Morgan Stanley wants a dispute over alleged racial bias at the company moved from the courthouse to a private arbitration program.

The wirehouse, which disputes the discrimination claims, asked a federal judge to compel former Morgan Stanley employee John Lockette into arbitration, according to court documents.

The lawsuit unfolds as minorities and women have long been underrepresented among the industry's financial advisor ranks. Black and African-Americans constitute about 13% of the U.S. population, but they comprise a mere 6% of financial advisors, according to data from the U.S. Census Bureau and Bureau of Labor Statistics. Women comprise less than one-third of all advisors.

The dispute between Morgan Stanley and Lockette is the most recent accusation of racial discrimination by a major brokerage firm, several of which have in the past settled class-action lawsuits alleging such bias.

Lockette accuses his ex-employer of failing to live up to the requirements of a class action lawsuit Morgan Stanley settled in 2007.

"Morgan Stanley has no genuine intent to reform, to provide equal opportunities to African-Americans, or to abide by the spirit of its agreement" to settle the racial discrimination claims, Lockette says in his lawsuit filed earlier this year in the U.S. District Court in the Southern District of New York.

Lockette, an African-American man from New Jersey, was employed with Morgan Stanley first as an assistant vice president and later as a regional training officer, from 2013 to until his termination in 2016, according to court documents. While employed by the firm, Lockette raised concerns about alleged discrimination with Morgan Stanley human resources department, court documents show.

In its request for a venue change, Morgan Stanley argues that Lockette agreed to a binding arbitration agreement, requiring any dispute arising from his employment to be heard in that forum.

Lockette "had adequate notice of, assented to, and is bound by his arbitration agreement, which should be enforced according to its terms," Morgan Stanley argues in court documents.

(Bloomberg News)
(Bloomberg News)


The company's internal employee dispute resolution program, called CARE (Convenient Access to Resolutions for Employees), was launched more than a decade ago, according to court documents.

Morgan Stanley expanded the program in 2015 to include mandatory arbitration, but says it gave employees a 30-day window to opt out of the new policy. The company says that Lockette failed to take advantage of this opt-out provision and thereby entered into a binding agreement to settle disputes through the CARE program.

"That plaintiff [Lockette] had ample notice, time and opportunity to opt out if he wanted to do so is evidenced by the fact that approximately 6,611 (or 16.3%) of the Morgan Stanley employees who, like plaintiff, received the notice of the expansion of the CARE Arbitration Program in 2015 did opt out," the company says in court documents.

Lockette denies that he saw a company email announcing the policy change and offering employees an opportunity to opt-out, according to his attorney, Shona Glink.

"This policy forces employees, like Mr. Lockette, to bring discrimination claims in a closed door, confidential arbitration where his rights to develop his case and to have the protections and rights ensured by the federal courts significantly restricted," says Glink, who is with law firm Stowell & Friedman.

Morgan Stanley "should not be able to bury these cases in a confidential process," she adds.

Morgan Stanley's introduction of the mandatory arbitration program, though the company contended its program was designed to quickly and fairly resolve any employment disputes.

Another former African-American employee of Morgan Stanley, Kathy Frazier, is currently suing the company over the policy. Frazier is also represented by Stowell & Friedman.

Frazier was not employed with Morgan Stanley at the time that the company introduced the arbitration program, says attorney Linda Friedman. "Her contract says that when she was hired that she had the right to go to court for racial discrimination claims."

The forum in which a dispute is heard and who presides over that forum matters greatly, Glink says. According to Morgan Stanley’s “CARE” guidebook, the firm works with two third-party arbitration services — Judicial Arbitration and Mediation Service and the American Arbitration Association — to provide mediation.

"Arbitrators’ financial interests are tied to repeat business from employers like Morgan Stanley. It is ridiculous to assume that arbitrators would work against their own best interest and provide a fair forum for victims of discrimination," she says.

A Morgan Stanley spokeswoman reiterates that the company denies Lockette's allegations. "The firm is strongly committed to nondiscrimination, and looks forward to addressing this former employee’s claims on the merits."