Appeals Court Overturns Damages Award for Former ML Adviser

A U.S. Court of Appeals has overturned a $2.1 million award won by an ex-Merrill stockbroker, but upheld the original verdict, along with an $850,000 award for defamation.

Deborah Galarneau sued Merrill Lynch in 2005 for defamation, breach of contract, and gender discrimination, among other claims. However, at trial, the jury rejected her gender discrimination and breach of contract claims, finding only in her favor in the defamation claim.

Merrill Lynch appealed but, in its opinion upholding the original verdict, the U.S. Court of Appeals for the First Circuit in Maine said “Merrill Lynch has not shown, not has it alleged, any extraordinarily compelling circumstances that would justify our reversal of the district court’s ruling.’

Merrill Lynch fired Galarneau in January 2004 and then filed a Form U-5 with NASD (now FINRA), required whenever a registered stockbroker leaves a firm, saying she was terminated because of inappropriate bond trading in one client’s account and use of improper time and price discretion in the accounts of three clients. Galarneau claimed she was unsuccessful at getting work as a broker at three other firms due to the accusations on the U-5. However, the appeals court also concluded, “There was no evidence that Merrill Lynch made the statement in the U-5 with the intent to deprive Galarneau of a job.’

“Merrill Lynch’s knowledge must have motivated its statement, or its actions must have been so outrageous as to imply malice,’ the opinion said.