Goldman Sachs and a former managing director who claims the bank systematically underpaid women don't agree on much, but in briefs at the 2nd Circuit Court of Appeals, both sides say that the future of employment discrimination class actions may depend on what the appeals court has to say about the mandatory arbitration clause in the contract Lisa Parisi signed when she was named a Goldman managing director. Does U.S. Supreme Court precedent clearly hold that Parisi gave up the right to serve as a name plaintiff in a sex discrimination class action when she agreed to the arbitration clause, as Goldman and its lawyers at Sullivan & Cromwell and Paul Hastings assert? Or do Parisi's civil rights mean she can litigate her class action claim that Goldman engaged in a pattern or practice or discrimination?

Goldman argues that if the 2nd Circuit permits Parisi to proceed in a class action, it would effectively nullify mandatory arbitration clauses in any case involving allegations of systemic employment discrimination. Parisi (who was represented in the trial court by Outten & Golden and Lieff, Cabraser, Heimann & Bernstein and now has appellate counsel from Public Justice) argues that unless the appeals court permits employees to uncover evidence of employers' alleged discriminatory practices, it will be sanctioning a violation of federal civil rights. The U.S. Chamber of Commerce and the securities industry have joined as amici supporting Goldman; Public Citizen and a host of public interest groups filed briefs for Parisi.

Like I said, this is a seriously high-stakes appeal. It will be argued Wednesday morning by Goldman counsel Robert Giuffra of S&C and Parisi counsel Paul Bland of Public Justice before a 2nd Circuit panel of Judges Barrington Parker, Reena Raggi and Gerald Lynch.

No one disputes that the contract Parisi signed when she was named a managing director included a mandatory arbitration clause. So when Parisi appeared as one of three name plaintiffs in a gender discrimination class action against Goldman, filed in federal court in Manhattan in September 2010, Goldman moved to compel arbitration with Parisi. (Goldman did not challenge the right of the other two employees to bring class action claims.)

Only one day after the U.S. Supreme Court upheld the legality of mandatory arbitration clauses that contravene state consumer laws in its April 2011 ruling in AT&T Mobility v. Concepcion, U.S. Magistrate Judge James Francis reached a contrary conclusion in the Goldman case. He said that Parisi could not pursue classwide arbitration of her claims because of the Supreme Court's 2010 ruling in Stolt-Nielsen v. Animal Feeds International. But because she has a federally protected right to assert that Goldman engaged in systemic gender discrimination, Francis said, under the 2nd Circuit's precedent in In re American Express Merchants' Litigation, Parisi could litigate her "pattern or practice" case, since mandating arbitration would preclude her from enforcing a "substantive federal statutory right." Despite howls of protest from Goldman, U.S. District Judge Leonard Sand upheld the magistrate's finding.

In its appeal at the 2nd Circuit, Goldman contends that Francis and Sand misapplied Supreme Court precedent on the primacy of arbitration, which, Goldman says, has only become more compelling since the trial court rulings last year. In January 2012, as Goldman's 2nd Circuit brief noted, the Supreme Court clarified in CompuCredit v. Greenwood that courts are required to enforce the terms of mandatory arbitration agreements even when the clauses address federal statutory claims. Goldman argued in its 2nd Circuit brief that the only exception to mandatory arbitration, under Supreme Court precedent in Concepcion and CompuCredit, is when Congress has carved claims out of the Federal Arbitration Act.

And according to Goldman, no such exception applies to Parisi's gender discrimination claim. In Goldman's view, the magistrate erred when he read into federal law a private right of action for a pattern or practice of discrimination; Goldman asserted that the "pattern or practice" language in federal anti-discrimination law applies only to the government's prosecution of claims, not to private class actions. It is courts, not Congress, that have adopted "pattern or practice" evidence to establish liability in private cases, Goldman asserted. The bank called the magistrate's holding that Parisi has the right to establish Goldman's systemic discrimination through a class action "an unsupported interpretation of judicial decisions concerning a method of proof," not a federal right.

Parisi's brief, you will not be surprised to hear, argued that the only way employees can show violations of their federal civil rights is by establishing an employer's pattern or practice of discrimination through collective action. Class actions asserting a pattern of discrimination "implement the broader purpose of deterring and remedying systemic bias in the workplace," the brief argued. And barring such class actions through mandatory arbitration clauses "would render legally impossible any private challenge to, or correction of, a pattern or practice of discrimination," Parisi asserted. "This violates a key principle that substantive (civil) rights may not be prospectively waived."

"If the court adopts Goldman's position," said Parisi counsel Adam Klein of Outten, "it would eradicate pattern or practice claims.... Without class actions, there is no way to discern discriminatory patterns or practices."

Goldman counsel Giuffra declined comment, but Goldman's briefs contend that Parisi (unlike the antitrust class members in the 2nd Circuit's American Express ruling) has the ability to pursue her claims on her own, through the arbitration process she agreed to.

(Reporting by Alison Frankel)

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