ELEVENTH CIRCUIT REINSTATES JURY VERDICT FOR MIAMI BUSINESSMAN AGAINST U.S. BANK FOR BAD FAITH BANKRUPTCY FILING
First Case Deciding that Federal Rules of Bankruptcy Procedure Govern a Federal District Court Jury Trial in a Bankruptcy Proceeding
MIAMI, FL (April 12, 2016) – On Friday, April 8th, 2016, the Eleventh Circuit Court of Appeal issued the attached published opinion in DVI Receivables XVI v. Rosenberg. The opinion reinstates a jury verdict in favor of Miami businessman Maury Rosenberg against U.S Bank, N.A.
The jury verdict, entered in March 2013, determined that Lyon Financial, which is now a part of U.S. Bank, acted in bad faith when it improperly filed an involuntary bankruptcy petition against Rosenberg, and awarded Rosenberg $6.12 million, including $5 million in punitive damages. U.S. Bank filed a post-trial motion for judgment as a matter of law. In 2014, United States District Judge Cecilia Altonaga confirmed the jury’s finding of bad faith, but overturned the punitive damages award and reduced Rosenberg’s compensatory damages to $360,000.
Rosenberg challenged the order vacating the jury verdict arguing in part that the Federal Rules of Bankruptcy Procedure, and not the Federal Rules of Civil Procedure, apply in a bankruptcy proceeding tried in district court, and that U.S. Bank’s post-trial motion was untimely because the Federal Rules of Bankruptcy Procedure require that a post-judgment motion be filed in 14 days rather than the 28 days provided in the Federal Rules of Civil Procedure. The ruling is the first appellate case in the country to decide the specific issue of whether the Federal Rules of Bankruptcy Procedure govern proceedings when a federal district court conducts a jury trial in a bankruptcy proceeding. In its opinion, authored by Senior Judge Stanley Marcus, the Eleventh Circuit stated that "when trying a case held under title 11, a district court (just like a bankruptcy court) must apply the filing deadline found in the Federal Rules of Bankruptcy Procedure when addressing a Rule 50 (b) motion."
"Because U.S. Bank filed its motion more than 14 days after the judgment was entered, it was untimely and the district court should not have considered the motion or set aside the jury verdict," said W. Barry Blum, a partner at Miami-based law firm Genovese Joblove & Battista who argued the case for Rosenberg before the Eleventh Circuit.
"We are pleased that the Eleventh Circuit reinstated the jury verdict, including the punitive damages for the bank’s bad faith bankruptcy filing," added Blum. "The opinion is well-reasoned and well-written. The holding that the Bankruptcy Rules apply in bankruptcy proceedings, both in district court and in bankruptcy court, respects the language of the federal rules and is consistent with other published cases. This is the first decision, though, that applies the principle in the context of a jury trial."
"This is the largest punitive damage award that we know of for a bad faith filing of an involuntary bankruptcy," said Paul Battista, lead bankruptcy counsel for Rosenberg and partner at Genovese Joblove & Battista.
In addition to the $6.12 million jury verdict, the Eleventh Circuit previously ruled that U.S. Bank is liable for Rosenberg’s attorney's fees, which have incurred over more than seven years in defending against the involuntary petition, including appellate fees, and for prosecuting the bad faith claims. Those fees are now over $3.5 million according to Battista.
"US Bank has now lost two trials in bankruptcy court, lost before the jury, lost five straight times on appeal, and was turned away by the U.S. Supreme Court. But it has contested every issue in order to delay being held accountable for its bad faith filing," added Blum.
In November 2008, DVI Receivables XIV and five other shell entities directed by Lyon Financial filed an involuntary bankruptcy petition against Rosenberg in an attempt to collect on a debt Rosenberg allegedly owed for medical equipment leases. The Bankruptcy Court dismissed the involuntary bankruptcy in 2009, finding that DVI Entities were not eligible creditors and lacked standing as a matter of law to file an involuntary petition against Rosenberg. Lyon appealed that decision to the district court and the Eleventh Circuit, both of which affirmed the dismissal in 2012.
Although Lyon Financial was not specifically named as a petitioning creditor in the bankruptcy filing, Bankruptcy Judge A. Jay Cristol found Lyon liable for attorneys’ fees and costs as a petitioner because it caused the petition to be filed in the name of the shell entities, despite that Lyon had earlier stated in a sworn complaint in a Pennsylvania case that it held the claim against Rosenberg. The district court affirmed the ruling as did the Eleventh Circuit in February 2015. In January 2016, the U.S. Supreme Court denied U.S. Bank’s petition to review that Eleventh Circuit’s decision. The decision issued on Friday is the third time the Eleventh Circuit has ruled in Rosenberg’s favor in less than four years.
About Genovese Joblove & Battista, P.A.
Genovese Joblove & Battista, P.A. (GJB) was established in 1999 by founding partners John H. Genovese, Michael D. Joblove, and Paul J. Battista. Today, GJB has grown steadily to become a major regional firm with offices in Miami and Fort Lauderdale and an affiliate office in Caracas, serving clients throughout the U.S. GJB attorneys are recognized for their experience representing clients in large and complex litigation in a number of areas, including bankruptcy, insolvency, receiverships, franchises, and general commercial matters, as well as white collar, real estate, employment law, class actions, and securities litigation. The firm and its affiliate, GJB Consulting, also counsel clients in local, state and federal government matters. For more information, visit www.gjb-law.com.