The trustee prosecuting a fraudulent transfer suit retains the right to a jury trial even if the defendant waives its right to a jury, according to Bankruptcy Judge Erik P. Kimball of West Palm Beach, Fla.
The bank defendant had not filed a proof of claim, because it had no claim, Judge Kimball said in his Oct. 2 opinion. Although defendants typically prefer having a jury, the bank in this case evidently saw a tactical advantage in trying to the case to the court.
To reach a conclusion, Judge Kimball stitched together several prominent bankruptcy decisions from the Supreme Court. He cited Katchen v. Landy, 382 U.S. 323 (1966), for the proposition that a defendant in a preference suit has the right to a jury trial if the defendant has not filed a proof of claim, because the preference suit by itself is not part of the equitable claims allowance process.
However, if the defendant has filed a claim, the Supreme Court ruled in Langenkamp v. Culp, 498 U.S. 42 (1990), that the defendant in a preference suit has no right to a jury trial because the preference suit has become part of the claims allowance process, an equitable proceeding where there is no jury trial right.
Attempting to deprive the trustee of trial by jury, the bank argued that waiving a jury on its part was equivalent to filing a claim and converting the process to an equitable proceeding. Judge Kimball disagreed.
The determination of the right to a jury trial focuses on the nature of the proceeding, Judge Kimball said. In that regard, he said that Granfinanciera v. Nordberg, 492 U.S. 33 (1989), “conclusively” established that “fraudulent transfer claims seeking monetary recovery are actions at law that are subject to jury trial on the timely request of a party.”
Judge Kimball therefore concluded that the trustee had a right to a jury trial unless the trustee elects to waive the jury. A week before the final pretrial conference, he gave the trustee a deadline for consenting to a bench trial or filing a motion to withdraw the reference, thus enabling the district court to conduct a jury trial.