Thursday, March 08, 2018

JPMorgan whistleblower’s $1.1M verdict was ‘infected by passion and prejudice’

By Anne Sherry, J.D.

The Southern District of New York ordered a new trial on a J.P. Morgan employee’s SOX whistleblower claim. The jury’s verdict awarding the whistleblower $1.1 million—half of that as back pay, half damages for emotional distress—was so excessive relative to the evidence as to reflect a jury motivated by passion or prejudice. This also called into question the integrity of the jury’s verdict on liability, requiring a new trial on all issues (Sharkey v. J.P. Morgan Chase & Co., March 5, 2018, Cote, D.).

The plaintiff was fired from her executive position about a week after formally recommending that J.P. Morgan end ties with one of her clients (“Client A”), who she believed was engaging in fraud. The Southern District of New York dismissed the complaint twice, the second time on remand with instructions to reassess the allegations under a more lenient standard. Even with this more plaintiff-friendly standard in mind, the district court identified an intervening cause for the firing: the executive’s having lied about speaking to a client. The Second Circuit vacated this decision, however, and a jury eventually awarded the plaintiff $563,000 in back pay and the same amount in damages for emotional distress.

The defendants moved for post-verdict relief by means of renewing their motion for judgment as a matter of law and adding, in the alternative, a request for a new trial. The court noted that the standard for granting judgment as a matter of law under Federal Rule of Civil Procedure 50 is similar to that for summary judgment, but the standard for granting a new trial under Rule 59 allows the trial judge more discretion. A new trial may be granted if the verdict is against the weight of the evidence, which does not need to be viewed in the light most favorable to the winner of the verdict. If the jury’s verdict was the result of passion or prejudice, the whole matter must be retried.

Rule 50 motion. The defendants’ motion for judgment as a matter of law had to be denied because the evidence, however scant, linking the plaintiff’s qualms about Client A to her firing sufficed to support the jury’s verdict as to liability. Although documents and credible evidence showed that the plaintiff was fired for her performance and for lying about a different client, the plaintiff did testify that she in fact reported that she believed Client A was engaging in activity that would violate the statutes enumerated in Sarbanes-Oxley. The defendants also failed to meet “their extremely heavy burden” to prove that, as a matter of law, a reasonable jury must have found by clear and convincing evidence that the plaintiff would have been terminated in the absence of protected activity.

The bank saw greater success on its motion for judgment as a matter of law. The testimony and documentary record permitted a jury to find that the plaintiff did make some effort to find another job in the eight months following her termination. After March 2010, however, the plaintiff stopped making any reasonable efforts to seek alternative employment. The one document that the plaintiff offered to counter this assertion, an email conversation between her and a recruiter, actually demonstrated that the plaintiff rebuffed the recruiter. As a matter of law, the plaintiff is eligible to receive back pay only through March 2010, and the court conditionally granted the motion for a new trial on back pay damages after that point.

Rule 59 motion. The defendants requested a new trial or, in the alternative, remittitur with respect to the emotional distress damages. Although these damages are recoverable, the court noted, they are substantially limited in amount unless the plaintiff presents objective evidence. After surveying other verdicts and taking into account the plaintiff’s testimony and the objective circumstances of her termination, the court concluded that any damages award would be capped at $20,000 to $50,000. The fact that the jury awarded damages equal to the back pay award indicated that the jury did not follow its instructions and, moreover, that it acted out of passion in favor of the plaintiff or prejudice against J.P. Morgan, not on the basis of the trial evidence and the law.

Because the verdict was tainted by passion or prejudice, there could be no confidence in the verdict as to liability. There was also no way to fairly try the issue of emotional harm separately from the issue of wrongful discharge. Accordingly, the court ordered the new trial on all issues.

Reinstatement. Finally, the court denied the plaintiff’s request for reinstatement. First, the plaintiff removed herself from the workforce entirely in 2012, abandoning her claim for reinstatement. Reinstatement was also inappropriate as an equitable matter due to the plaintiff’s malfeasance in lying to her superior. Finally, it would place both parties in an untenable position to order reinstatement given that in the course of the nine-year litigation the plaintiff had impugned the bank and the bank had called her character into question.

Normally, front pay would be the alternative remedy to reinstatement, but it was unavailable here because the plaintiff removed herself from the workforce.

The case is No. 10cv3824.

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