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Chen-Oster v. Goldman, Sachs & Co.

United States District Court, S.D. New York

March 30, 2018



          ANALISA TORRES United States District Judge.

         On 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.


         I. Individual Plaintiffs

         A. H. Christina Chen-Oster

         Plaintiff 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.

         B. Shanna Orlich

         Plaintiff 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.

         C. Allison Gamba

         Plaintiff 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.

         D. Mary De Luis

         Plaintiff Mary De Luis began working for Goldman Sachs in 2010 as a Senior Analyst in the Investment Management Division. Second Am. Compl. ¶ 137.[1] 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.

         E. The Class

         Plaintiffs 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.

         Plaintiffs 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. Id.

         II. Goldman Sachs

         Goldman 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.

         Within 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. Id.

         Business 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 quartiling.”

         A. Performance Evaluation

         1. 360 Review

         Each 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.

         2. Quartiling

         The 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.

         Goldman 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”).

         At the 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.


         B. Compensation

         Professionals 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 bonus.

         The 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.

         C. Promotion

         At 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.”).

         At the 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.

         This 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.

         In 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.

         The 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 13-14.

         III. Procedural History

         On September 16, 2010, Plaintiffs H. Christina Chen-Oster and Shanna Orlich[2] 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.

         A. Standing

         This 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.

         On 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.

         Relying 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.

         On 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.

         Goldman 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.

         B. Class Certification and Daubert Motions

         Plaintiffs 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.

         On 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.

         As a 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.[3] See ECF No. 568.


         I. Expert Testimony

         A. Legal Standards

         1. Rule 702

         Under 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).

         The 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).

         2. Standard of Review

         A 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.

         B. Michael A. Campion

         Judge 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 ...

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