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Rojo v. Deutsche Bank

June 23, 2010


The opinion of the court was delivered by: Hon. Harold Baer, U.S.D.J.


Plaintiff Andres Rojo commenced this action against Defendant Deutsche Bank,*fn1 for material breaches of his employment contract, unjust enrichment, liability in quantum meruit, promissory estoppel, and fraud. Deutsche Bank moved for summary judgment before Judge Sand, which resulted in the dismissal of the contract claims.*fn2 The case was thereafter referred to me and the remaining claims were tried during a two-day bench trial. Thereafter, the parties submitted post-trial briefs. This case was sub judice on March 24, 2010. Based on my findings of fact and the conclusions of law that follow, I conclude that Deutsche Bank is not liable to Rojo on any of his remaining claims, and the Complaint must be dismissed.


A. Deutsche Bank Recruits the J.P. Morgan Team

The history of this case begins in September of 2000, when J.P. Morgan announced a merger with Chase Manhattan Bank. At the time, Plaintiff was employed by J.P. Morgan, where he was a Vice President in the Latin America division of the J.P. Morgan Private Bank. Rojo Dir. ¶ 7; Trial Tr. 30:3-10 (hereinafter "Tr.").*fn3 After the merger announcement, Plaintiff was approached by several banks that sought to recruit him and other members of his team at J.P. Morgan. Plaintiff opines that he had discussions about employment with Merrill Lynch, Prudential Securities, Goldman Sachs, Citibank, and Deutsche Bank. Rojo Dir. ¶ 6. The essence of Rojo's fraud claim is that Deutsche Bank made certain fraudulent misrepresentations during employment negotiations that caused him to enter into an employment agreement with the Bank, a decision that he alleges ultimately proved to be damaging to him and his career.

Rojo's discussions with Deutsche Bank began in October of 2000, when he met with Carlos Padula, then co-head of Deutsche Bank's Private Wealth Management Latin America Division. Rojo Dir. ¶¶ 9-10. Padula expressed interest in recruiting Rojo to join Deutsche Bank, and at least initially, Rojo said that he was happy at J.P. Morgan. Rojo Dir. ¶ 9; Padula Dir. ¶16.Nevertheless, Rojo spoke with his colleagues at J.P. Morgan about opportunities at Deutsche Bank, and assembled a group of fourteen bankers and brokers, at varying levels of seniority, who were interested in a possible move to Deutsche Bank (collectively, the "J.P. Morgan team"). Rojo Dir. ¶ 12. In November or December of 2000, Rojo and his J.P. Morgan colleague, Houda Foster, attended meetings with Padula and other senior executives in Deutsche Bank's Private Wealth Management division, including Berndt von Maltzan, then Global Head of Private Wealth Management, and Herbert Scheidt, then Head of International Private Wealth Management. Rojo Dir. ¶ 13, Padula Dir. ¶ 18.

During the meetings, the Deutsche Bank executives expressed the Bank's interest in expanding its business in Latin America, while Rojo and Foster described their Latin America business at J.P. Morgan. Padula Dir. ¶ 20. Rojo told Padula that his team could likely bring to Deutsche Bank about thirty percent of the assets they were managing at J.P. Morgan. Tr. 45:17-18. The parties disagree about the amount of assets that each expected the J.P. Morgan team to bring to Deutsche Bank. Padula understood that the J.P. Morgan team managed $9 billion in assets, and therefore projected that the team would bring $3 to $5 billion in assets to Deutsche Bank. Deutsche Bank then used this estimate as a guideline in building compensation packages for the J.P. Morgan team and in estimating revenues that would be gained through the acquisition. Padula Dir. ¶ 20. Rojo, meanwhile, was unaware of Deutsche Bank's projections, and insists that $9 billion came up during discussions with Padula only because it was the total amount of J.P. Morgan assets in Latin America after its merger with Chase. Tr. 47:3-5. Pre-merger, the J.P. Morgan team's business totaled $4.2 billion; Rojo therefore estimated that the team would bring approximately $1.4 billion to Deutsche Bank. Tr. 48:7. Rojo and Padula both acknowledged that whatever the asset base, they expected relatively lower returns in the first years after the move, and higher returns later on. Tr. 48:10-13.

B. Rojo Negotiates Compensation Packages

Plaintiff negotiated with Deutsche Bank to assemble proposed compensation packages for the J.P. Morgan team.*fn4 Tr. 49: 8-18. The compensation packages included some combination of several components: base salary, a sign-on bonus, guaranteed annual incentive compensation, and an incentive compensation pool to be shared by the team. Rojo Dir. ¶15. Rojo was offered a managing director position, in which he would serve as Senior Relationship Manager and Global Market Head for the Southern Cone Region of South America.*fn5 Tr. 39:19-40:11. His salary was set at $250,000 per year, in addition to which his contract provided for a sign-on bonus of $600,000 and a guaranteed bonus of $1.75 million for each of his first two years at Deutsche Bank. Tr. 41:12-23. In addition, Deutsche Bank agreed to create a guaranteed incentive compensation pool to be shared by the J.P. Morgan team, known as the Finder's Pool, which would accrue according to a formula based on the assets that the team brought to Deutsche Bank. Rojo Dir. ¶ 15; Tr. 42:22-43:5. Although Deutsche Bank created compensation projections and break-even analyses based on the estimated assets, Rojo was never shown the projections, nor did he ask to see them.

C. The Cost of the Acquisition Did Not Appear on the Latin America P&L and Was Accounted for Centrally

During negotiations, Rojo told Padula that he was concerned about how Deutsche Bank would account for the cost of the acquisition, because of the size of the proposed J.P. Morgan compensation packages relative to the level of business in Deutsche Bank's Latin America Private Wealth Management business. Tr. 52:22-24. Specifically, Rojo expressed concern that the Latin America group would operate at a loss for several years after the acquisition of the J.P. Morgan team. Padula agreed that losses were likely in the early years. Tr. 54:17-19. Rojo asked Padula whether compensation for the team would come out of the operating expenses of the Latin American division. Rojo Dir. ¶ 15. Padula told Rojo that the cost of the acquisition would not appear on the Profit & Loss Report (P&L) for Deutsche Bank's Latin America Private Wealth Management group. Tr. 65:24-25. Indeed, as both parties acknowledge, there was never a P&L for Latin America that reflected the compensation that Deutsche Bank paid to the members of the J.P. Morgan team. Tr. 65:2-5; 143:1-3.

Padula also assured Rojo that the acquisition of the J.P. Morgan team would be financed centrally, because Deutsche Bank's decision to hire Rojo and his colleagues was part of a long-term strategy. Tr. 55:17-19. The deal required final approval by the Vorstand, the Board of Directors that leads Deutsche from its central office in Frankfurt. Tr. 137:5-12. Padula told Rojo that the Bank was aware that it would take time for the deal to become profitable. Tr. 56:1-6. Although Rojo sought assurances that the cost of the acquisition would not appear on the Latin America P&L, he did not ask Padula for details about how Deutsche Bank planned to account for acquisition. Tr. 69:22-24. Padula assured Rojo that the cost of the acquisition would not immediately affect the balance sheet of the Latin America region (Tr. 144:2-5), but cautioned Rojo that he was not familiar with the way in which Deutsche Bank would account for bonuses paid to the J.P. Morgan group. During negotiations of the compensation packages, Rojo did not press for any further information or accounting. Tr. 69:22-24.

Ultimately, when it came time to pay bonuses, the revenue stream of the Latin America region was not sufficient to cover the bonus payments guaranteed to the J.P. Morgan team. Von Maltzan Decl. ΒΆ 27. Consequently, Deutsche Bank's central management subsidized bonuses for the Latin America region using revenues from other international regions. Tr. 222:10-14. When the Bank's central office in Frankfurt reviewed the P&Ls for the Private Wealth Management business on a worldwide basis, the P&L for each region was shown without the cost of bonuses. Tr. 240:11-18. The worldwide bonus accrual for the wealth management business was reflected in a separate ...

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