A Dallas jury last month issued a verdict of more than $5 billion against JPMorgan Chase for various breaches of fiduciary duties – by any measure an enormous damages award in a probate case and reportedly the largest in Texas. The jury found that JPMorgan acted both negligently and fraudulently in administering the estate of Max D. Hopper, an American Airlines executive and a creator of SABRE, the airline reservation system used by every major airline. Hopper died of a stroke in 2010 without a signed will, and JPMorgan was retained to administer his estate, which has been estimated to be worth at between $19 and $25 million.
Under Texas probate law, assets amassed during the Hoppers’ marriage had to be divided equally between Hopper’s wife and his children. According to the lawsuit brought by Hopper’s wife, Jo N. Hopper, and his adult children from a previous marriage, the family hired JPMorgan Chase shortly after Hopper’s death to administer the estate, and collect and divide up the assets between his heirs – assets that reportedly included furniture, art, jewelry, a large collection of fine wine and Hopper’s “6,700 golf putters.”
The family claimed that the bank “held the assets hostage” – failing to act expeditiously in collecting and dividing up the assets, not releasing interests in some assets for more than five years and continuing to hold on to others, more than seven years after Hopper’s death. The heirs also alleged that JPMorgan Chase’s actions deprived them of millions of dollars in inheritance, mishandling the assets under its control, allowing stock options to expire, failing to sells stock as directed by Mrs. Hopper, and using the heirs’ own money – more than $3 million of the estate’s assets – to hire lawyers to defend against the family’s suit.
Mrs. Hopper also painted the bank and its representatives as having horribly mistreated her, to the point where she expressed in a written statement that “surviving stage 4 lymphoma cancer was easier than dealing with this bank and its estate administration.”
After a four-week trial, the jury deliberated for only about four hours before deciding that the bank had committed fraud, and breached its fiduciary duties and its fee contract. The jury award included approximately $4.7 million in compensatory damages (actual damages including the $3 million taken for legal fees and for mental anguish suffered by Mrs. Hopper), at least $4 billion in punitive damages (the jury verdict form actually indicates $8 billion, which the family’s lawyer attributed to duplication of damages amounts), and $5 million in attorney fees.
While the punitive damages award of that size might not be sustained upon appeal, the verdict still reminds us that fiduciary liability is no laughing matter. Because punitive damages are becoming more and more of a serious risk for fiduciaries—individuals and big banks and trust companies alike (and perhaps even more so with big banks and trust companies because of the size of their coffers); the onus is on fiduciaries to be extremely cautious and cognizant of their duties and responsibilities and to carefully select skilled and knowledgeable guidance and assistance. The stakes are far too high now not to take this seriously.