How much is a decimal point worth? Trader Kai Herbert plans to find out.
Herbert brought suit against JPMorgan Chase & Co. in Britain's high court after he quit his job at UBS in 2010 and moved to South Africa based on a job offer from the bank with a salary of 24 million rand, or about $3.1 million. The hitch is that the actual salary was 2.4 million rand, one-tenth what Herbert contends he was entitled to as per the contract terms.
According to Bloomberg, Herbert sued for an amount equal to around $900,000. Following the discovery of the error and determining what his actual salary would be, Herbert didn't take the job. He was only intermittently employed in the subsequent months, which was attributed to cost-cutting by banks that led to widespread layoffs.
JPMorgan spokeswoman Kate Hayworth declined to comment via email. Bloomberg said the bank argued that Herbert should have known the outsized salary offer was a mistake based on the amount.
Legal scholars say Herbert's case will be tough to win, even though the bank acknowledged making the initial typographical error. "Mistakes happen all the time in contracts," said Kent Greenfield, professor at Boston College Law School. Greenfield said courts typically will interpret the contracts against the drafter. "They made the mistake, and they should bear the cost of the mistake."
But Greenfield said the exception to this norm is if the contractual mistake is so glaring that the contract can be considered unreliable.
This is where Herbert's claim could fall apart. "If 2.4 million is within the range that a person in this position should reasonably expect to be paid, I think it is very unlikely that his claim will succeed," David Millon, professor at Washington & Lee University Law School, said via email. "If 2.4 is normal, any sensible person should know that an offer to pay 10 times that amount is a mistake."
Greenfield pointed out that Herbert easily could have verified the contract's eye-popping salary with JPMorgan before turning in his resignation to UBS and moving to a new continent. But although he expressed doubts that Herbert will prevail in court, this still could be one pricey decimal point if the bank opts to settle rather than fight it out in court.
"My guess is this is a case you can pay to make go away," Greenfield said. If the bank decides that settling will be cheaper than litigating, they're likely to choose the former, he predicted.