A group of several hundred black financial advisors who are suing Merrill Lynch for racial discrimination got good news on Friday as an appellate court ruled that they could proceed with their class action against the brokerage firm, reversing a lower court opinion denying certification. Even more significantly, the appellate panel agreed with the plaintiffs that in this case, the U.S. Supreme Court’s ruling in Wal-Mart v. Dukes could be used to support class certification rather than deny it.

Writing for a unanimous three-judge panel of the U.S. Court of Appeals for the Seventh Circuit, Judge Richard Posner found that the brokers could proceed with their claims as a class solely as to liability and injunctive relief. The brokers had originally filed suit in November 2005, alleging that Merrill’s policies regarding the formation of broker teams and the distribution of accounts had disproportionately harmed them and their ability to make salaries comparable to their white colleagues. Posner wrote that “challenging those policies in a class action is not forbidden by the Wal-Mart decision.”

Stowell & Friedman partner Linda Friedman, who is representing the Merrill plaintiffs, was understandably thrilled. Friedman, who attended the Dukes oral arguments at the Supreme Court, told us that her reliance on the Dukes decision in the Merrill case wasn’t a Hail Mary attempt, but a well-thought out strategy. “We took what we learned from the Supreme Court and repackaged our argument accordingly,” she said.

The case was first heard by Chicago federal district judge Robert Gettleman, who denied class certification in August 2010 and then denied a motion to reconsider his ruling in February 2011.

Last July, Friedman filed an amended motion for class certification, and asked Gettleman for a bifurcated process in which class certification would be granted solely on liability, with a special master to rule on individual damage claims if Merrill were found to be liable. Surprisingly, Friedman argued that the Supreme Court’s decision in Dukes actually weighed in favor of certification, despite the widely held view that Dukes was a complete and utter disaster for employees seeking to bring class action suits against employers.

Gettleman denied the motion, but supported an interlocutory appeal in order to clarify the issue. Writing for the Seventh Circuit panel, Posner agreed with Friedman that the plaintiffs were challenging the policies of Merrill Lynch, and not the actions of local managers acting on their own as in the Wal-Mart case. Posner turned aside Merrill’s arguments in its appellate brief that the challenged policies were analogous to Wal-Mart because Merrill “delegated discretion to local managers to approve or disapprove teams” as well as “implementing and departing from the policy” regarding account distribution.

Additionally, Posner agreed with Friedman that granting class certification solely on liability was the most efficient means of resolving the case, with individual determinations on relief to follow should Merrill be found liable. “We have trouble seeing the downside of the limited class action treatment that we think would be appropriate in this case,” wrote Posner.

Friedman told us that when she attended the Wal-Mart orals at the Supreme Court, she sensed that the justices were most worried about damages and protecting a company’s right to demonstrate that a class member was not entitled to relief. That helped her determine her strategy in the Merrill case, she explained. “The Seventh Circuit has a rich history of allowing bifurcated class actions,” Friedman said.

Merrill’s attorneys, Stephen Shapiro of Mayer Brown and Jeffrey Klein of Weil Gotshal, referred comments to their client. “We disagree with the ruling and we are still evaluating the decision, but believe that the ruling does not fundamentally change our views that the allegations lack merit,” said Shirley Norton, a spokesperson for Merrill’s parent company, Bank of America, in an email.