Litigation Daily, July 15, 2010 – Novartis Agrees to Pay $152.5 Million to Settle Historic Gender Discrimination Class Action

Posted July 15th, 2010.

As it appeared in Litigation Daily

David Sanford and Katherine Kimpel of Sanford, Wittels & Heisler told us in May that they were confident their historic $250 million punitive damages verdict in a gender discrimination class action against Novartis would be upheld by the U.S Court of Appeals for the Second Circuit. That may be true, but in a settlement deal announced Wednesday, they were willing to take an almost $100 million haircut on their big win.

In the deal, jointly announced by Novartis and Sanford Wittels, Novartis will put $152.5 million in a cash fund for eligible class members. As part of the agreement, which is subject to approval by Manhattan federal district court judge Colleen McMahon, Novartis will not object to a request by Sanford Wittels for up to $38 million in attorneys fees and $2 million in expenses. The named plaintiff will receive from the settlement fund the damages they were awarded by the jury. (Here\’s the 66-page settlement agreement.)

Novartis maintains that none of the behavior alleged in the case was systemic, but it nonetheless agreed to implement programs designed to ensure fair treatment of all members of its sales force. The value of the programs is estimated to be $22.5 million.

The settlement is noteworthy not just for what it accomplishes, but also for what it moots. Class certification rulings in discrimination cases are hotly contested. A Second Circuit opinion on the Novartis class–whichever way it came out–could have had a major impact in employment litigation, particularly considering that the U.S. Supreme Court will be weighing Wal-Mart\’s certiorari petition in Dukes v. Wal-Mart next term.

We were also interested to note who signed the settlement agreement for Novartis: Cravath, Swaine & Moore. Elsewhere in the agreement Novartis says its settlement team also included longtime outside counsel Kaye Scholer and Vedder Price, which received some sharp criticism for its trial strategy in the Novartis case.

In announcing the settlement, both sides issued statements. “While we believe that there was not systemic discrimination at NPC, the trial revealed that some of our associates had experiences influenced by managerial behavior inconsistent with our values,” Novartis CEO Joe Jimenez said. “As a company, we are now even more strongly resolved to ensure that all our employees act and behave in accordance with our corporate values. We aspire to be a leader in diversity and inclusion, and I am committed to implementing decisive measures to ensure that we act in accordance with our values.”

The plaintiffs lawyers, meanwhile, praised Novartis in their statement for agreeing to the settlement terms. “Novartis has agreed to a momentous settlement,” said Sanford. “The terms of this agreement allow for full compensation of both former and current female field force employees, ensuring that every woman who worked at Novartis over the past eight years has been compensated fairly.”

Added Kimpel: “In this settlement, Novartis establishes itself as a leader on issues for women in the workplace. In particular, [Novartis] is committed to substantially revising its human resources policies, revamping its personnel management systems, and strengthening its commitment to ensuring gender equality in the workplace.”

— Andrew Longstreth

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