Today Judge Colleen McMahon of the U.S. District Court for the Southern District of New York gave final approval to a $175 million settlement of a gender discrimination class action in Velez v. Novartis Pharmaceuticals Corp., Case No. 04-9194 (S.D.N.Y.). The settlement benefits a class of more than 6,000 female current and former sales representatives who alleged systemic discrimination in pay, promotions, and other working conditions at Norvartis. To effectuate the settlement, the Court certified a settlement class of 6,026 female sales employees who worked at Novartis at any point from July 15, 2002, through July 14, 2010. View Settlement Approval Order.
Following a fairness hearing on November 18, 2010, at which no objections were raised to the proposed settlement, Judge McMahon granted final approval to a consent decree consisting of $152.5 million in back wages, benefits, and adjusted wages, incentive payments to the named plaintiffs who helped litigate the case, and attorneys’ fees of $38.1 million and litigation costs of $2 million, plus $22.5 million in non-monetary relief representing Novartis’ commitments to enhance its employment policies to eliminate sex discrimination. View Final Order. As such, this is the largest Title VII employment discrimination settlement of 2010, and one of the largest ever in a workplace discrimination class action.
Novartis and the plaintiffs’ class settled the case following a jury verdict against the company under Title VII of the 1964 Civil Rights Act and jury awards of $3.4 million in compensatory damages to plaintiffs who testified at trial and $250 million in punitive damages.
The $38.125 million award of attorneys’ fees to plaintiffs’ counsel, or roughly 22 percent of the settlement total, is sure to grab the attention of class action employment lawyers in the plaintiffs’ bar. This is by far the largest fee award in 2010 in an employment-related class action. In her November 30 decision approving attorneys’ fees, Judge McMahon found the fee award reasonable due to the risk undertaken by plaintiffs’ counsel, the reputation and skill of both parties’ counsel, the time and labor expended, the complexity of the litigation, and the benefits bestowed upon the class. Although the Court applied the “percentage of the fund” approach instead of a “lodestar” method in calculating the award in this common fund case, it found that under either approach the attorneys’ fees were reasonable. In addition, the Court also granted plaintiffs’ request for reimbursement of over $2 million in litigation expenses.
Notably, the agreement also added novel and burdensome requirements that Novartis hire external specialists and consultants to ensure compliance with the settlement agreement. In particular, the agreement requires that Novartis:
- retain an external specialist to “design and carry out an annual adverse impact analysis of ratings”;
- work with an external Compensation and Benefits specialist to “design a base salary pay-in-range analysis and subsequent adverse impact analysis of annual rates of pay”;
- retain an “external specialist to design and carry out an adverse impact analysis” for employees qualified and interested in promotions; and
- work with two outside consultants to “improve the overall culture of the company.”
These unique non-monetary obligations are likely to show up on settlement checklists of the plaintiffs’ bar in negotiating future settlements of employment discrimination class actions. Accordingly, companies with operations located in the Second Circuit should take additional precaution to update and evaluate their workplace policies.
On multiple levels, the results in Velez v. Novartis Pharmaceuticals Corp. raises the stakes for defendants in all class actions. Higher settlement demands and aggressive lawyering from the plaintiffs’ side are sure to follow in its wake.