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Presenting Bankruptcy Concepts to Juries

By Philip Oliss and Sarah K. Rathke

Bankruptcy attorneys may conceive of their field as being a highly specialized and insulated world. Until recently at least, these practitioners tended to practice in bankruptcy courts only; those courts conveniently specialized in bankruptcy, and everyone gathered in those courts spoke essentially the same language. A common belief among bankruptcy practitioners has been that disputed matters invariably sound in equity, thus posing very little danger that an attorney would ever encounter a jury. Moreover, bankruptcy-related issues are sometimes thought to be highly technical, often involving complex accounting or sometimes regulatory or tax principles, such that adjudication by a jury is undesirable in any event.

But juries can appear where one least expects them. Our firm, Squire, Sanders & Dempsey, recently won a defense verdict in a jury trial involving claims by the Federal Deposit Insurance Corporation (FDIC) against a Chapter 11 debtor and former savings and loan holding company, AmFin Financial Corporation. The FDIC had placed AmFin's subsidiary, AmTrust Bank, into receivership and was seeking to recover at least some of its receivership costs from the bank's parent. Although the full explanation of the bank's deterioration is complicated, as a savings and loan specializing in residential mortgage lending, AmTrust Bank was hit particularly hard by the 2008 (and onward) financial crisis, when its customers began defaulting on their mortgages at record levels.

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