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Ultimately he had to close his company. He and his wife now live with their son Doug, 27, in a million-dollar condo in downtown Miami.
The 2008 petitions might have ended the story. But U.S. Bankruptcy Judge A. Jay Cristol in Miami tossed out the petition against Rosenberg. Cristol held that the special-purpose DVI entities weren’t actual creditors with standing to file the petitions but pass-through entities. A different judge dismissed petitions against Rosenberg’s company on similar grounds.
U.S. Bank and the other entities appealed Cristol’s decision twice, and lost twice.
Meanwhile, the parties agreed to a jury trial outside bankruptcy court to handle the requisite damages from the dismissed petition.
A jury recently found seven defendants, including U.S. Bank, to have acted in bad faith in filing the bankruptcy petitions. Jurors were instructed to determine bad faith by considering such things as whether the petitioners were motivated by the desire to embarrass or harass, or whether they filed the petition solely as a substitute for regular debt collection procedures to coerce a settlement, among other things.
The jurors awarded Rosenberg $6.12 million in damages: $5 million in punitive damages and $1.12 million for such things as emotional distress. To award punitive damages the jurors had to find that the bank acted with malice or that its actions were particularly egregious. U.S. Bank is also on the hook for Rosenberg’s estimated $3.9 million in legal expenses.
In closing arguments Yale Galanter, the criminal defense lawyer Rosenberg hired for the trial, said the jurors should award punitive damages high enough to be “a wake-up call” to an institution with a net worth of $38 billion. Though jurors awarded far less, Rosenberg’s lawyers are proclaiming total victory.
“They just got body slammed,” Galanter said. “It was about holding this giant of a bank responsible for their illegal use of the bankruptcy code.”
Galanter, a $600-an-hour lawyer known for representing celebrities such as O.J. Simpson, said he thinks the case is the first time a contested involuntary bankruptcy has resulted in a jury trial in civil court. According to him, the $6 million award is the largest punitive-damage award in U.S. history in such a case.
David Wheeler, a bankruptcy specialist on the board of the American Bankruptcy Institute, said he’s never heard of an involuntary bankruptcy case going so far. It is rare to get a bad-faith finding or punitive damages in bankruptcy court, Wheeler said, and he’s never heard of an amount such as $6 million.
Carlos Sardi at Genovese Joblove & Battista, the Rosenbergs’ bankruptcy lawyer, called the verdicts pioneering. It’s a warning, he said, for any creditor considering filing an involuntary bankruptcy petition: “Creditors beware.”
Jennifer Bjorhus • 612-673-4683