United States District Court, S.D. New York
Lee E. Buchwald, Plaintiff,
The Renco Group, et al., Defendants.
ALISON J. NATHAN, District Judge.
On February 27, 2015, Defendants in this action made an oral motion for a mistrial based on an alleged inconsistent verdict after the jury returned a unanimous verdict and immediately after, not before, the jury was dismissed on the consent of all parties. The Court denied that motion. Tr. at 3066. Nevertheless, Defendants have submitted a letter arguing that judgment should not be entered in this matter until the claimed inconsistencies in the verdict are addressed, either by entering judgment in favor of Defendants, or ordering a new trial.
The Court addressed the claimed inconsistency in the verdict by orally denying Defendants' motion for a mistrial when Defendants raised it immediately after the jury was dismissed. This order elaborates the Court's grounds for denying that motion, and explains why Defendants' claimed inconsistency will not stand as an impediment to entry of judgment consistent with the jury's verdict.
Although most pertinent to this discussion is the sequences of events that followed the jury's return of a unanimous verdict, some additional background on the procedural development of the jury instructions and verdict form are required.
On the evening of February 19, 2015, the Court distributed a draft jury charge and special verdict form to the parties in advance of the charging conference scheduled for the next day. The charging conference lasted the full day of Friday, February 20, 2015, and continued for several hours on Monday, February 23, 2015. On this first day of the charging conference, the parties addressed the question of whether federal law regarding fraudulent transfers and New York state law of fraudulent conveyance could be addressed in a single jury charge, or set of jury charges, because they were substantially the same. After the Court asked the parties if there was a conflict between state and federal law, Defendants' counsel responded:
Fair consideration in some respects is a broader concept, which is why I made that observation, than reasonably equivalent value. So it has a broader legal definition that reasonably equivalent value under the New York statute. The New York statute is anachronistic across the country because it is one of four states that doesn't cover the Fraudulent Transfer Act and it has a different meaning and can be read more broadly.
What we are essentially talking about in this case is whether there is reasonably equivalent value so that from a practical perspective I believe we can harmonize things, but I believe there is a conflict in that component of the statute.
Tr. 2499 at 18-25, 2500 at 1-4. While this exchange was facially about the difference between the laws of New York and Utah, Defendant also represented that the bankruptcy code and Utah law are "fundamentally the same" and that they "coincide." Tr. 2504 at 7; Tr. 2510 at 11. Later, when discussing the concept of reasonably equivalent value under federal law and New York law, Defendants' counsel stated that "the New York statute talks about it [reasonably equivalent value] in a different vernacular and with some different ideas." Tr. 2509 at 1-2. He further stated that the bankruptcy code contains "a slightly more pro transferee set of tests, as opposed to the New York statute." Tr. 2509 at 25, 2510 at 1. The Court provided the parties the opportunity to file letter briefs about the differences between New York, Utah, and federal law over the weekend following the conference, and in their letter Defendants states that "[u]nlike the UFTA [Uniform Fraudulent Transfer Act], Section 273 of the New York Debtor Creditor Law imposes a good faith' requirement." Dkt. No. 305 at 1 n.1.
On February 23, 2015, the Court distributed versions of the draft jury charge and special verdict form reflecting the changes made at the February 20, 2015 conference. When the charging conference resumed later in the day on February 23, the Court explained that its revised charge would instruct the jury on both federal and New York law, because federal law and Utah law were essentially the same. The Court would thus be able to reserve any choice-of-law questions until after the verdict, and would need to reach them only if Defendants whose liability was subject to a choice-of-law dispute were found liable under New York but not federal law. Tr. 2600 at 15-25, 2601 at 1-4. At that time, neither party objected to the procedure, or made an argument that the New York and federal charges were redundant. Indeed, the solution largely mirrored Defendants' proposal from February 20, where they suggested that it would not be necessary to repeat the federal and Utah instructions twice, see Tr. 2510 at 9-11, but did not state that a New York instruction would be entirely unnecessary, because they agreed that New York law governed transfers from Renco Metals to The Renco Group, Inc., see Tr. 2496 at 19-25, 2497 at 1-5.
The Court also distributed drafts of the special verdict form in advance of the February 20 and February 23 conferences. On both drafts, the jury was instructed to consider the question of whether Defendants committed fraudulent conveyances under New York law regardless of whether the jury found fraudulent transfers under the bankruptcy code. Indeed, in the drafts sent to the parties before each day of the charging conference, as well as the final version of the form that went to the jury, the jury was explicitly instructed to consider fraudulent conveyance under New York law immediately even if they determined that MagCorp and Renco Metals did not meet the tests for insolvency, inadequate capitalization, or inability to pay debts under federal law. In all three versions, the jury was told to proceed to the question about New York law if they answered "No" to all of the federal-law questions about whether the companies were insolvent. Neither party objected or otherwise suggested changes to this general procedure, nor was any argument made that it would be unnecessary to consider fraudulent conveyance under New York law if the jury answered the insolvency, unreasonably small capital, and inability to pay debts questions entirely in the negative.
The parties gave their summations on February 24, 2015, and the Court charged the jury on the morning of February 25, 2014. The jury returned a verdict on February 27, 2015, that in relevant part found in favor of all Defendants on Plaintiff's claim for fraudulent transfers under the bankruptcy code, but finding Defendants Rennert, Legge, Thayer, Ogaard, Brown, Kaplan, and the Renco Group, Inc. liable for fraudulent conveyances under New York law. The jury assessed damages only against Defendants Rennert and the Renco Group, Inc.
After the jury indicated that they had reached a verdict but before the jury was brought in and the verdict was read to the parties, the Court told counsel:
When I finish reading, assuming everyone agrees that it was their verdict, I will ask if there is any reason that I cannot dismiss the jury. So that will be an opportunity to identify if there is anything in the verdict form itself that might ...