Opinion
Bankr. Case No. 99-53170-C, No. 99-53171-C, Jointly Administered Under, Adv. No. 04-5041-C.
August 29, 2005
ORDER DENYING DEFENDANTS' CONDITIONAL MOTION FOR SEPARATE TRIALS AND FOR LIMITATION OF CLAIMS TO BE SUBMITTED
Eight-hundred-and-fifteen investors assigned their claims against the defendants to the Investor Claims Trust. The plaintiff is the trustee of the Investor Claim Trust. The defendants argue that they are "entitled to try each of the 815 claims." DOC. # 221 at 5. The defendants seek that result by requesting separate trials under Rule 42(b), or alternatively for severance under Rule 21.
"The procedure authorized by Rule 42(b) [separate trials] should be distinguished from severance under Rule 21 [severance]. Separate trials will usually result in one judgment, but severed claims become entirely independent actions to be tried, and judgment entered thereon, independently." McDaniel v. Anheuser-Busch, Inc., 987 F.2d 298, 304 n. 19 (5th Cir. 1993).
Under Rule 42(b), the court may order a separate trial "in furtherance of convenience or to avoid prejudice, or when separate trials will be conducive to expedition and economy. . . ." FED. R. CIV. P. 42. "The decision to [order separate trials] rests within the sound discretion of the trial court. The application of Rule 42(b) does not lend itself to a bright-line test but, rather, requires case-by-case analysis. . . . The party seeking [separate trials] bears the burden of establishing that [separate trials are] warranted." Dallas v. Goldberg, 143 F.Supp.2d 312, 315 (S.D.N.Y. 2001) (internal citations omitted). Separate trials should not be routinely ordered. McDaniel v. Anheuser-Busch, Inc., 987 F.2d 298, 304 (5th Cir. 1993).
See also Jeanty v. County of Orange, ___ F.Supp.2d ___, 2005 WL 1797963 at *12 (S.D.N.Y. July 27, 2005) ("the presumption is that all claims in a case will be resolved in a single trial, and it is only in exceptional circumstances where there are special and persuasive reasons for departing from this practice that distinct causes of action asserted in the same case may be made the subject of separate trials") (internal quotation marks omitted); Monaghan v. SZS 33 Assocs., L.P., 827 F.Supp. 233, 246 (S.D.N.Y. 1993) ("[separate trials under] Rule 42(b) . . . is reserved for truly extraordinary situations of undue prejudice") (emphasis in original).
Courts have considered the following factors in determining whether to order separate trials: (1) whether the issues are significantly different from one another; (2) whether the issues are to be tried before a jury or to the court; (3) whether the posture of discovery on the issues favors a single trial or bifurcation; (4) whether the documentary and testimonial evidence on the issues overlap; (5) whether one party would gain some unfair advantage from separate trials; (6) the complexity of issues; (7) whether a single trial of all issues would create the potential for jury bias or confusion; (8) the possibility that the first trial may be dispositive of the case; and (9) whether separate trials would enhance or reduce the possibility of a pretrial settlement. See Dallas, 143 F.Supp.2d at 315; Calmar, Inc. v. Emson Research, Inc., 850 F.Supp. 861, 866 (C.D. Cal. 1994); Kimberly-Clark Corp. v. James River Corp. of Va., 131 F.R.D. 607, 608 (N.D. Ga. 1989) (citing cases). The Fifth Circuit emphasizes the first factor:"[t]here is an important limitation on ordering a separate trial of issues under Rule 42(b): the issue to be tried must be so distinct and separate from the others that a trial of it alone maybe had without injustice." McDaniel, 987 F.2d at 305 (emphasis added).
The defendants do not address the distinct-and-separate requirement under Rule 42(b). As a procedural matter, it is not clear how it is even possible for the defendants to address that requirement because Rule 42(b) is concerned with separate trials of distinct "claims, cross-claims, counter claims, third-party claims or issues", not separate trials of the same claim (knowing participation in breach of fiduciary duty) brought by 815 investors through the Investor Claims Trust. The defendants elide that distinction (separate trials of claims or issues, versus separate trials for each investor), and fail to explain how Rule 42(b) can be read to reach the result they desire. That alone is enough to deny the defendants' motion for separate trials.
The classic scenario for separate trials is bifurcating a lawsuit into liability and damage phases. See Kos Pharms., Inc. v. Barr Labs., Inc., 218 F.R.D. 387, 391 (S.D.N.Y. 2003) ("it is often appropriate to bifurcate patent cases because damages are sometimes complex and unrelated to issues of liability. . . ."), citing Guas v. Conair Corp., 2000 WL 1277365 at *3 (S.D.N.Y. Sept. 7, 2000).
But suppose for the sake of argument that Rule 42(b) could be used in the manner the defendants wish to use it. The only relevant factor the defendants appear to argue is prejudice. The defendants first argue that the plaintiff, "[h]aving failed to plead and establish the class certification requirements . . . should not be allowed to proceed as if this is a class action case." DOC. # 221 at 3, citing Freeman v. Dean Witter Reynolds, Inc., 865 So.2d 543, 553 (Fla.Dist.Ct.App. 2003). This argument assumes that if the plaintiff could have brought his lawsuit as a class action, he is required to. Rule 23, which governs class actions, says an "action may be maintained as a class action if [certain prerequisites] are satisfied. . . ." FED. R. CIV. P. 23(b) (emphasis added). Rule 23 does not require the plaintiff to bring a class action if the prerequisites are satisfied; the rule does not say an "action must be maintained as a class if [certain prerequisites] are satisfied. . . ." Thus, even if the plaintiff could have brought his lawsuit as a class action, he is not required to.
The only authority the defendants cite, Freeman, does not advance their argument. The defendants cite one sentence in Freeman out of context: "This case is not a class action, and there is no basis to permit this kind of collective pleading." Freeman, 865 So.2d at 553. In Freeman, the receiver of North American Financial Services was attempting to assert causes of action on behalf of North American's customers. Because those customers did not assign their claims to the receiver, the Freeman court held that the receiver had no standing to assert their claims. The problem in Freeman is not present in our case. The 815 investors assigned their claims to the plaintiff as the trustee of the Investor Claims Trust. The district court ruled that the plaintiff has standing to assert the assigned claims on behalf of the assigning investors. See District Court's June 20, 2002 Order Regarding Pending Motions and Order of Stay Pending Arbitration fo Debtor Claims, Civil Action No. SA-01-CA-583-FB.
Another argument for finding prejudice under Rule 42(b) concerns damages. The defendants contend that they have a right to individualized cross-examination of the investors to rebut the plaintiff's theory of damages. DOC. # 263 at 6. However, the defendants do not articulate how having a single trial prejudices that right. Having a single trial does not logically or procedurally dictate how many witnesses the defendants may call. Because Rule 42(b) does not contemplate the sort of relief the defendants seek, and because, even if it did, the defendants fail to satisfy their burden of proof, their motion for separate trials is DENIED.
The defendants also request severance under Rule 21. Rule 21 states that "[a]ny claim against a party maybe severed and proceeded with separately." Because the defendants do not state which claim they want to be severed, their motion for severance is DENIED.
SO ORDERED.