One voicemail about a competitor, $2.2 million in punitive damages

What happened

Steven Hefter is an investment adviser with more than thirty years in the industry. In December 2018 he was working for Wells Fargo. He learned that a woman he knew socially, who had received money in a divorce settlement, was planning to hand it to Robert Kalman to manage.

Hefter had never heard of Kalman. So he looked him up on BrokerCheck, the industry tool that publishes an adviser's employment history, customer disputes, and regulatory actions, and ran Google searches on Kalman and on a former business partner of his. What he found concerned him.

He then left the prospective client a voicemail. The jury found that the voicemail falsely accused Kalman of past fraud in his profession, and that Hefter left it in an attempt to move her business away from Kalman and toward himself.

What the jury and the courts did

The case went to trial in Lake County on defamation per se and false light invasion of privacy. The jury found Hefter liable on both. Against Hefter it awarded half of all legal fees, $100,000 in presumed damages, and $2.5 million in punitive damages, plus another $100,000 in compensatory damages on the false light count. It found Wells Fargo liable too, awarding half of all legal fees and $25 million in punitive damages.

On post-trial motions the trial court cut the award back considerably. It struck the attorney fee awards against both defendants. It struck the false light compensatory award as a double recovery. And it found the punitive damages excessive, remitting them to $1.1 million against each defendant, for $2.2 million in total.

Both sides appealed that result. Hefter argued he was entitled to a new trial because of evidentiary errors, and alternatively that even the reduced punitive award was too high. Kalman cross-appealed asking for the original punitive damages to be restored. Wells Fargo did not appeal.

The Second District affirmed the whole structure. The remittitur stood, and neither side got it moved.

Why this matters if you compete for business

Almost everything about this case is ordinary except the number. An experienced professional heard that a prospect was about to hire someone else, spent a few minutes on publicly available research, and made one phone call. That is a completely routine sequence in any competitive industry.

What made it expensive was the leap from what the public record showed to what he told the prospect it meant. Public sources of the kind he used report disclosures, complaints, and regulatory events, and those entries do not establish that the person committed fraud. Characterizing them that way to a prospective customer is where a competitive phone call turns into defamation per se, which in Illinois means the statement is actionable without proving specific damages.

The employer's exposure deserves its own attention. Wells Fargo did not make the call, and the jury still assessed punitive damages against it ten times larger than against the person who did. Where a salesperson's disparagement of a competitor happens in the ordinary course of their work, the company is in the case.

The practical guidance is unglamorous. Say what you can support, and be careful about the difference between the fact of a disclosure and a conclusion about what it means. Compete on your own record. Where a genuine concern about a competitor is worth raising with a client, describing the public record and letting them read it is a different act from characterizing it.

A word about the number

The headline figure moved twice, from $27.5 million to $2.2 million, and the appellate court left it there. That is worth remembering whenever a verdict is reported. Remittitur exists precisely because juries and courts weigh punishment differently, and the first number published is often not the number anyone pays.