3d DCA Watch — The Continuing Story of BDO Seidman

Well it feels good to be back in the saddle again.Three things I learned from my recent “unplugging”:1. Working a matter up for trial is hard.2. There are too many distractions in the day, and it felt clarifying to be able to focus for extended periods of time on a single topic or issue, without answering phone calls, continually looking at emails, or incessantly surfing the tubes for Drew Barrymore updates.

3. Oy with this Sultan of Brunei.

Speaking of Resplendently Robed Ones™, let’s dig right in and see what written utterances have emerged from our very own sometimes blinkered, always bunkered band of A-Team judicial misfits:

BDO Seidman v. Banco Espirito:

It’s nice to see the 3d DCA pick up some steady work.Here, that work consists of regularly passing on various appellate issues that arise from the accounting malpractice trial that has been playing to sold-out audiences before Judge Rodriguez for several years, with no apparent end in sight:

The accounting firm of BDO Seidman, LLP appeals a jury verdict and final judgment awarding the appellees over $159 million in compensatory damages and over $351 million in punitive damages. The appellees—Banco Espirito Santo and two of its affiliates (collectively, “Banco”)—cross-appeal the denial of prejudgment interest on the compensatory award from the date the losses allegedly occurred through the date of the jury verdict. We reverse the final judgment and remand the case for a new trial, finding that the “trifurcation” of the trial into three distinct phases impermissibly allowed the jury to render a verdict on BDO’s liability for gross negligence (a determination pertinent in this case as a predicate for the later consideration of punitive damages)1 two months before the jury’s consideration of, and verdict deciding, the intertwined issues of causation, reliance, and comparative fault.

Because of the prejudice inherent in the premature, first-phase gross negligence finding, we do not address in detail other aspects of the trial. Our conclusion regarding the “trifurcation” issue renders moot or pretermits our consideration of most of the other parts of the jury’s verdicts and the remaining points on appeal and cross-appeal.

I once had trifurcated premature, first-phase gross pretermittal — once.(It may have been the six Gin Gibsons, I’m not sure.)Actually, reading Judge Salter’s clear, concise, calm opinion, it’s amazing anyone could have thought otherwise. Here’s the nub of it:

The trial court ultimately determined that comparative fault and causation issues would be tried and determined in the second, compensatory damages phase rather than in the first phase. The question of whether BDO was “personally guilty of gross negligence” would be determined in the first phase. The jury would then be asked at the close of phase II whether Banco was entitled to punitive damages against BDO (and if so, the amount of those punitive damages would be determined in phase III). This meant that the phase I jury deliberation regarding negligence and gross negligence did not include specific evaluations of the alleged negligence and fault, including failures to report or act, on the part of the Banco parties and ten third-party or Fabre actors. Those determinations occurred instead at the close of phase II, when all of the evidence in that phase was viewed against the backdrop that BDO had already been found not merely negligent, but so negligent (or “guilty”) as to arise to the level of intentional disregard for the rights of others.

This makes eminent sense, though that means they have to do it all over again (presumably without Big Lew Freeman).

Judge Salter at the end is sympathetic to a case that has dragged on for years, consumed seven months of trial time and has resulted in one mistrial already, but he ultimately concludes that the “cart cannot lead the horse,” which either was the title of an old episode of Little House on the Prairie or else is judicial-speak for “enjoy the retrial.”

I guess for the 37 firms involved, that’s a good thing?