Arbitrator awards $1.6M for institutional bias at Morgan Stanley 

In what plaintiff’s counsel called one of the more significant arbitration employment law awards in North Carolina, global financial services provider Morgan Stanley was ordered to pay more than $1.6 million after being found liable for sex and age discrimination against a 51-year-old, white, male plaintiff.  

The ruling came after several years of arbitration and a nine-day trial.  

Josh Van Kampen of Van Kampen Law in Charlotte, an attorney for plaintiff Charles Randall, said the April 13 award included back pay, punitive damages and attorneys’ fees and costs.  

Van Kampen said that the arbitrator, Terrence Lee Croft of Atlanta, made broad findings of institutional bias in favor of women at Morgan Stanley. Specifically, the company operated “a corporate culture steeped on giving women preferential treatment.” The discrimination was so overt, Van Kampen said, that it was the theme of a “smoking gun” video produced for a Morgan Stanley annual meeting.  

“Claimant went big in this arbitration by challenging that Morgan Stanley operated a corporate culture that explicitly favored women and disfavored older white males, and the arbitrator agreed and issued a large punitive damage award,” Van Kampen said.  

According to Croft’s findings, Morgan Stanley operated a facially discriminatory bonus plan incentivizing discrimination in favor of women, Latinos and African Americans. The company offered a formulaic metrics-based diversity award and a supplemental diversity award tied to the level of engagement and the quality of the manager’s efforts toward these groups. 

Defendant’s incentives challenged 

Van Kampen said that employers should pursue diversity in the workforce through hiring, but that Morgan Stanley crossed legal lines by incentivizing managers to terminate nondiverse employees to make way for diverse new hires.  

“Morgan Stanley went further and added a punitive component, wherein the manager lost money for not attaining the assigned diversity metrics,” Van Kampen said. “The metrics bonus did not just incentivize hirings of diverse candidates; it also incentivized retaining diverse candidates. Where a diverse candidate was lost, it created a loss of a diverse position that needed to be filled with a diverse candidate to maintain the status quo metric. In that scenario, managers were incentivized to ‘manage out’ nondiverse employees to make way for diverse employees. 

“After receiving an all-female chain of command, (my client) was managed out of the bank despite an exemplary employment record and despite having his strongest metrics in the year he was terminated. The arbitrator agreed with our contention that had Mr. Randall been female or substantially younger, he likely would not have been terminated.”  

Croft found it significant that Morgan Stanley used an award to recognize only women across wealth management.  

“Males were excluded until 2018, the year claimant filed with the (Equal Employment Opportunity Commission),” Van Kampen said. “Morgan Stanley’s deliberate decision to exclude males for such an award on a companywide basis evidences a bias in favor of women and against men.”  

Randall also was represented by Noel Harlow and Brian Cordova of Van Kampen Law, and Kathryn Hagerman and Michael G. Morrison II, formerly of the firm.  

“Employers mandate arbitration in employment cases because they think they are more likely to win in arbitration or avoid large verdicts, and the data validate that assessment,” Van Kampen said. “Mr. Randall defied the odds big time by winning on all claims and winning big.” 

Morgan Stanley’s response 

The attorneys for Morgan Stanley, Carole G. Miller and Anthony DellaSala of Bressler, Amery & Ross in Birmingham, Ala., did not respond to a request for comment. But Susan Siering, head of Morgan Stanley’s wealth management media relations team, provided Lawyers Weekly with an emailed statement.  

“Morgan Stanley 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 statement read.  

According to court records, Morgan Stanley petitioned a federal court to vacate the arbitration award, citing the “evident partiality” of the arbitrator. The petition states that the arbitrator, Croft, failed to disclose that he had filed fraud claims against a predecessor of Morgan Stanley, alleging a conspiracy and effort to defraud him and others out of millions of dollars through knowingly false projections and representations, material omissions, fraudulent concealment, breach of fiduciary duties, and other willful and wanton conduct. The defendant noted that Croft’s claims were dismissed pursuant to the statute of limitations, and that he recovered nothing.  

Morgan Stanley further stated that Croft slept through critical portions of the hearing, “always during the Respondent’s witnesses.”  

Van Kampen said that Morgan Stanley “unfairly attacked” Croft’s integrity and maligned him after hiring a private investigator to dig into Croft’s past to avoid accountability.  

“All the investigator uncovered was a 30-year-old investor lawsuit that the arbitrator was included in along with 49 other plaintiffs, against a thrice-removed corporate predecessor to Morgan Stanley,” Van Kampen said. “Morgan Stanley could have just as easily discovered this complaint before it selected arbitrator Croft, but it only went digging after he ruled against it.” 

Van Kampen added that Croft was never observed sleeping through any portion of the hearing and that Morgan Stanley never made a record at the trial of Croft sleeping through portions of the hearing, raising the issue only after it lost.  

“Rather than accept the result, I think Morgan Stanley has seemingly attempted to punish the arbitrator and to deter he and other arbitrators from punishing the Morgan Stanleys of the world,” Van Kampen said. “Morgan Stanley chose the wrong arbitrator to impugn. Arbitrator Croft has over 3,500 arbitrations and mediations under his belt and has an impeccable reputation.”