Wall Street Bias Claim Nixed

Federal court declines appeal of gay man bound by arbitration agreement

The federal appeals court in Manhattan ruled that a gay man’s employment discrimination claim could not be heard in court, because he had signed a mandatory arbitration agreement routinely required by securities industry employers when he was hired.

The unanimous April 21 ruling in the case of Jonathan Gold was consistent with prior rulings by the Manhattan appeals court, but differed from some rulings elsewhere, which have questioned the propriety of securities industry rules for handling discrimination complaints. Ironically, the industry recently backed away from requiring arbitration of discrimination claims, but too late to help Gold’s case.

Gold began to work for Deutsche Bank in 1995, after earning his MBA at NYU. When hired, he was required to sign Form U-4, mandated by the National Association of Security Dealers (NASD) for all employees registered to trade in financial instruments. The form prominently mentions that both employee and employer agree that all disputes about their employment relationship will be subject to arbitration.

Gold claims that once people at Deutsche Bank figured out that he was gay, he was subjected to various petty indignities and given poor job assignments. In 1996, he was involuntarily transferred to a subsidiary, Deutsche Morgan Grenfell/C. J. Lawrence, where he claims that his immediate supervisor created a hostile work environment, making fun of Gold for being gay, and that a senior male employee made sexual demands on him. He was discharged a few months later.

Early in 1997, Gold filed a lawsuit in the federal court, claiming that he had been subjected to a hostile work environment and quid pro quo sexual harassment, both in violation of the 1964 Civil Rights Act, which forbids sex discrimination and has been interpreted to cover hostile environment situations where the victim was targeted because of his sex. Gold also included some state law claims.

The case was assigned to District Judge Kimba Wood, who granted the employer’s motion to suspend the case pending arbitration of the claim, and who subsequently rejected Gold’s attempt to get the court to take up the case again on its merits after he lost in arbitration.

Appealing Wood’s ruling to the 2nd Circuit appeals court, Gold argued that he had not knowingly agreed to arbitrate such claims, contending that he had been rushed into signing the form in a setting that did not allow time for true consideration, and that he had not understood what rights he was waiving.

The appellate panel, in an opinion by Senior Circuit Judge Wilfred Feinberg, gave short shrift to Gold’s arguments, noting that the Circuit Court had recently ruled that Form U-4 satisfied federal rules for mandatory arbitration agreements. As an MBA graduate from NYU, Feinberg found, Gold could be expected to understand the significance of signing this form, which was written in plain language.

Feinberg also noted that Gold, in challenging the circumstances of signing the form, was raising new factual issues that should have been presented to Wood at an earlier stage in the case.

Courts in other parts of the country, perhaps not so accommodating to the interests of the securities industry, have seriously questioned NASD’s arbitration system for dealing with employment discrimination claims. Most cases that go before NASD arbitration panels are claims raised by dissatisfied customers of brokerage houses and banks. NASD tightly controls the process and appoints all the arbitrators. The system was really set up mainly for self-policing by the industry of its dealings with customers. Such a system, in which the arbitrators are selected by an association of which the employer is a member, does not provide the kind of impartial decision-making appropriate to a discrimination claim.

Recognizing these criticisms, the industry association recently agreed that it would no longer require financial industry employees to arbitrate discrimination claims, but this decision was not made retroactive, and so is of no help to Gold.

Gold might have fared better had he filed his lawsuit in the New York State courts, emphasizing his state civil rights claims instead of his federal claims. A claim of sexual orientation discrimination under New York City’s human rights ordinance might also have been a better route.

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