What distinguished the hearing was Kauper's command of the subject. "It was a no-B.S. environment," says Baker. "You couldn't pretend that something irrelevant was relevant or that some obscure principle of antitrust law would solve everything." A procedural innovation also sped things up. Instead of calling witnesses serially, Kauper had both sides testify simultaneously on the same issue, letting him see their differences quickly so he could try to reconcile them.
The Resolution
On June 20 Kauper issued a final order to the parties. Pulse's fixed fees violated the antitrust laws, he said, and he suggested that the organization convert to a flexible fee system. He awarded no damages. Two months later Kauper released an 84-page opinion.
For First Texas, victory was bittersweet. What had teetered in the spring toppled in the fall. The FSLIC took the bank into receivership, selling it to Ronald Perelman, CEO of The Revlon Group Inc. In its second life, it is known as First Gibraltar Bank FSB.
What They Saved
Stan Paur, president and CEO of Pulse, estimates that his legal bills were only about 20% of what they would have been in conventional litigation. And the proceeding saved the company much disruption. "We only had 13 employees," he says. "Three or 4 were pulled off daily to prepare for the proceeding. We were in a damage-control mode for months -- but fortunately, only months as opposed to three years or so if it had gone through litigation."
LAWSUIT #3
The Case of the Slow-Moving Elevator
The Litigants
Trebmal Construction Inc.: A construction and real-estate development company with headquarters in Cleveland. Headed by Carl Milstein, who founded the company in 1974. Annual sales from $5 million to $15 million. Dover Elevator Co.: A subsidiary of Dover Corp., a Fortune 500 elevator manufacturer with 1988 sales of $1.95 billion.
The Conflict
Carl Milstein was one of the few people betting on Cleveland's future back in 1979. His company, Trebmal Construction, bought an old downtown hotel and began renovations to convert it into an office building. Milstein contracted in 1980 with Dover Elevator to bring the elevator system up to date with the rest of the building.
Dover installed four new elevators, but problems arose immediately. The elevators, Trebmal complained, did not move people quickly enough -- and the building had reached only half its occupancy. Trebmal filed suit in federal court in September 1983, complaining that Dover had breached the contract and its express and implied warranties that the elevators were fit for the particular purpose for which they were intended. It asked for more than $1 million in damages. Dover denied any liability.
From the beginning, it looked like fighting between the two companies' attorneys would add greatly to the difficulty of settling the case. As the discovery process began, tempers flared. Responding to one request for documents, Dover searched through files in several cities for 10 months and failed to come up with what Trebmal wanted. Trebmal's attorney asked U.S. District Judge Thomas D. Lambros to impose sanctions for "a cavalier and incomplete response . . . [that] must be treated as a total failure to answer." Time and again, the lawyers lashed out at each other. They fought on -- for five years.
The 'Trial'
Judge Lambros was fed up. Back in 1980 two nagging cases like the Trebmal-Dover suit had consumed weeks of his courtroom time. "These two were cases that could have been settled," says Lambros, "but something was missing in the pro-cess. There was an information gap, an inability of counsel and the parties to effectively predict how a jury would see it."
After those cases, Lambros devised a new proceeding he called a summary jury trial. The lawyers argue to a jury for one hour in the presence of their clients. The jury returns a verdict on liability and damages, usually the same day; the lawyers then ask the jurors individually how they reached their decision. The verdict is only advisory, but "clients see that once they enter the courtroom, they've transferred the decisional process to the jury," says Lambros. "It brings home the reality of the trial and the risk of losing." Lambros found that more than 80% of all cases that went through summary jury trial -- and he reserved the technique only for "hard-core durable cases" -- settled before the real trial. In 1984 the Judicial Conference of the United States recommended that all federal judges consider using the technique, and today dozens of them do.
The judge scheduled the Trebmal case for summary jury trial on May 16, 1989, only four months short of its sixth anniversary in litigation. Clearly, Lambros did not want to spend a week trying the suit, an unremarkable case that he felt the parties could better resolve themselves. The litigants had a right to a jury trial, of course, but Lambros saw the federal courts as a limited resource that should be used more wisely.
On the day of the proceeding, only minutes passed before the sniping started. José Feliciano, of Baker & Hostetler, the attorney for Dover, argued that evidence of Milstein's prior conviction on two federal felony charges should be admissible at trial. "If you want to try that monkey business, go ahead," William J. Kraus, of Kraus & Kraus, the attorney for Trebmal and Milstein, replied angrily. As the two went at each other, Lambros interrupted: "I'm not really interested in your egos at this point."
The admissibility question was an important issue, though, and the flexibility of the summary jury trial enabled Lambros to handle it in an innovative way. He announced that he would empanel two juries of six people each. Both juries would sit through the presentation and hear the judge's charge; then, while the first jury retired to consider the evidence, the second jury would stay to hear the additional evidence of Milstein's prior record. By questioning the jurors later, the attorneys could see if the evidence made any difference to the case.
