Novartis Pharmaceutical Gender Discrimination Class Action – $253 Million Jury Verdict; $175 Million Settlement

Case Description

Case Type: Gender Discrimination
Company: Novartis Pharmaceuticals

Amy Velez, et al., v. Novartis Pharmaceuticals Corp.

In the largest gender discrimination case to ever go to trial, Sanford Heisler successfully represented a class of 5,600 female sales representatives of Novartis Pharmaceutical Company in their gender pay and promotion and pregnancy discrimination claims. A unanimous decision by a jury of nine found Novartis liable for gender discrimination in pay and promotion and pregnancy-related matters and awarded 12 former Novartis sales reps $3.36 million in compensatory damages and the class of 5,600 women an additional $250 million in punitive damages In addition, the verdict from the jury meant that the remaining 5,600 women in the class were also entitled to additional awards of backpay and to seek compensatory damage awards up to $300,000 each. The verdict and the resulting monetary awards was the largest ever in the U.S in an employment discrimination case.

After weeks of negotiations, the parties in July, 2010 announced they had reached the terms of a preliminary settlement, and had negotiated the deal to extend to cover all female sales reps through July 2010, increasing the class size to approximately 6,200 women in total. On November 30, 2010 Judge Colleen McMahon of the United States District Court of the Eastern District of New York, approved the final settlement agreement valued at $175 million. Judge McMahon described Sanford Heisler as trying the case “brilliantly” and noted that the firm achieved “extraordinary” and “one of a kind” results for the class in both the trial and the later settlement.

$152.5M of the settlement is earmarked for the monetary fund. From that monetary fund, $60M is set aside for back pay awards — 100% of the value of back pay damages to the class. In addition, approximately $40M is set aside for compensatory damages, with each class member having the right to seek payments up to the full $300,000 allowed under law. Finally, the monetary fund also provides service payments to class representatives and class members who helped prosecute the case, attorneys’ fees and case expenses, and the administrative costs of implementing the settlement terms.

$22.5M earmarked for broad-reaching systemic reforms is believed to be among the largest non-monetary settlements ever reached. These systemic reforms will address: (1) the way Novartis promotes women into management; (2) the way Novartis evaluates its employees; (3) the way Novartis compensates its employees; (4) the way Novartis investigates and responds to complaints of discrimination and unfair treatment.

The nearly seven-week trial began April 7, 2010 and over the course of the trial 13 female sales representatives and managers testified for the plaintiffs. In addition, Plaintiffs called two expert witnesses and eight hostile witnesses during their case in chief, crossed 16 of Novartis’ witnesses, and called an additional two rebuttal witnesses. Testimony pointed to systemic discrimination against female employees in their pay, in promotions to management and in the ways in which pregnant women and young mothers were treated. Notably, Plaintiffs secured key admissions from the Company’s witnesses about the extent of the problems at Novartis – including admissions from the form Head of HR that the Company did not have a centralized system to track discrimination complaints, from the current Head of HR that Novartis did not actually enforce its “zero tolerance” policy, and from the founder of the “Womens’ Network” that Novartis had too few women in management.

The trial, verdict and subsequent settlement all will have a significant impact on the way companies around the world treat their male and female employees and will set a precedent for major pending class-action suits, including that of Walmart which is currently before the U.S. Supreme Court awaiting a decision on the class certification issue.

The case is Amy Velez et al., vs. Novartis Pharmaceuticals Corporation. Novartis was created in 1996 through a merger of Ciba-Geigy and Sandoz pharmaceutical companies. Headquartered in Basel, Switzerland, the company had 2009 sales of $44.3 billion.

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