Overlawyered: Chronicling The High Cost Of Our Legal System

“Former employee wins $4.1 billion”

Not a misprint: the arbitration award in Chester v. iFreedom Communications Inc., (PDF), in favor of a former chief marketing officer fired without cause, was really $4.1 billion with a b. [Dennis Westlind, World of Work via Ohio Employer’s Law; JAMS, Los Angeles]

P.S.: A commenter at an Alabama site: “So much for mandatory binding arbitration always favoring the big company.”

P.P.S.: More on how it happened, including serious lapses by the defendant in responding to the action, from AmLaw Litigation Daily, National Law Journal, and Daniel Schwartz.

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6 Comments

  • Interesting. The defendants were unhelpful in discovery, so the base amount for the award came from a single month’s sale figure of $535K with the understanding that sales had grown between 10% and 20% per month in 2005. The arbitrator then compounded it forward assuming 10% growth per month for 7 more years (until 2012). This is an amazing growth rate that has the arbitrator assuming approximately $1.9 billion in revenue a month in 2012 or $23 billion a year. For comparison, this is more than Oracle had in revenue last year. Of course, the actual damages were also trebled for punitive damages (for a breach of K?), but I guess that is Cali law.

    Comparing this arbiter’s calculations to practical economics, I have a feeling this is going to be a hard judgment to collect outside of fantasy land.

  • Talk about bet the company litigation.

  • Under the FAA, one way you can challenge a normally unassailable arbitration award is over miscalculations apparent on the face of the award. Anybody think this might qualify?

  • Why would it fail to qualify? I’m just waiting for my award of ten quadrillion dollars. And then I’m going to flap my arms and fly to the moon.

    Bob

  • I’m waiting for the trial lawyers to explain to us why arbitration is unfair to employees, and that this particular plaintiff was really entitled to twice as much.

    • By Ted

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