hr'g Tr. II,
at 218, ECF No. 345. Across business units, Goldman Sachs
employed two systems for evaluating its employees, known as
“360 review” and “manager
year, every Goldman Sachs professional undergoes the 360
review process. At the outset, each employee performs a
self-evaluation and names 8 to 12 evaluators-subordinates,
bosses, peers, and internal clients-with whom he or she has
recently worked. Kung Dep. at 280-81, ECF Nos. 265-11,
265-12, 265-13. An employee's direct manager may modify
the list of evaluators, typically in consultation with that
employee. Id. at 281-85. The evaluators, who are
pulled from both the employee's business unit and other
units, Geman Decl. ¶¶ 5-6, ECF No. 311, then assign
a numerical value to a range of criteria. In one year, all
Goldman Sachs professionals were evaluated on these criteria:
“Technical Skills, ” “Communication Skills,
” “Judgment, ” “Teamwork, ”
“Compliance, ” “Diversity, ”
“Leadership, ” “Overall Commercial
Effectiveness, ” and “Overall Professional
Performance.” Francis R&R, at 7; see also Kung Dep.
at 305-07. The 360 review process was employed across each of
Goldman Sachs' divisions throughout the class period.
After the 360 review process is complete, managers receive
the reviews and then add their own evaluations and narrative
summaries. Kung Dep. at 321.
second evaluation procedure Goldman Sachs uses is
“quartiling, ” or what Plaintiffs refer to as
“forced ranking.” Managers assign each
professional to one of five “quartiles.” The top
25% of employees go to quartile 1, the next 25% to quartile
2, the next 25% to quartile 3, the next 15% to quartile 4,
and the bottom 10% to quartile 5. Kung Dep. 316-18; Francis
R&R, at 8.
Sachs instructed its managers to place employees in one of
the five quartiles based on seven factors: (1) 360 review
data, (2) quality of performance, (3) long-term commercial
impact or contribution, (4) technical and functional
expertise, (5) potential to assume increasing responsibility,
(6) leadership and management skills, and (7) diversity and
citizenship-related activities. Manager Performance Rating
Toolkit, ECF No. 265-16; see also Guidelines for the Manager
Performance Rank, ECF No. 265-17 (instructing managers to
rank employees based on their “performance,
contribution, and potential relative to: (1) expectations for
that individual's level of experience and position; and
(2) that individual's peers”). Generally, quartile
ranking “relies heavily on the results of the 360
review process and on production numbers, where
present.” Ward Report, at 32, ECF Nos. 298, 298-1; see
also Guidelines for the Manager Performance Rank
(“Comments and ratings from 360 reviewers and any
relevant midyear comments should be a key input for your
ranking decisions.”). Goldman Sachs guidelines also
advise that rankings “should approximate a forced
distribution over the entire division, but need not be
exact.” Guidelines for the Manager Performance Rank;
see also Heller Dep. at 322, ECF No. 248-21 (noting that
quartiles have “soft edges”).
conclusion of the quartiling process, managers ensure the
units have complied with distribution goals. See Heller Dep.
84:15-85:2, 90:17-91:1, 320-21; Landman Dep. at 15:3-11, ECF
Nos. 248-13, 265-14; Larson Dep. at 191:23-192:10, ECF Nos.
248-24, 265-19, 358-5; Kung Dep. at 311:16-312:8. That is,
managers may move employees to different quartiles in order
to enforce the distribution and avoid “grade
inflation.” Francis R&R, at 9; Heller Dep. at
320-21; Kung Dep. at 322, 332; Larson Dep. at 161-62, 187-88;
see also Campion Report ¶¶ 50, 59, ECF No. 294
(forced ranking “mitigates the tendency to homogenize
evaluation scores” and to award everyone “an
above-average rating”). In a similar vein, Human
Capital Management-Goldman Sachs' human resources
department-will inquire and adjust rankings if there are
great discrepancies between the 360 reviews and the quartile.
Kung Dep. at 325-27.
at Goldman Sachs are typically compensated with a base salary
and a year-end bonus, with the bonus representing the largest
portion of a professional's annual compensation. Francis
R&R, at 10; Mehling Dep. at 226-27, ECF Nos. 248-25,
265-22, 358-6. Some professionals, such as Private Wealth
Advisors, receive a cut of commissions rather than a year-end
process of determining compensation begins with Goldman Sachs
allocating a budget to each division in the company. Francis
R&R, at 10; Kung Dep. at 56-57; Larson Dep. at 60.
Managers at the division level, typically the Chief Operating
Officer and Chief Financial Officer, then further divide the
budget among the various business units. Francis R&R, at
10; Kung Dep. at 56-57; Larson Dep. at 61. Managers then
recommend compensation for specific employees. Francis
R&R, at 10; Kung Dep. at 58-59; Larson Dep. at 61.
Compensation recommendations then wind their way back up the
chain, Francis R&R, at 10, with compensation proposals
reviewed by the business unit head, then reviewed by a
division-wide compensation committee, and finally, by the
firm-wide compensation committee, id. at 10-11; Kung
Dep. at 59-60, 64-67, 68-70; Heller Dep. at 24; Larson Dep.
at 62-63. Quartile scores informed but were not determinative
of compensation decisions. See, e.g., Casturo Decl.
¶ 17, ECF No. 268 (“[W]e consider manager quartile
in making compensation decisions for both sales
representatives and traders . . . . [but] it is just one
input into compensation determinations.”); McNamara
Decl. ¶ 18 n.5, ECF No. 282.
Goldman Sachs, the vetting process for promoting Vice
Presidents to Managing Directors is known as
“cross-ruffing.” Francis R&R, at 11; Kung
Dep. at 398; Heller Dep. at 80; Larson Dep. at 227.
Cross-ruffing does not involve an application process;
rather, the firm selects Vice Presidents to promote through
cross-ruffing. Vice Presidents generally need to rank in the
first or second quartile to be promoted. Kung Dep. at 429
(“[O]ur strongest performers are promoted and typically
they would be ranked Q1s and Q2s.”).
outset, human resources staff work with business unit heads
and other managers to develop a division-wide list of
candidates for promotion. Heller Dep. at 205:18-23, 234:1-3;
Larson Dep. at 227:15-21; Kung Dep. at 414-15, 419:5-24;
see also Ward Report, at 73. The list is often
ranked to emphasize priority candidates. There is significant
overlap between the persons on the compensation committee and
the persons on the cross-ruffing committee that determines
eligibility for promotion. Larson Dep. at 228.
list of candidates then goes to division heads. Larson Dep.
at 232. Division heads may remove or add a candidate, and
they may modify their relative rank. Kung Dep. at 417-21;
Larson Dep. at 232-35. Following approval by the division
head, the list goes onto the firm-wide talent assessment
group. Larson Dep. at 240.
addition to compiling a list of candidates for promotion, the
firm develops a list of “cross-ruffers.”
Cross-ruffers are Managing Directors at the firm who evaluate
the candidates. Heller Dep. at 218, 224; Larson Dep. at 224;
Kung Dep. at 440-42. Human resources initially generates a
list of proposed cross-ruffers in consultation with the
division heads, which is then submitted to the firmwide
talent assessment group. Larson Dep. at 235, 240. After the
cross-ruffers are chosen, they are trained by the firm-wide
talent assessment group. Id. at 241.
process of evaluating the candidates primarily involves
interviewing about a dozen persons familiar with the
candidate's work, including managers, peers, and internal
clients. Id. at 242-44. Cross-ruffers will be
assigned a handful of candidates for evaluation who are
outside the cross-ruffer's business unit. In the course
of their interviews, cross-ruffers complete standardized
forms and criteria to be discussed in the interviews.
Id. at 245. After the interviews are complete, the
cross-ruffers meet for a day-long meeting to develop a ranked
list of candidates, which is ultimately submitted to the
firm-wide talent assessment group and division heads. Larson
Dep. at 245-46; Heller Dep. at 226; Kung Dep. at 448-49.
Ultimately, Goldman Sachs' management committee decides
who is promoted. Larson Dep. at 248-50; Francis R&R, at
September 16, 2010, Plaintiffs H. Christina Chen-Oster and
Shanna Orlich filed this putative class action alleging
intentional discrimination, disparate impact discrimination,
retaliation, and pregnancy discrimination under Title VII and
the NYCHRL. ECF No. 5. The Honorable Leonard B. Sand
originally presided over this case, before it was reassigned
to the undersigned on May 24, 2013. ECF No. 181.
case's long and circuitous history is largely
attributable to a dispute over whether former Goldman Sachs
employees can obtain injunctive and declaratory relief
against the firm. In 2012, Judge Sand ruled that they could
not, granting Goldman Sachs' motion to strike
Plaintiffs' Rule 23(b)(2) class allegations for want of
standing. ECF No. 158 at 14; Chen-Oster v. Goldman, Sachs
& Co., 877 F.Supp.2d 113, 122 (S.D.N.Y. 2012). That
is, Judge Sand held that Plaintiffs who no longer worked at
Goldman Sachs lacked standing as a class to enjoin or declare
unlawful the firm's practices that allegedly
discriminated against women. Chen-Oster, 877
F.Supp.2d at 122.
April 13, 2015, Plaintiffs filed a motion to add two
additional named Plaintiffs, Allison Gamba and Mary De Luis,
ECF No. 377, which was granted on August 3, 2015, ECF No.
410; see also ECF No. 450 (affirming magistrate
order at ECF No. 410). That same day, Plaintiffs filed a
second amended complaint that included Gamba's and De
Luis' claims. ECF No. 411.
on Judge Sand's 2012 order, ECF No. 158, Defendants moved
to dismiss Gamba's claims for injunctive and declaratory
relief on September 28, 2015, ECF No. 441. In a similar vein,
by letter dated May 9, 2016, Defendants notified the Court
that De Luis no longer worked for Goldman Sachs, ECF No. 446,
and subsequently moved to dismiss her claims on the same
ground, ECF No. 457.
April 12, 2017, the Court denied Goldman Sachs' motion to
dismiss Gamba and De Luis' claims for injunctive and
declaratory relief, and permitted Plaintiffs to file a
supplemental complaint, ECF No. 479, which they did on April
12, 2017, ECF No. 486. Because the rule of law announced in
Judge Sand's 2012 order relied on dicta and was in
conflict with several other decisions considering the issue,
the Court abrogated it and revived Plaintiffs' claims for
declaratory and injunctive relief. ECF No. 479, at 5-11. In
effect, the Court reasoned that because a former employee may
face the same allegedly discriminatory policy after she is
reinstated, she has standing to sue for injunctive and
declaratory relief. See id.
Sachs sought interlocutory review of this ruling on April 25,
2017. ECF No. 484. On June 14, 2017, the Court granted
Goldman Sachs' request and certified two questions for
appeal: (1) whether former employees lack standing to seek
injunctive or declaratory relief against their former
employer, and (2) whether a former employee who has not
alleged unlawful discharge can seek the remedy of
reinstatement under Title VII. ECF No. 500. On August 29,
2017, the Second Circuit denied Goldman Sachs' petition
for interlocutory review. ECF No. 539.
Class Certification and Daubert Motions
filed their motion for class certification on May 19, 2014,
ECF No. 246, and the Court referred it to the Honorable James
C. Francis for a Report and Recommendation, ECF No. 240.
Judge Francis held a two-day hearing on the admissibility of
expert testimony and class certification. See
generally Class Cert. Hr'g Tr. I; Class Cert.
Hr'g Tr. II. The M&O on expert testimony excluded
some, but not all, expert testimony submitted in connection
with Plaintiffs' motion for class certification. See
generally Francis M&O. The R&R determined that
all factors of Rule 23(a)-numerosity, commonality,
typicality, and adequacy-had been satisfied. Yet, Judge
Francis ultimately recommended against certifying a class
pursuant to Rule 23(b)(3) because individual causation issues
would predominate over class-wide issues. Francis R&R, at
6-14, 24-35. And in reliance on Judge Sand's 2012 order,
the R&R also recommended that former employees could not
seek injunctive or declaratory relief.
August 30, 2017, the Court revived Plaintiffs' injunctive
and declaratory class claims after the Second Circuit's
denial of interlocutory review, and vacated those parts of
the R&R that, in reliance upon Judge Sand's earlier
ruling, recommended that Rule 23(b)(2) and (c)(4) class
certification were unavailable to Plaintiffs. ECF No. 540.
result, this opinion addresses only the portion of
Plaintiffs' motion that seeks class certification under
Rule 23(b)(3). Class claims for injunctive and declaratory
relief under Rule 23(b)(2) and (c)(4) are now being pursued
on a separate track-currently scheduled to be fully submitted
in late 2018. See ECF No. 568.
Rule 702 of the Federal Rules of Evidence, expert testimony
may be admitted if it (1) “help[s] the trier of fact to
understand the evidence or to determine a fact in issue,
” (2) “is based on sufficient facts or data,
” (3) “is the product of reliable principles and
methods, ” and (4) “the expert has reliably
applied the principles and methods to the facts of the
case.” Fed.R.Evid. 702. In other words, Rule 702
requires expert testimony to “be not only relevant, but
reliable.” United States v. Romano, 794 F.3d
317, 330 (2d Cir. 2015).
Supreme Court's decision in Daubert detailed
factors for district courts to consider in determining
reliability, “includ[ing] the theory's testability,
the extent to which it ‘has been subjected to peer
review and publication, ' the extent to which a technique
is subject to ‘standards controlling the
technique's operation, ' the ‘known or
potential rate of error, ' and the ‘degree of
acceptance' within the ‘relevant scientific
community.'” Id. (quoting Daubert v.
Merrell Dow Pharm., Inc., 509 U.S. 579, 593-94 (1993)).
“Under Daubert and Rule 702, expert testimony
should be excluded if the witness is not actually applying
expert methodology.” United States v.
Dukagjini, 326 F.3d 45, 54 (2d Cir. 2003).
Standard of Review
district court reviews a magistrate judge's decision to
admit or exclude expert testimony under the “clearly
erroneous or contrary to law” standard. 28 U.S.C.
§ 636(b)(1)(A); see also Sansalone v. Bon Secours
Charity Health Sys., Inc., No. 05 Civ. 8606, 2009 WL
1649597, at *1 (S.D.N.Y. June 11, 2009) (explaining that
“the decision to admit or exclude expert testimony is
considered nondispositive of an action” and, therefore,
the “‘clearly erroneous or contrary to law'
standard of review . . . [of] Federal Rule of Civil Procedure
72” applies). “An order is clearly erroneous if
the reviewing court is left with the definite and firm
conviction that a mistake has been committed.”
Lifeguard Licensing Corp. v. Ann Arbor T-Shirt Co.,
LLC, No. 15 Civ. 8459, 2017 WL 3142072, at *1 (S.D.N.Y.
July 24, 2017) (internal quotation marks omitted). “An
order is contrary to law when it fails to apply or misapplies
relevant statutes, case law or rules of procedure.”
Id. Here, the Court concludes that the M&O does
not contain clear error and is not contrary to law.
Michael A. Campion
Francis denied Plaintiffs' motion to strike portions of
an expert report prepared for Defendants by Michael A.
Campion, Ph.D., a Professor of Management at Purdue
University. See Francis M&O, at 33-34. Judge
Francis reasoned that Plaintiffs' argument went
“exclusively to Dr. Campion's opinions on the
merits of their claims and not to issues of class
certification, ” and, accordingly, denied their motion
as premature. Id. at 34. In their objections,
Plaintiffs do not argue that Dr. Campion's opinions do,
in fact, go to class certification. Rather, they argue only
that “another Court may determine otherwise” and
Judge Francis' ruling thereby “opens ...