Battling a Bank to Collect a Judgment

It’s not exactly David v. Goliath, but it’s close.

Maury Rosenberg, a small-business owner from Philadelphia, has been waging a seemingly quixotic battle over the last six years against U.S. Bancorp after, he says, it forced him and his business into involuntary bankruptcy. Mr. Rosenberg, who ran a group of radiology screening centers, contends the bank violated federal law in using involuntary bankruptcy as a tool to collect debts. He says he has spent his every last penny â€" some $6 million so far â€" to fight a battalion of lawyers from U.S. Bancorp, which counters that Mr. Rosenberg is simply trying to evade his obligations.

Against tough odds, Mr. Rosenberg has won a series of rulings in at least four federal courts, which have found U.S. Bancorp’s actions to be improper. A federal jury in Florida, where Mr. Rosenberg has his primary residence, found the bank acted in “bad faith” and awarded $6.1 million to Mr. Rosenberg, including $5 million in punitive damages, though he had been seeking $450 million. The bank, not Mr. Rosenberg, had requested the case be heard by a jury. A judge in one of the many cases found that U.S. Bancorp improperly used a series of special-purpose entities “to artificially create six creditors for the improper purpose of attempting to satisfy the provisions of bankruptcy code that allow creditors to file involuntary bankruptcy petitions.”

And yet this battle continues because U.S. Bancorp refuses to give up, appealing at every turn. After the jury ruled against the bank last March, it not only appealed, but filed a new lawsuit against Mr. Rosenberg in Pennsylvania. Last month, a judge dismissed one of U.S. Bancorp’s motions, saying “the third time is not a charm,” though the case remains active and some of the bank’s other motions withstood the judge’s scrutiny.

Mr. Rosenberg, 67, said he was once worth more than $50 million from a career in real estate. A philanthropist, he was listed in a 2008 statement from Lincoln Center as a supporter on the same line with the financier Joseph R. Perella and his wife, Amy. Mr. Rosenberg nearly broke into tears when I spoke to him.

“If they can do this to me,” he said, “imagine what they do to people that can’t defend these actions. I’m truly learning that it doesn’t matter if I’m right or wrong because they keep filing more and more appeals and motions. It’s getting to the point that I can’t afford the legal fees and I can’t ask my attorneys to work for free.”

The bank, according to Mr. Rosenberg, even privately approached his lawyers and offered to pay their fees, which Mr. Rosenberg is in arrears on, if they would stop representing him. The bank has denied this.

At issue is a dispute that began in the depths of the financial crisis in 2008. Mr. Rosenberg’s company, National Medical Imaging, leased radiology machines. The leases were then bundled and sold as investment packages serviced by a unit of U.S. Bancorp, Lyon Financial Services. When the company started suffering under the strain of the economic downturn and new regulations that reduced the government’s insurance reimbursements, Mr. Rosenberg reached out to the bank in hopes of restructuring, or spreading out, his payments. But because he was on time with his payments, he said, the bank refused to negotiate a new arrangement. Hoping to press the bank into negotiations, he stopped making the payments, even though he says now that he could have afforded to do so. But instead of seeking to reach a new agreement with him, the bank filed an involuntary bankruptcy proceeding against him and his company.

Mr. Rosenberg draws parallels between his situation and the homeowners who lost their houses through foreclosure.

“When you compare it to the mortgage business, it’s exactly the same issue,” he said. “The little guy that owns a mortgage and has been assigned to a million different people and nobody knows who the debt is really due to, can’t afford to go fight it.”

To U.S. Bancorp, which is based in Minneapolis, Mr. Rosenberg is an overly litigious businessman seeking to shake it down. The bank is contesting the $6.1 million judgment against it.

“Mr. Rosenberg is a sophisticated businessman whose company borrowed $27 million in loans,” a spokesman for U.S. Bancorp said. “After his company defaulted the first time, the bank agreed to write that obligation down to $15 million, and Mr. Rosenberg signed a personal guaranty on that commitment in exchange for the write-down. His company then defaulted again after only 21 months â€" and he has not paid a penny on his guaranty.”

“In addition to writing off a significant portion of this loan,” the spokesman added, “we have attempted to resolve this matter repeatedly with Mr. Rosenberg outside the courts, to no avail. He and his family have two lawsuits pending against us. It is our right â€" on behalf of our shareholders and the millions of customers who pay their obligations â€" to pursue a just settlement.”

It’s true that Mr. Rosenberg has been involved in a lot of lawsuits. According to a document prepared by U.S. Bancorp and presented in court, Mr. Rosenberg has been involved in 165 cases since 1984. One of his own lawyers is suing him for fees. He also has not always been a model litigant. One judge called him out for being “childish.”

Mr. Rosenberg is unapologetic.

“When you’re in the real estate development business, you would find that over a 20-year span I probably have 100 to 120 nuisance lawsuits averaging $1,500 to $2,000.” He said, “You will never find a judgment against us because of a disagreement.”

“I’m not ashamed,” he said. “I was running a business.”

Mr. Rosenberg says he has sought repeatedly to settle the case, but that all the offers from U.S. Bancorp have been for less than the current judgment against the bank.

He says he is virtually ruined.

“It’s very, very upsetting to think that I worked for 40 years, 50 years and have it all taken away not because I made a bad business move, not because I stole something, but because of the arrogance of these institutions,” he said.

“We’re still borrowing money, pretty much living on the day-to-day basis,” he added, saying that he’s behind on mortgage payments for his homes. “I’m not the type to run away from obligations, so it’s very difficult. It’s been terrible.”