In Re: RFC and RESCAP Liquidating Trust Litigation

Background

The court had previously ruled on summary judgment that the reasonableness of the Bankruptcy Settlements could not be decided as a matter of law and presented genuine factual disputes. The court then asked the parties to address whether a jury or the court should decide that issue at trial.

The opinion states that ResCap Liquidating Trust, referred to as “ResCap,” is proceeding to trial on a contractual-indemnity claim. Although the complaint also pleaded breach of contract, the court understood that ResCap was advancing only the contractual-indemnity claim at trial. ResCap seeks money damages.

Legal Standard

The Seventh Amendment preserves the right to a jury trial in suits at common law. The court applied the federal legal-versus-equitable framework, which asks whether the claim resembles an action historically tried in a court of law or equity, whether the remedy is legal or equitable, and whether having a jury decide the particular issue is necessary to preserve the historical common-law right.

The court emphasized that federal law controls this jury-trial question even when state law creates the claim. Minnesota law treats the reasonableness of pretrial settlements as an equitable matter decided by a court, but that characterization did not control the federal constitutional analysis.

Analysis

The court concluded that the contractual-indemnity action is more like a traditional legal action. It relied on authority classifying contractual indemnity as an action at law and noted that ResCap seeks money damages, which are generally considered legal relief.

The court also found that the reasonableness inquiry functions like a benchmark for determining a monetary obligation, rather than an order requiring the defendants to take or refrain from a specific action. The issue is predominantly factual and requires the factfinder to assess the Bankruptcy Settlements and related circumstances.

The court acknowledged practical reasons for having a judge decide the issue, including the judge’s familiarity with the evidence and the possibility of inconsistent verdicts in multi-defendant litigation. It nevertheless concluded that the federal policy favoring jury trials, especially for disputed factual questions, required a jury trial. The court found no applicable complexity exception to the Seventh Amendment.

Disposition

The court ordered that “the reasonableness of the Bankruptcy Settlements will be determined by a jury.” The order did not decide whether the settlements were reasonable; it decided that a jury must determine that factual issue at trial.