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ARNONE v. DEUTSCHE BANK

May 12, 2003

GERARD M. ARNONE, PLAINTIFF, AGAINST DEUTSCHE BANK, AG, DEUTSCHE BANK AG, NEW YORK BRANCH, AND BANKERS TRUST COMPANY, DEFENDANTS.


The opinion of the court was delivered by: Miriam Goldman Cedarbaum, United States District Judge

OPINION

This is a diversity action to remedy an alleged breach of contract by the defendants Deutsche Bank, AG, Deutsche Bank AG, New York Branch, and Bankers Trust Company.*fn1 Defendants have moved for summary judgment.

BACKGROUND

Plaintiff Gerard M. Arnone ("Arnone") is suing defendants Deutsche Bank AG, Deutsche Bank AG, New York Branch, and Bankers Trust Company (the "Bank") for a breach of contract related to his termination from employment at the Bank. The complaint states that defendants have refused to pay Arnone a bonus for securing certain Taft-Hartley business for the Bank, "despite the promises and assurances" of his supervisors that Arnone had earned the bonus and that it would be paid to him in the amount of $825,000.

This Action

Arnone was employed by the Bank in 1987 as a Vice President in the Global Institutional Sales division. His assignment was to market custody and investment management services to institutional trust funds, specifically to union pension funds. This type of banking activity is traditionally known as "Taft-Hartley" business. In or about 1997, Arnone was promoted by the Bank to the title of Managing Director. During the period relevant to the claim in this case, i.e., between 1998 and 2000, Arnone reported to Douglas W. Doucette ("Doucette"), Managing Director and Head of the Client Management Group. Doucette, in turn, reported to Timothy F. Keaney ("Keaney"), Managing Director and Head of the Retirement Services Group.

Plaintiff alleges that the Bank instituted a new standard in 1998 under which it rewarded its managers/salespeople with bonuses based upon the profitability of the banking product or service sold, sometimes referred to as the "gold/silver/bronze" standard.

Arnone led a formal presentation to the Central States Teamsters ("CST") in September 1998 on behalf of the Bank to bid for a potentially lucrative investment management appointment. In October 1998, CST decided to award the Bank some $3 billion in Taft-Hartley trust management business. Then, in December 1998, CST notified the Bank that it had decided to award the Bank an additional 35% of the assets of CST's pension fund to manage as named fiduciary, raising the total amount of CST assets under management by the Bank to approximately $9 billion. By early January 1999, CST had transferred approximately $1 billion to the Bank to manage, and was in the process of transferring the remainder of the $9 billion award.

In early December 1998, Arnone confirmed with Keaney his expectation of a bonus of at least $800,000 based on the "gold standard" and the CST business brought into the Bank. Arnone further confirmed with Doucette in early January 1999 his expectation of a bonus at the "gold standard" of payment based on the CST business.

However, the Bank was involved in an "escheatment issue" that ultimately caused the Bank to withdraw from the CST fiduciary business. In January 1999, after the Bank received the initial one billion dollars from CST, Arnone learned for the first time that a separate division of the Bank was under investigation by both the United States Department of Justice and the New York State Attorney General for failing to escheat to New York State authorities approximately $19.1 million in unclaimed, abandoned funds. Plaintiff had no involvement in the escheatment issue.

As a result of the escheatment problem, and the failure of the Bank to disclose the problem to CST during the bidding process, the Bank was forced to resign from the management of the CST account in or about February 1999. Thereafter, on or about March 11, 1999, the Bank publicly announced that it would plead guilty to a felony and pay fines to the federal and state governments totaling approximately $63.5 million. It is undisputed that the Bank resigned as fiduciary before it earned any revenue on the CST account. It is also undisputed that bonuses at the Bank were calculated based upon actual revenue received, whether under the old discretionary bonus system or under the precious metal standard.

However, Arnone maintains that the Bank made a separate and distinct promise to pay him a bonus as if the CST business had been retained. Arnone and his supervisors Doucette and Keaney had several conversations regarding his bonus after the Bank resigned from the CST account in February 1999.

According to Arnone, in October 1999 he spoke with Keaney about the amount of bonus he would receive for having brought in the CST pension business. In the lobby of the Bankers Trust building at 130 Liberty Street, Keaney put his arm around Arnone and said, "you know, Jerry, we're going to pay you as if the Central States Teamsters business came in."

It is undisputed that plaintiff did not receive a bonus for 1999, and the Bank terminated his ...


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