In Re: RFC and RESCAP Liquidating Trust Litigation

Background

ResCap Liquidating Trust sued Primary Residential Mortgage, Inc. (PRMI) in a related case for breach of contract and indemnification. The lawsuit was part of the consolidated ResCap litigation involving residential mortgage-backed securities transactions. ResCap did not demand a jury trial in its complaint.

The case was initially assigned to Senior District Judge David S. Doty and then reassigned to Judge Nelson for pretrial purposes. An amended administrative order stated that the consolidated cases were reassigned to Judge Nelson on a temporary basis and could later be transferred back for summary judgment and trial. Relying on that order, PRMI intentionally chose not to demand a jury trial and instead pursued a bench trial, in which the judge determines the facts.

As the consolidated litigation proceeded, the judges of the District of Minnesota decided that Judge Nelson should oversee the remaining cases through summary judgment and trial. PRMI’s counsel attended related proceedings and did not renew PRMI’s jury demand. After the court’s jury trial in a related case ended, PRMI informed the court on May 9, 2019, that it believed its case would return to Judge Doty. When told that Judge Nelson would handle the remaining cases through trial, PRMI said it would file a jury demand and then moved under Federal Rule of Civil Procedure 39(b) for permission to have a jury trial.

PRMI’s argument

PRMI acknowledged that it had waived its jury right for strategic reasons. It argued that the change in which judge would preside over the trial justified allowing a late jury demand. PRMI also argued that, because some witnesses and issues might overlap with the related trial, Judge Nelson could not fairly and impartially assess the witnesses and evidence after presiding over that trial.

Court’s analysis

The Seventh Amendment and Federal Rule of Civil Procedure 38 protect the right to a civil jury trial, but a party generally waives that right by failing to demand it within the required time. Rule 39(b) permits a court, in its discretion, to order a jury trial despite the waiver.

Judge Nelson denied PRMI’s motion for three main reasons. First, the court found PRMI’s delay inexcusable because its counsel had long been involved in the consolidated litigation and understood, at least by the start of the related trial, that Judge Nelson would handle PRMI’s bench trial. The court also found that the delay caused genuine prejudice to ResCap, which had identified experts and prepared expert reports expecting a bench trial.

Second, the court rejected PRMI’s claim that Judge Nelson’s prior experience with witnesses and issues in the related trial made a fair bench trial impossible. The court stated that a judge can fairly and impartially preside over a bench trial in a related case after presiding over a jury trial, where the judge did not make the credibility determinations. The court noted that a judge who could not be impartial would be required to recuse herself.

Third, the court found no reason to believe that trying the case before Judge Nelson would prejudice PRMI’s rights. The court observed that a bench trial might allow PRMI to present more favorable evidence because a judge is generally better able than a jury to avoid unfair prejudice, confusion, misleading evidence, unnecessary delay, wasted time, and cumulative evidence.

Disposition

The court denied PRMI’s motion for a jury trial under Rule 39(b). The opinion does not rule on the underlying breach-of-contract or indemnification claims.