Judge Approves $40 Million Racial Discrimination Settlement Against Abercrombie & Fitch

• Originally published in The New York Sun on April 15, 2005 Copyright 2005 The New York Sun, One SL, LLC

By JOSH GERSTEIN, Staff Reporter of the Sun

A federal judge yesterday approved a $40 million settlement of employment discrimination lawsuits charging that a popular clothing chain, Abercrombie & Fitch, avoided hiring minorities and women nationwide in order to preserve the "all-American look" cultivated by the company in its catalogs and advertisements.

After a brief hearing, Judge Susan Illston gave a strong endorsement to the settlement. In addition to offering cash compensation, the deal requires the company to set up a diversity office and to cease the practice of limiting recruiting to certain fraternities and sororities.

"I think this is excellent work," Judge Illston said. She heaped praise on attorneys for both the company and the class. The judge also paid tribute to the "courage" of Abercrombie employees who were named plaintiffs in the case. "I do think you've done a public service," she said.

The lawsuits alleged that Asian-Americans, African-Americans, and Latinos who were hired by the company were often relegated to stockrooms where those staffers could not be seen by customers. An attorney for Abercrombie referred questions to the officials at the company's headquarters, who offered no comment. In court filings, the company has denied any systemic discrimination.

Under the settlement, employees, former employees, and job applicants at Abercrombie who claim discrimination will be eligible to receive between $300 and $6,900 each. The precise amount of the award will depend on a point system that takes into account the impact of the alleged discrimination.

About 20,000 people filed claims by the March 25 deadline, lawyers said.

The judge also approved a request that the attorneys who brought the case be awarded $7.25 million in fees and expenses. Abercrombie has agreed to pay that amount in addition to the nearly $40 million to be distributed to the claimants.

Lawyers for the class recently warned Judge Illston that in North Carolina an attempt to defraud the settlement fund was under way. A statement filed with the court said a man had taken out a radio ad about the settlement and was charging people $15 to complete claim forms.

The firm in charge of the claims process, Settlement Services Incorporated of Tallahassee, Fla., said it received a single manila envelope in January containing about 84 unauthorized and invalid "registration forms." At about the same time, the toll-free hotline set up for the Abercrombie case began receiving calls about unrelated discrimination cases such as those involving African-American farmers and Denny's restaurants. Attorneys for the class said they have referred the matter to federal prosecutors.

In another development, some former Abercrombie employees who tried to exclude themselves from the litigation told The New York Sun they were urged to withdraw the so-called opt-out statements they had filed.

The ex-employees said after they sent letters opting out of the lawsuit, they were contacted either by mail, telephone, or both by staffers at the claims office in Florida.

In January, Jessica Heleniak, 25, of Phoenixville, Pa., who worked at Abercrombie for a few months while on college break, mailed in a 114-word opt-out statement. "I got a call from a lady, she sounded like someone who processes paperwork. She said that wasn't what I was requesting; she could send the right paper to me and I could be done with it," Ms. Heleniak said in an interview.

"I'm not going to take advantage of the system and try to get money when I don't feel discriminated against," said Ms. Heleniak. She later signed a new statement provided by the claims administrator saying she wanted to rescind her request to opt out.

Ms. Heleniak said she found it strange that she was recontacted since her first statement was so explicit. "I found it repetitive," she said.

Another former Abercrombie staffer, Mallory Hartung, 20, of Houston, said that after she sent in a statement opting out of the case, she got a letter from the claims office asking her to reconsider.

"It was weird," her father, Charles, said in an interview. "It was like you say you don't want any part of this. Now, they say you want something different. It was like they were just trying to keep her in the class."

The Hartungs provided a copy of the notice to the Sun. "The purpose of this letter is to provide information so that you may make an informed decision regarding your options," the document said. "We are aware that some persons who filed 'opt-out' statements do not intend to sue Abercrombie. We do not know if you are in this category. In an effort to clarify your status, we would like to discuss this matter with you."

According to court records, nine of the 57 people who initially opted out of the class later rescinded their withdrawal. All used precisely the same statement to do so.

Abercrombie can reduce its $40 million payment by approximately $2,000 to $3,000 for each class member who opts out, under a formula that is part of the deal.

One attorney involved in class-action litigation, John Pentz of Maynard, Mass., said the administrator should not push people to remain in the class.

"When class members call them, they expect a neutral, fair objective middleman," Mr. Pentz said. "It's improper for the administrators to be doing the work of class counsel."

Mr. Pentz added that class members "can opt out for any reason, even an irrational one."

An official with Settlement Services, Thomas Warren, referred questions about the procedure to the lawyers who brought the litigation. An attorney for the class, Jack Lee of San Francisco, said the contacts were appropriate. "Probably close to 80% of the people [who opt out] are just confused," Mr. Lee said. "We don't urge anyone to withdraw a righteous opt-out if they feel strongly about it."