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Innovative Solution Resolves VSI v. SPX Dispute

Juries are not just for verdicts anymore.

Seven weeks into a jury trial in federal court, the parties in a breach-of-contract dispute—VSI Holdings v. SPX Corp.—agreed to dispense with the rest of the trial and cut straight to a jury poll to determine a financial settlement (See “Settlement by Jury Poll”).

“The approach saved time, effort and the expense of a lengthy trial,” said Dennis Haffey, director of Dykema’s litigation department, which represented the plaintiff in the case. “Both sides were willing to test the strength of their convictions by letting the jury have a voice in the outcome of the settlement.

As Haffey explained to InsideCounsel magazine in a recent Dykema on Demand Podcast, this unique jury-poll settlement exemplifies the type of innovation that can help companies resolve legal disputes.

“The lesson of this case is that litigation attorneys need to be flexible and creative,” Haffey said. “Lawyers should use the many variations of dispute resolution—or create new ones—to meet the needs of the client and case.”

Hawks and Doves

The VSI v. SPX case arose from a failed merger. In March 2001, SPX Corp. agreed to acquire VSI Holdings, but six weeks later SPX terminated the merger, citing an adverse-change clause in the purchase agreement. VSI responded by suing SPX for willfully breaching its contract.

A federal-court jury in Detroit, Mich., considered three main questions, namely: Did a material adverse change occur that gave SPX the right to terminate the merger? Was VSI denied the opportunity to cure the alleged adverse change? And was SPX’s decision a “willful breach” of the contract, which would negate the agreement’s $9 million limit on damages?

The parties disagreed sharply on these questions, leading to a contentious trial. More than 250,000 documents were submitted as evidence, along with 50 witness depositions, 11 expert depositions and scores of motions.

“After seven weeks of trial, only four witnesses had completed testifying,” Haffey said. “Because of the complexity of the issues at trial, and the vigorousness of the advocacy, the case seemed to be headed for multiple months of trial followed by appeal and re-trial.

A lengthy dispute served neither party, because it would result in spiraling litigation costs for the defendant, and a delayed recovery for the plaintiff—which during litigation had filed for bankruptcy and ceased operations. At the same time, however, the litigants included conflicting constituencies that made a conventional settlement difficult.

“Both sides had hawks and doves that were for and against settlement,” Haffey said. “The parties obviously disputed the amount of liability, so it was difficult to settle on a specific number.”

The jury-poll settlement proved to be a workable solution that avoided the length and expense of a full trial, appeal and potential re-trial. However, implementing that solution wasn’t easy.

Innovative Lawyering

To make the arrangement work, first the litigating parties had to agree on the possible range of the financial settlement that would result from the jury poll. Then, because the plaintiff was in bankruptcy, the settlement had to be approved in advance by the bankruptcy court. “We had to show the settlement was in the best interests of the creditors, without knowing the amount,” Haffey said. “That increased the difficulty.”

Additionally, the arrangement had to be approved by the trial-court judge, who had never heard of such a settlement before. He allowed the novel approach, however, because it resolved the dispute in a way both parties could accept.

The solution worked in this case because both parties felt they had successfully presented their primary arguments and were ready to let the jury decide the outcome of the settlement, even though the full case hadn’t been heard. Such a combination of factors might be unlikely to occur again, but the unique solution serves as a model nonetheless.

“In other situations, attorneys might understandably be reluctant to have a binding jury poll mid-trial,” Haffey says. “The lesson is to customize and be innovative in trying to find the win-win situation that is critical to reaching an agreement.”

Dennis Haffey can be reached at dhaffey@dykema.com.

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Featured Articles :

• Innovative Solution Resolves VSI v. SPX Dispute
  Shareholders often use the courts to attempt to hold directors personally responsible for all kinds of corporate problems.

• Settlement by Jury Poll
  Lawyers for VSI Holdings and SPX Corp. broke an impasse in the litigating parties’ breach-of-contract dispute by combining a settlement agreement with a jury poll.

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