(Bloomberg) — The family of an elderly JPMorgan Chase & Co. client who lost tens of millions of dollars in investments as he slipped into dementia faces a major setback in their years-long legal battle with the bank after a magistrate judge recommended their case be thrown out.

Peter Doelger, 86, and his wife, Yoon, sued JPMorgan in federal court in Boston over investments they claim should never have been allowed and ended up wiping out a large chunk of a fortune once tied to more than 50 million dollars. They claim that Peter began to show signs of dementia around the time he signed a document in 2015 absolving the bank of any responsibility for complex and risky bets on his portfolio.

The family's subsequent losses, chronicled by Bloomberg in December, are testing whether Wall Street firms can be held accountable for what happens if clients lose the ability to understand their investments.

Read the Big Take: JPMorgan is in a fight over $50 million in lost client assets

Magistrate Judge Jennifer Boal, in a report made public late Tuesday, found that Doelgers failed to make “legally sound” allegations that JPMorgan breached any duty by letting Peter keep most of his financial portfolio. invested in oil and gas related securities. The recommendation set high limits on the claim that the firm benefited from his cognitive impairment.

Peter was diagnosed with progressive dementia in early 2014 and had complained that “people were using radio frequencies or radiation to attack him,” the judge said. But by the time his fortune disappeared in 2020, “none of the doctors who evaluated Mr. Doelger between August 2015 and March 2020 recorded in his medical records any concerns about his ability to manage his finances. his”.

Protections for vulnerable adults in Florida, where the Doelgers had a home, also did not apply to Peter, Boal found. The regulations cover people who are unable to perform activities of daily living — not someone with simple cognitive decline, she said.

“The records show that Mr. Doelger traveled between 2015 and 2020,” Boal wrote. “He swam and rowed. He engaged in candid conversations about world politics.”

The only claim the judge said could go to trial is one filed by JPMorgan saying the Doelgers' allegations have no merit and forcing them to pay increased legal costs and other unspecified damages.

U.S. District Court Judge Angel Kelley will decide whether to accept Boal's findings. The couple's lawyers hope to avoid such a ruling, arguing that it would ignore the law as well as evidence of JPMorgan's wrongdoing and their influence.

“We strongly believe that dismissing this case without a trial would not only be improper, but would deprive the Doelgers of their right to be heard and could have a chilling effect on other victimized investors, ” James Serritella, an attorney at Kim & Serritella in New York. who is also Peter's son-in-law, wrote in a statement sent by email. “We are confident that Judge Kelley will be fair and will fully consider the entire record.”

JPMorgan declined to comment on the magistrate judge's recommendation. Last year, the bank said its employees noticed no signs of cognitive decline from Doelger and that the firm repeatedly suggested he diversify his investments.

Seeing for dementia

The case stems from a growing issue as baby boomers retire at a record high stock of wealth. Many have saved enough to be considered “accredited” or “sophisticated” under US law – allowing them to participate in complex and risky investments. The industry lacks a formal system for detecting when customers can no longer manage their finances, leaving it up to individual firms to set internal policies.

At JPMorgan, employees are required to immediately report to their supervisor “any situation where they have a reasonable basis to believe that diminished capacity and/or potential financial abuse, exploitation or neglect of an elderly or vulnerable client has occurred “, according to the documents. presented in the Doelgers case.

Signs of diminished capacity, according to JPMorgan's policy, include memory loss, disorientation, difficulty performing simple tasks, impaired judgment, unusual mood swings and difficulty with abstract thinking.

The Doelgers' main contact at JPMorgan told the court that he did not know about Peter's declining mental health until the family moved to sue JPMorgan.

This contradicted the testimony of Yoon, who said there were numerous episodes of Peter fidgeting between phone calls during the half-decade relationship. She said she told their contact at JPMorgan that Peter had memory problems. And an expert witness for the Doelgers wrote in a court report that by the second half of 2019 Peter's declining mental state would be apparent to people at the bank.

Boal, however, stressed that the family never disclosed to JPMorgan that Peter had dementia or depression, or that he had been diagnosed with a mental health condition or received treatment.

The magistrate also noted that Yoon and the family's lawyers proved in court that Peter reviewed and understood the lawsuit before filing it in 2021. A court-ordered exam later found him incompetent to testify in the lawsuit and both sides have agreed not to contest it.

Disputed numbers

More broadly, Boal said, the Doelgers could not show that there were material facts in dispute that would require a trial.

One of those disputes involves the Doelgers' wealth at the time JPMorgan sought to handle their portfolio. In 2015, JPMorgan filings listed the family's net worth at $100 million, when it was actually closer to $50 million — possibly less.

The bulk of Doelgers' portfolio consisted of limited partnerships – securities tied to oil and gas contracts. Under JPMorgan's eligibility guidelines, such letters must be limited to just 5% of a client's assets.

In 2015, Peter had more than $30 million invested in MLPs. This raised concerns within JPMorgan, which required him to sign a “Big Boy letter” attesting to his understanding of such complex products and noting that he had been encouraged to diversify his portfolio. By signing, he agreed not to hold JPMorgan responsible for any losses.

The Doelgers allege that someone at JPMorgan knowingly overstated Peter's wealth in order to get the bank to approve the concentration of MLPs — and swapped pages from an account application after Peter signed it.

Boal, in her recommendation, said the Doelgers presented no evidence of this and that whether the family had $100 million or $50 million in assets was moot because, either way, the MLP's investments exceeded the 5% limit.