A pair of Boston-based attorneys from Davis Malm, Christopher Marino and Gary Matsko, achieved a rare victory in a bankruptcy-related jury trial. Despite not specializing in bankruptcy law, they successfully defended Arthur Demoulas, a majority shareholder in W.J. Bradley Mortgage Capital LLC, against a trustee’s attempt to reclaim $44 million.
Background on the Case
Christopher Marino, a business and trial lawyer, and Gary Matsko, who focuses on civil litigation, had to quickly adapt to the complexities of bankruptcy law when they took on the case of Arthur Demoulas. Demoulas had sold his stake in W.J. Bradley Mortgage Capital LLC in December 2015 for $25 million, but the company filed for Chapter 7 bankruptcy four months later. The trustee alleged that the transaction was fraudulent and had contributed to the firm’s downfall.
Discovery and Trial
Discovery in the case took place in Delaware bankruptcy court, but the trustee requested a jury trial. Marino and Matsko, though inexperienced in bankruptcy jury trials, welcomed the opportunity to present their case to a jury.
“Everybody knew it could be done, but nobody had ever seen or heard of it being done,” Marino said, highlighting the novelty of their approach. The attorneys filed a motion to withdraw the reference, moving the case to federal district court without opposition. The trial date was set for July 8, giving the team eight weeks to prepare.
An Unusual Move
According to Ed Neiger of ASK LLP, withdrawing the reference for a jury trial in a Chapter 7 case is extremely rare. He noted that the primary reason for filing for bankruptcy is often to avoid jury trials. The trustee’s agreement to the withdrawal was surprising, given that trustees usually do not make sympathetic plaintiffs.
The Trustee’s Approach
Typically, a bankruptcy trustee will attempt to settle claims with involved parties. However, Demoulas was determined to fight the claim, insisting he had done nothing wrong. This determination, combined with a strong case, led to an unusual trial rather than a settlement.
Insights from a Former Judge
Bruce Markell, a Northwestern University Pritzker School of Law professor and former bankruptcy judge, remarked on the rarity of jury trials in bankruptcy cases. Most such cases are moved to district court if they do go to a jury, as was the case here.
Preparing for Trial
Matsko and Marino, both experienced in federal court trials, quickly adapted to the bankruptcy context. They gathered evidence to refute the claim that Demoulas’s $25 million redemption had caused W.J. Bradley’s financial troubles. Their defense highlighted the company’s concurrent $44 million recapitalization and the impact of new industry regulations and revenue loss from branch closures.
Jury Selection and Verdict
The lawyers selected jurors who could understand complex financial details and look beyond initial impressions. The trial lasted four days, and the jury delivered a verdict for the defense in less than an hour, including their lunch break.
Aftermath
Following the verdict, an agreement was reached: the defense would not seek attorney fees, and the trustee would not appeal. A judge approved the deal, closing the case. Marino and Matsko reflected on their successful venture into bankruptcy law, with Matsko humorously contemplating retirement with an undefeated record.
(source)
