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A common pleas judge in Scranton has added roughly $5.7 million in prejudgment interest onto the $17.3 million a jury there awarded in May 2005 to the owners of a local shoe business that went bankrupt in 1997 after what the owners claimed was wrongdoing on behalf of its bank, CoreStates. In an opinion in which he denied a defense post-trial motion to remit the multimillion-dollar verdict down to a nominal $1 award, Lackawanna County Common Pleas Judge Terrence R. Nealon – who presided over both phases of the bifurcated trial in Busy Bee Inc. v. Wachovia Bank – also included post-judgment interest of just less than $3,800 per day, running from late May 2005 until payment of the full award. Both plaintiffs’ and defense counsel in Busy Bee are attorneys from Philadelphia. The lender liability lawsuit had been filed by a group of family-owned shoe businesses called B. Levy & Son against CoreStates’ successor, Wachovia. Two separate 12-member juries in Lackawanna County had, over the course of late 2004 and early 2005, heard the case’s liability and damages phases. Plaintiffs attorney Steven Coren of Kaufman Coren & Ress in Philadelphia said he expects post-judgment interest in the matter to total nearly $1 million. “We believe that [Nealon's] opinion is thorough and sound, and that the time has come for the bank to right the wrong committed by their predecessor,” Coren said yesterday. Defense attorney Elizabeth Ainslie of Schnader Harrison Segal & Lewis did not immediately respond to a call seeking comment. The B. Levy & Son group had alleged that CoreStates provided them with false information that ultimately forced them into bankruptcy, according to court documents. Specifically, B. Levy & Son claimed that the bank negligently misled it into liquidating its retail assets in 1996 and then used the liquidation as grounds for declaring the company in default on its loan agreement with the bank. In September 2004, the liability jury in Busy Bee unanimously found CoreStates liable for breach of contract and fiduciary duty, and fraudulent and negligent misrepresentation. That jury also found the bank’s conduct toward the plaintiffs to be “outrageous,” according to the verdict sheet from that phase. During the damages phase, the defense argued that B. Levy & Son should receive only nominal compensatory damages and no punitive damages, contending that the bank never caused the plaintiffs any harm. The bank highlighted how the 108-year-old shoe business had suffered losses in the years before its demise and argued that the business was worth little when the alleged wrongdoing occurred in the mid-1990s, Coren told The Legal in May 2005. An expert for the plaintiffs had estimated that the loss of the company’s retail and wholesale operations totaled more than $39 million, according to court documents. Coren said the highest settlement offer from Wachovia was $10 million – a proposal that came shortly before the jury came back with a verdict after three hours of deliberations. The plaintiffs refused. Ruling on a motion in limine prior to trial, Nealon addressed a novel evidentiary issue that he said no Pennsylvania appellate court has: “Whether the net worth of the successor corporation (Wachovia) or the net worth of the predecessor corporation and original tortfeasor (CoreStates) is the appropriate measure of ‘the wealth of the defendant’ for purposes of assessing punitive damages.” In 1998, CoreStates was succeeded by First Union Bank, which merged with Wachovia in 2001. The defense wanted to preclude the plaintiffs from telling the jury about Wachovia’s present net worth. It argued that the liability jury found that CoreStates had engaged in “outrageous conduct” in 1995 and 1996, and, therefore, only the net worth of CoreStates was relevant to the issue of punitive damages. Nealon rejected this reasoning and said he would permit the parties to introduce evidence of Wachovia’s wealth in 2005, as well as CoreStates’ in 1995 and 1996, letting the jury decide whether the wealth of either the successor or the predecessor bank was more appropriate. In his opinion filed last week, Nealon – in addition to rejecting Wachovia’s arguments as to improper evidence admissions, erroneous jury instructions and inflammatory remarks by plaintiffs’ counsel during opening and closing arguments – disagreed with Wachovia that the B. Levy & Son group’s tort claims were barred under the “gist of the action” doctrine. “Since the evidence established that the defendant engaged in tortuous conduct after the parties’ written agreement had been terminated, and the defendant attempted to enforce rights and impose obligations that did not exist under the parties contract, the plaintiffs’ tort claims are collateral to the parties’ contract and are not foreclosed by the gist of the action doctrine,” Nealon wrote in last week’s opinion. The exact amount of pre-judgment interest, as calculated by Nealon, is $5,697,452. As a result, he ordered the original $17.3 million verdict molded to just less than $23 million. (Copies of the 138-page opinion in Busy Bee Inc. v. Wachovia Bank , PICS No. 06-0339, are available from The Legal Intelligencer . Please call the Pennsylvania Instant Case Service at 800-276-PICS to order or for information. Some cases are not available until 1 p.m.)

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