Whistleblower at hedge fund is misclassified and wrongfully terminated. $1.5M. Contra Costa County.

Summary

Analyst complains about being misclassified as an independent contractor rather than an employee; and that she was illegally paid with "soft dollars."

The Case

Case Name: Jessica Lee v. Michael Wilkins, Kingsford Capital Management, LLC, and Kelly Mazzucco
Court and Case Number: Contra Costa County Superior Court / CIVMSC18-00816
Date of Verdict or Judgment: Wednesday, December 11, 2024
Date Action was Filed: Friday, November 17, 2017
Type of Case: Employment, Whistleblower, Wrongful Termination
Judge or Arbitrator(s): Hon. Charles S. Treat
Plaintiffs:
Jessica Lee
Defendants:
Kingsford Capital Management, LLC
Michael Wilkins
Kelly Mazzucco
Type of Result: Jury Verdict

The Result

Gross Verdict or Award: $1,550,000
Award as to each Defendant:
The jury verdict of $1,550,000 was against defendant Kingsford Capital Management, LLC for the cause of action violation of California Labor Code section 1102.5 Whistleblower Retaliation.

Defendants Michael Wilkins and Kelly Mazzucco were dismissed following defendants' motion for nonsuit.
Economic Damages:
Lost Earnings: $700,000

Future Lost Earnings: $500,000
Non-Economic Damages:
Past emotional distress damages and future emotional distress damages of $350,000.
Punitive Damages:
The jury awarded $0 in punitive damages. The punitive damages trial took place on December 11, 2024.
Trial or Arbitration Time: 15 days
Jury Deliberation Time: 9.5 hours for verdict including punitive damages Phase 1, 1.25 hours for hours for punitive damages Phase 2.
Jury Polls: 11-1 for Labor Code section 1102.5 whistleblower retaliation. 11-2 for punitive damages (Phase One). 10-2 for $0 in punitive damages (Phase Two).
Post Trial Motions & Post-Verdict Settlements: Plaintiff will be filing a motion for attorney's fees pursuant to California Labor Code section 1102.5, subdivision(j). Defendant intends to file a motion for new trial based on excessive compensatory and emotional distress damages.

The Attorneys

Attorney for the Plaintiff:
The Law Office of Jan T. Aune by Jan T. Aune, Burbank.
Attorney for the Defendant:
Gordon & Rees LLP by Michael A. Laurenson and John V. Ricca, San Francisco.

The Experts

Plaintiff's Technical Expert(s):
Michael Rosen, Ph.D., economic damages.

Martin Dirks, M.B.A., federal securities laws.

Facts and Background

Facts and Background:
Plaintiff worked as an analyst at Kingsford Capital Management, LLC ("Kingsford"). Kingsford is a hedge fund that performs short-selling of securities. Plaintiff worked at Kingsford from 2009 until November 2015 when she was terminated. Plaintiff analyzed/researched securities that Kingsford was planning to short sell or in which it had already taken a short position. Plaintiff did a significant amount of work analyzing Chinese stocks that Kingsford was going to short or that Kingsford had already shorted. Plaintiff speaks both English and Chinese.
Plaintiff's Contentions:
Plaintiff claimed she was retaliated against and terminated after she reported that she reasonably believed that (1) she was misclassified by defendant Kingsford Capital Management, LLC ("Kingsford") as an independent contractor from 2009 to 2015 in violation of federal law; (2) Kingsford was using "soft dollars" to pay employees misclassified as independent contractors in violation of section 28(e) of the Securities Exchange Act of 1934; and (3) Kingsford requested that plaintiff publish false information about securities and/or publish information about securities under an assumed name in violation of the Exchange Act, Rule 10b-5 of the Exchange Act, and the anti-fraud provisions of federal securities laws.

Plaintiff reported the violations to Kingsford's co-founder and Managing Partner, defendant Michael Wilkins, and Chief Compliance Officer and Chief Financial Officer, defendant Kelly Mazzucco (both dismissed on motion for nonsuit).
Defendant's Contentions:
Kingsford contended that it terminated plaintiff in November 2015 because she was not performing well as an analyst, and not because she reported violations of federal independent contractor law and federal securities laws, as plaintiff contended.

Kingsford contended that even though it classified plaintiff as an independent contractor from 2009 through approximately January 2015, Kingsford hired plaintiff as analyst and employee in February 2015 and her previous classification as an independent contractor was no longer an issue.

Kingsford contended that it stopped the practice of paying soft dollars to workers it classified as independent contractors in or about 2014, so that was no longer an issue. For the punitive damages trial, Kingsford contended that for punitive damages jury instruction (Phase II), CACI 3942 Entity Defendant, none of the five factors for determining how reprehensible the defendant's conduct was applied to Kingsford.

Demands and Offers

Defendant §998 Offer: By defendant Kingsford: $500,000

Additional Notes

Defendant's offer following verdict: Defendant offered $1,550,000 following the jury verdict on December 10, and prior to the jury trial on Punitive Damages (Phase Two) on December 11.