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Judge Takes to Task Big Law Firms, Financial Giants in ABFS Case
The Legal Intelligencer
September 22, 2009
Philadelphia Judge Mark I. Bernstein's opinion was short, but it said plenty.
The commerce program judge was clearly irked by a request from several large financial institutions to dispense with a jury trial in the case against them by the trustee of the bankrupt American Business Financial Services.
Bernstein said the financial companies that are defendants in the case are represented by some of the best and largest law firms in the country with more than ample resources to have filed the motion in a more timely fashion.
"The financial institution defendants are represented by some of the largest, most distinguished, and thorough law firms in the country," Bernstein said, adding later, "These firms can assign however many partners, senior associates, junior associates and exceptional newly hired law school graduates to handle matters of any complexity.
"These firms include Wilmer Cutler Pickering Hale & Dorr of New York City, Marino Tortorella & Boyle of Chatham, New Jersey, Dechert and Spector Gadon & Rosen of Philadelphia, Pa.," he said. "Indeed, the very motion at issue is filed by thirteen attorneys." The case, captioned Miller v. Santilli, was begun in 2006 and the financial institution defendants are the only parties who have yet to settle out. Over the course of the last three years they have repeatedly requested a jury trial, Bernstein pointed out.
But earlier this year, with the argument that contracts signed between the parties required a bench trial and prior litigation counsel failed to notice those provisions, the financial defendants argued the jury demand should be stricken. Bernstein denied their request in July and issued a four-page opinion earlier this month now that the ruling is being appealed to the Pennsylvania Superior Court. The opinion didn't focus so much on the merits, but instead targeted the timeliness of the attorneys' filings.
"Although willing to blame 'prior counsel' for its failure to move for a non-jury trial for three years, at no point is 'prior counsel' identified," Bernstein said. "The actions (or inactions) of prior experienced counsel is the parties represented."
In a footnote to his opinion, Bernstein said the defendants continue to be represented by the same attorneys who entered their appearance in the matter and said the docket doesn't show any entries for a withdrawal of appearance by any of their counsel.
Steven M. Coren of Kaufman Coren & Ress, the attorney for trustee George L. Miller, confirmed that the only change of representation was that one of the three clients in the matter represented by Dechert brought on new counsel -- the New Jersey firm Marino Tortorella.
Dechert still represents the JP Morgan and Bear Stearns entities. Marino Tortorella came in earlier this year to represent Morgan Stanley, Coren confirmed, and Dechert no longer represents the company. All of the financial institution defendants signed on to the motion to strike the jury demand. The motion was filed by an attorney from Spector Gadon, according to the docket. Spector Gadon serves as local counsel for the Credit Suisse entities along with Wilmer Hale.
Kevin Marino of Marino Tortorella was admitted pro hac vice in January 2009, and the motion to strike the jury demand was filed in May. Marino signed the reply memorandum of law supporting that motion to strike. In the memo, which was signed by all of the financial institution defendants, Marino asserted that other firms represented ABFS in its negotiation with the financial institution defendants when they were negotiating loans for ABFS and it was those firms who were familiar with the jury waiver provisions since they helped craft them.
Those firms, according to documents in the case, were Blank Rome and Dewey Ballantine.
Blank Rome had been sued in this case on other issues and recently settled with the trustee for $20 million. Dewey Ballantine has never been a party in this action.
According to Bernstein's opinion, the financial institutions blame their litigation counsel for not focusing on the jury waivers that were included in the lending agreements between ABFS and the institutions.
They argued, Bernstein said, citing their reply brief, that it wasn't until after discovery had been completed, when the financial institution defendants' attorneys began to focus on pretrial motions, that the litigation counsel looked at the jury waiver provisions in the contracts.
Marino said in the reply memo that it is common for such motions to be filed at the close of discovery and that Miller suffered no prejudice by the motion being filed five months before trial.
The motion was filed in May 2009, according to the docket, and trial is set to start Oct. 26. According to Coren, the parties have agreed the trial will go ahead as scheduled despite the appeal to the Superior Court. He said he was pleased with Bernstein's ruling denying the motion to strike.
In the opinion, Bernstein said the filing was made "only a few weeks before trial" and that the actions and inactions of trial counsel may be attributed to the client.
"The complexity of the case cannot excuse any alleged failure to decide the most basic issue in any litigation -- whether the case should be tried to a jury or not," Bernstein said. "It is simply incredible to contend that counsel never noticed that all their filings acknowledged, preserved, and even demanded a jury disposition. Specifically, in this case, the superb counsel hailing from the most respected law firms in the country who did not remember the first lesson of every law school trial advocacy class, is never identified."
In their reply memo, the financial institution defendants argued Miller made representations in his complaint that he had a right to a jury trial, and litigation counsel relied on those representations.
"They, in turn, labored for some time under the misunderstanding engendered by that improper jury demand," Marino wrote in the reply memo. "But what was at best a mutual mistake (and at worst an attempt by Plaintiffs' counsel to revive a right he knew had been waived) does not constitute a 'waiver of the waiver.' Litigation counsels' failure to realize that their clients intentionally and expressly waived their known right to a jury trial when represented by other counsel does not operate to invalidate that waiver."
According to the reply memo, judges have enforced jury waivers on the eve of trial when learning of such contractual provisions.
The financial institution defendants joined accounting firm BDO Seidman in the case. BDO Seidman is seeking arbitration, according to the opinion.
A spokeswoman for Dechert said the firm had no comment on Bernstein's ruling. Marino, Douglas Curtis of Wilmer Hale and Timothy Russell of Spector Gadon also declined to comment.
