Jury Awards $8 Billion Verdict Against JPMorgan Chase for Mismanaging Estate
A Dallas jury awarded more than $8 billion to the wife and two stepchildren of former American Airlines executive Max Hopper after finding that JPMorgan Chase mismanaged the executive’s estate. Hopper is described as a “technology innovator” who pioneered the airline’s reservation system.
Hopper died without a will. He had about $19 million in assets at the time of his death. JPMorgan was appointed as the estate administrator. Its duty was to divide the estate in the manner required by Texas law.
According to the lawsuit, the bank took five years to distribute assets, including a collection of 6,700 putters and 900 bottles of wine. At the time of trial, seven years after Hopper’s death, some assets still remained undistributed.
Although it takes time to inventory an estate’s assets and to determine their value, the lawsuit suggested that JPMorgan took an unreasonably long time to complete that process. The bank may have earned extra fees by prolonging its appointment as the estate administrator.
The lawsuit alleged that JPMorgan engaged in fraud and breached its fiduciary duty to the estate. A fiduciary duty is a legal obligation to act in the best interest of a beneficiary. Estate administrators have a duty to put the interests of the estate’s heirs ahead of their own financial interests.
The community property of Max and Jo Hopper was divided according to Texas law, half going to Jo Hopper and the other half to Max Hopper’s children from a prior marriage. JPMorgan’s job was to divide the remaining property after paying Max Hopper’s outstanding debts.
The family hired JPMorgan as the estate administrator after it pitched its expertise in independent estate administration. According to the family’s attorneys, however, “the family's chief representative at the bank, Susan Novak, a vice president and senior fiduciary officer in the private wealth management/estate settlement unit in Dallas, had only once in her career at the bank handled an intestate estate.”
In addition to delaying property distribution, the family argued that JPMorgan allowed stock options to expire and ignored Jo Hopper’s wishes to sell certain stock. The resulting losses were part of the jury’s verdict.
In addition, JPMorgan reduced the estate by more than $3 million by using the estate’s assets to pay its lawyers to defend against the allegation that it breached its fiduciary duty. The lawsuit also alleged that JPMorgan breached its fee agreement with the family.
The verdict consisted of about $4.7 million in actual damages (including financial losses and emotional distress), $5 million in attorney’s fees, and $8 billion in punitive damages. The punitive damages award consisted of $2 billion each to Jo Hopper, the two stepchildren, and the estate. Since the estate will pass its damages award along to the heirs, the punitive damages award to the estate might impermissibly duplicate the award to the heirs.
More importantly, the punitive damages award will almost certainly be reduced because it is disproportionate to the award of actual damages. The Supreme Court has suggested that punitive damages are excessive, in violation of the Constitution, if they are more than ten times the amount of actual damages. Some observers view that holding as an example of judicial activism, given that the Constitution says nothing about punitive damages.
JPMorgan has challenged the verdict, claiming that it owes the family “nothing.” The bank’s law firm complained that the jury “accepted to the penny” the damages calculation made by the plaintiffs’ attorneys without any “independent analysis.” Of course, the bank’s lawyers weren’t in the jury room and have no way of knowing what the jury did or did not consider. The jury took four hours to return a verdict, enough time to have a substantive discussion the evidence.
In any event, the question is whether the verdict is supported by the evidence, not whether the jury analyzed the evidence. After all, if the jury had found in JPMorgan’s favor, the bank’s lawyers would not be complaining that the jury engaged in no “independent analysis” of the evidence.
All parties expect the judge to reduce the punitive damages award. If the judge upholds the award of actual damages, JPMorgan is likely to appeal.