A businessman who U.S. Bancorp pushed into bankruptcy has fought back in courts and won several victories, but the Minneapolis bank company says it’s not over.
The company suffered key setbacks in recent months in a dispute with Maury Rosenberg that started 13 years ago. Rosenberg, 70, made a fortune in Philadelphia real estate and plowed it into other businesses, including one whose debts eventually wound up under U.S. Bank’s supervision.
Their battle spans courtrooms in Pennsylvania and Florida and the company even tried to take it to the nation’s highest court. The Supreme Court in January said it would not hear a U.S. Bancorp argument that it should not have to pay attorney’s fees for Rosenberg. Then, in April, a federal appeals court ruled the company was too late in filing a crucial 2013 motion to get out of paying a jury-awarded $6.1 million to Rosenberg.
At a hearing early next month, lawyers will argue about the interest U.S. Bancorp may have to pay on the $4.1 million in attorney’s fees owed to Rosenberg.
The two sides have conducted settlement talks through the years but never come close on terms.
After so many losses, it’s unclear why U.S. Bancorp continues to fight, particularly since the amount of money at stake is so small for a firm that made nearly $6 billion in profits last year. The nation’s fifth-largest bank says it is battling on principle against a litigious businessman who is trying to evade his obligations.
“He and his businesses have a long history of litigating disputes with banks, creditors and others,” the company said in a statement Friday. “According to public records, Mr. Rosenberg and his companies have collectively been involved in at least 150 different lawsuits — primarily as the defendant.”
It added, “We will continue to pursue our options in the legal system because our customers, employees, and shareholders expect us to make responsible financial decisions and to defend the best interests of the company.”
Rosenberg says the company is delaying justice by throwing money at a case that it keeps losing.
The cases revolve around loans to Rosenberg’s now-defunct company, National Medical Imaging, which at its peak operated 23 outpatient radiology screening centers, employed 150 and posted annual revenue of $72 million.
Rosenberg’s company leased equipment beginning in 2000 from several entities, including Lyon Financial Services, which became part of U.S. Bank. The loans were bundled into securities by an entity called DVI Financial Services Inc. and then sold to investors.
Lyon claimed that National Medical Imaging defaulted in 2003. A legal battle ensued and the two sides eventually settled, with Rosenberg agreeing to a personal guarantee of up to $7.6 million if the firm defaulted again.
In 2008, new federal regulations were set to cut insurance reimbursements, which dealt a blow to National Medical Imaging.
Rosenberg approached U.S. Bank and Lyon to try to restructure the loans, hoping to stretch out the payments. He said U.S. Bank wouldn’t meet or talk to him while the company was current on payments, so he stopped paying to force a renegotiation.
Without payments, however, Lyon and U.S. Bank considered the company to be in default. Entities related to them subsequently filed involuntary Chapter 7 bankruptcy petitions against National Medical Imaging, its holding company and Rosenberg.
“They just wiped us out,” Rosenberg said.
After being pushed into bankruptcy, Rosenberg had to close National Medical Imaging. The family’s standing among the philanthropic groups it was involved in — the Rosenbergs were honored in 2009 at a Lincoln Center gala — crumbled. Gone too was a $50 million trust fund that Rosenberg created for his son Doug. He and his wife Sara now live with Doug in Miami.
But Rosenberg has been slowly winning in court. A judge in Miami tossed out the bankruptcy petitions against him. He held that the entities who filed the petition didn’t have standing to do so. A different judge dismissed petitions against Rosenberg’s company on similar grounds.
Meanwhile, Rosenberg sued U.S. Bank for damages and the parties agreed to a jury trial outside bankruptcy court on that part of the case.
The jury found in 2013 that seven defendants, including U.S. Bank, acted in “bad faith” in filing the bankruptcy petitions, and awarded Rosenberg $6.1 million in damages. The next year, a judge cut the damage award to $360,000.
Then, the damages were reinstated by an appeals court on a technicality — U.S. Bank’s lawyers hadn’t filed a motion in time according to bankruptcy court rules. U.S. Bank is still trying to get the jury award reconsidered and is waiting for an appeals court to rule.
The bank has other victories in the dispute.
As the involuntary bankruptcy played out, the bank filed cases to enforce the personal guarantee against Rosenberg and National Medical Imaging. Rosenberg did owe money and has never paid it back.
In 2015, Rosenberg agreed in Pennsylvania state court to a $12 million judgment against the defunct company. In May, a federal judge in Pennsylvania ordered that Rosenberg should pay U.S. Bank $6.5 million in damages and attorney’s fees because he did not fulfill his personal guarantee to companies that later became part of U.S. Bank.
Rosenberg argues that these contract claims can’t be enforced against the damages awarded in the separate involuntary bankruptcy case, and they’re only a “negotiation tactic.” U.S. Bank insists the judgments in its favor are unrelated to the ongoing bankruptcy case.
A personal battle
Over time the dispute has become personal, with both sides accusing the other of litigiousness. U.S. Bank has deeper pockets, but Rosenberg and his family have been resolute and possess a flair for public relations. They’ve drawn media attention, including the New York Times, to the case several times.
“The only reason we’ve gotten this far is because we had a lot of money at one time and my husband has the personality to stand up to them,” said Sara Rosenberg.
Doug Rosenberg buttonholed U.S. Bank CEO Richard Davis at an investor’s event in New York in 2014 to try to set up a meeting. The conversation was cordial but fruitless, he said.
Sara Rosenberg made it into another investor presentation later that year. She stepped to the microphone when the audience was allowed to ask questions and asked Davis what percentage of the bank’s budget is devoted to litigation. He responded candidly.
After he couldn’t secure a meeting with Davis, Doug Rosenberg then organized a Twitter campaign, enlisting low-level celebrities to tweet at the company on his family’s behalf.
A battle over fees
At the moment, the jury award still stands, as does U.S. Bank’s obligation to cover $4.1 million in legal fees for Rosenberg.
The latest dispute is over attorney’s fees — how much U.S. Bank owes Rosenberg and when the money should be paid.
Lawyers filed a flurry of motions in early June, with Rosenberg’s attorneys arguing that “U.S. Bank shamelessly makes the same arguments it has already made — and lost — as a cynical strategy to avoid, and in fact profit from, the consequences of its bad faith conduct,” they wrote. “It is frivolous and sanctionable. Enough already!”
U.S. Bank’s lawyers retorted that they are “not accustomed to receiving opposing papers of this nature, and attributes the tone and content of plaintiff’s reply to frustration at the length of time these proceedings have taken and to an eagerness to get fees awarded and paid.”
This disagreement, among other things, will be the subject of an Aug. 4 hearing in bankruptcy court in Miami.