Jottings By An Employer's Lawyer

Monday, July 10, 2006

Sticks and Stones ... But Words Can Be Costly Too - $4.5 Worth

Two employers have recently been reminded of an important lesson -- defamation is not just a concern of media entities. And those claims can be serious as juries in Maine and Texas recently made clear -- returning MDV's for the loss of a good name.

In Maine, it was Merrill Lynch on the wrong side of a Portland verdict, Jury awards nearly $3M in Maine defamation case. Although it is hard to tell exactly what happened from the news reports, it appears Merrill Lynch was sued for complying with a statutory duty to report about the conduct of a broker.

Things were complicated however with some contradictory internal materials according to the news story:
At least two letters from Merrill Lynch attorneys defended Galarneau's handling of the account that was in question. And an internal review of her conduct found no wrongdoing, Galarneau's lawyers said.
From my experience what may well have happened -- in response to a claim of wrongdoing by the broker, the company initially defended the actions; then after some more digging, more information about the broker's conduct was uncovered, decision to terminate made and required statutory report was filed. At trial, they get beat up with evidence of their initial actions. A classic Catch 22 for the employer it would seem.

In central Texas another of those situations that seems to occur more than you would think was also being played out - the employee you are convinced is stealing, but somehow it can't (or doesn't) get proved. A car dealer found out the hard way those accusations can boomerang when an employee accused of stealing was no-billed by a grand jury. It wasn't the end of things at the Coryell County courthouse however -- Tranum loses $1.5 million civil case.

Costly reminders that there are always two sides to every story -- and being on the down side of one accusing an employee of wrong doing is not a good place to be.

Update: The initial verdict in the Maine case has now made its way through post-trial motions and been decided by the appellate court. Although the Court affirmed the basic defamation holding, it did strike the $2.1 million punitive damage award, leaving a verdict of $850,000 intact. Galarneau v. Merrill Lynch (1st Cir. 10/12/07).


From my 20 years of experience in the financial industry, and in particular with Merrill Lynch, your assumption is inaccurate to say the least. The public records of this trial clearly show the facts supported the jury's decision. Merrill Lynch lied and got caught. Instead of appealing, they would be better served to terminate employment of those managers involved in this deception to defame a woman broker. The public would recognize and appreciate Merrill Lynch stepping up to the plate and finally doing the right thing.
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