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Bear, Stearns Funding, Inc. v. Interface Group-Nevada

November 7, 2007

BEAR, STEARNS FUNDING, INC., PLAINTIFF,
v.
INTERFACE GROUP-NEVADA, INC., DEFENDANT.



The opinion of the court was delivered by: Haight, Senior District Judge

MEMORANDUM OPINION AND ORDER

Plaintiff Bear, Stearns Funding, Inc. ("Bear Stearns") moves to strike the jury demand defendant Interface Group-Nevada, Inc. ("Interface") included in its answer and counterclaims. The particulars of this complex commercial transaction and resulting energetic litigation are described in detail in the Court's opinion deciding the parties' cross-motions for summary judgment, reported at 2007 WL 1988150 (S.D.N.Y. July 10, 2007), familiarity with which is assumed. Those particulars are recounted below only to the extent necessary to explain the Court's resolution of the present motion.

Bear Stearns' motion to strike Interface's jury demand has been fully briefed, including the filing, with the Court's permission, of sur-reply briefs, followed by a further exchange of letters by counsel. The motion is now fully submitted.

For the reasons below, Bear Stearns' motion is granted.*fn1

I. BACKGROUND

In June 2001, the parties entered into a Loan Agreement pursuant to which Bear Stearns loaned $141 million to Interface, secured by a mortgage encumbering the Sands Expo and Convention Center, located in Las Vegas, Nevada. 2007 WL 1988150, at *1. The Loan Agreement spawned a number of other interrelating documents: the Original Sharing Agreement, the Post-Closing Cooperation Letter, and the Revised Sharing Agreement. Id. at *2-4. They are collectively described by their terms as "the Loan Documents." The exchange of claims and counterclaims in the pleadings implicates them all.

Section 10.7 of the Loan Agreement contains a waiver by Interface, the "Borrower," of its right to trial by jury. That waiver appears in the Loan Agreement in capitalized boldface. In order properly to set the stage for this opinion, I set forth the language in the same fashion:

BORROWER [INTERFACE] HEREBY AGREES NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVES ANY RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST WITH REGARD TO THE LOAN DOCUMENTS, OR ANY CLAIM, COUNTERCLAIM OR OTHER ACTION ARISING IN CONNECTION THEREWITH. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY BORROWER, AND IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A TRIAL BY JURY WOULD OTHERWISE ACCRUE. LENDER [BEAR STEARNS] IS HEREBY AUTHORIZED TO FILE A COPY OF THIS PARAGRAPH IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER BY BORROWER.

It is hard to imagine a more complete, all-encompassing, repetitive waiver of a right to trial by jury. One is reminded of Lewis Carroll's The Hunting of the Snark: "What I tell you three times is true." This language could only have been written a lawyer (or a squad of them); and, as one would expect, the parties were represented by eminent counsel during the negotiation and drafting of the Loan Agreement and its satellite agreements. Bear Stearns was represented and advised by the firm of Cadwalader, Wickersham & Taft. Interface was represented and advised by the firm of Paul, Weiss, Rifkind, Wharton & Garrison.

Presumably, parties entering into such contracts hope and expect that everyone will live in contractual harmony and amity, to the eventual economic benefit of all. But that is not always the way, at least in this world. Disputes broke out between Bear Stearns and Interface. On October 17, 2003, Bear Stearns filed a complaint against Interface, alleging that Interface owed it over $1 million under the Revised Sharing Agreement, one of the Loan Documents. The Cadwalader firm drafted the pleading, and has continued to represent Bear Stearns throughout the case. On December 2, 2003, Interface filed an answer, affirmative defenses, and counterclaims.*fn2 Interface was no longer represented by the Paul Weiss firm. Its responsive pleading was drafted by the firm of Wasserman Grubin & Rogers, which continues to represent Interface.

Interface's answer, affirmative defenses, and counterclaims ends with a "Demand for Jury Trial" which states: "Pursuant to Fed. R. Civ. P. 38(b), Interface demands a jury trial on all issues raised by the Complaint and the defendant's counterclaims." It does not appear from the record on this motion whether the Wasserman firm attorneys, in making that jury demand on behalf of Interface, were aware of or gave any consideration to the fact that in the Loan Agreement, negotiated on Interface's behalf by the Paul Weiss firm, Interface had waived its right to make such a demand.

Bear Stearns did not react immediately to Interface's pleading by moving to strike the jury demand on the ground of waiver. The parties embarked upon extensive discovery. Witnesses were deposed. Documents were produced. On July 31, 2006, Bear Stearns filed a motion for summary judgment, coupled with a motion to strike Interface's jury demand. Interface cross-moved for summary judgment. The Court first considered the summary judgment motions and held Bear Stearns' motion to strike the jury demand in abeyance, since the resolution of the summary judgment motions might moot that motion. The Court decided the summary judgment motions in the opinion previously cited. Certain issues remain to be tried. Disputes have arisen as to whether additional discovery should be allowed. Interface has filed objections to Magistrate Judge Peck's September 25, 2007 Order addressing that issue. Those objections are pending before this Court. No trial date has been set.

In these circumstances, the Court should now decide Bear Stearns' motion to strike Interface's jury ...


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