FAMs usually sit closest to the cockpit to provide best protection for the pilots flying the plane. On the 77W this means first class.
I think it makes most sense to un-upgrade a F passenger who was upgraded from J, instead of bumping a paid F passenger. But, F tends to sell well on LHR flights so maybe no J->F upgrades were initially processed. I think a more appropriate compensation for the OP would have been refund the fare difference between the J equivalent of the F fare paid - for example difference between discounted F and discounted J.
By now, AA should know a FAM could be onboard any flight and block seats in advance, then release them if no FAM requires the seats.