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James Y. Xu v. J.P. Morgan Chase & Co. - 9/23/2003

Case Summary: On September 23, 2003, the Honorable William H. Pauley III, United States district judge, denied in its entirety a motion filed by J.P. Morgan Chase seeking summary judgment on claims brought by a former employee for his unpaid bonus compensation. James Y. Xu, who ran Chase's exotic options trading desk prior to the bank's merger with J.P. Morgan, alleged that he was promised a percentage of the desk's revenues as bonus compensation for 2000. His employment was subsequently terminated on November 28, 2000, at which time the firm offered him a standard severance package and a payment of $365,000. Mr. Xu alleged that he should have instead received bonus compensation in excess of $1.8 million for the over $40 million generated by the exotic options trading desk during his tenure as desk head. In seeking summary judgment on Mr. Xu's claims, J.P. Morgan Chase relied on its written incentive plan, arguing that the plan precluded any oral agreement to pay Mr. Xu a percentage of his revenues because the incentive plan provided the firm with absolute discretion to determine whether and how to pay bonus compensation to its employees. Judge Pauley noted, however, that the discretion provided for by the incentive plan "is fatal to J.P. Morgan Chase's preclusion argument." Because the incentive plan is discretionary, Judge Pauley held, it cannot be enforced as a contract and thus did not preclude the separate oral agreement alleged by Mr. Xu. The Court also held that Mr. Xu's alternative claims for breach of implied-in-fact contract (based on the parties' course of dealing in paying bonus compensation) and recovery in quantum meruit (for the reasonable value of Mr. Xu's services) are similarly not precluded by the incentive plan. Mr. Xu's claim for violation of the New York Labor Law was also upheld. Click here to read Judge Pauley's Order in James Y. Xu v. J.P. Morgan Chase & Co.; 01 Civ. 8686 (WHP).

Lawyer(s):
Jeffrey L. Liddle
Christine A. Palmieri


Judge: William H. Pauley III



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