Marriott case jurors reveal frustrations Deadlock dashed hopes for major precedent

THE BALTIMORE SUN

Things weren't going well in Jury Room 5D.

After almost two torturous days of being huddled around a large, wooden conference table in the federal courthouse in Baltimore in October, the 10 jurors sensed a verdict was virtually impossible.

The only thing that could change that would be if two of them switched -- and that was unlikely.

But almost from the moment the four women and six men entered the small, white room on the fifth floor, it was clear that the group was deadlocked in the multimillion-dollar securities fraud trial involving Marriott Corp. and three of its top executives.

Finally, on Oct. 19, Judge Alexander Harvey II ended the deliberations by telling jurors "not to violate their consciences" by forcing a decision, then declaring a mistrial.

From the time the civil case went to them and the judge's final declaration, the jurors depict three tension-filled days of frustration and sometimes-heated debate as the panel members with no securities or legal backgrounds -- struggled to apply ambiguities contained in securities law written six decades ago to 1994 corporate America.

At the center of the case were Marriott, one of the nation's largest and best-known companies; millions of dollars; and whether the company knowingly kept secret from bondholders information of a major corporate restructuring that slashed the value of their $400 million in holdings.

The bondholders, a group led by Chicago-based PPM America Inc., an affiliate of British insurer Prudential Insurance PLC, had sued Marriott just after an announcement in October 1992 that the hotel giant planned to literally split into two companies.

Marriott maintained the decision to split into Host Marriott Corp., a real estate concern that would absorb much of the Bethesda company's $3 billion in debt and assets, and managed-services-dominated Marriott International Inc., came only after the bond sale was consummated. The split occurred in October 1993.

The case, and much of the deliberations among jurors, centered around the timing of required disclosure by the company.

Was Marriott required, under federal law, to reveal its plans when they were first discussed internally? Or only after those plans reached a stage approaching reality?

Legal experts and scholars -- as well as jury members -- also hoped the case would serve as an important precedent, further defining the Securities and Exchange Act of 1934 and sending a strong signal to corporations about their responsibility to disclose information to both bondholders and shareholders.

Although the jury was unable to do that, a majority had voted to find one of Marriott's senior officers liable -- and by extension the company -- and had settled on damages to be awarded, according to interviews with five of the 10 jurors.

The jurors had wasted little time after they got the case the afternoon of Oct. 17.

They were eager to get a feel for how each was leaning, so within minutes of entering the jury room they took an initial vote.

One by one the votes were tallied. At the end, the count was eight to exonerate Marriott and its executives, and two in favor of finding the company liable.

The vote was so overwhelming because most on the jury felt that the plaintiffs had failed to prove their claim that they had suffered $18 million in losses by Marriott's actions.

"Most of us felt the bondholders really hadn't lost anything, at least anything we could point to, because the bonds had recovered and investing is generally risky," one juror said. "You know that going in. If you lose, you lose."

The rest of the afternoon was spent discussing the case. But without written instructions from the judge, the jurors were left to decipher crude notes taken in court, which quickly led to disagreements over facts and interpretation.

"There was a constant source of friction," one juror recalled. "Several people said they knew then that we were going to be there a while, and it was obvious that people held certain opinions, and that they held a high stake in those opinions."

On the second day, a juror brought in a fan -- hoping to dissipate the smoke coming from some of the members' cigarettes. Another engaged in needlepoint. Coffee cups, candy and food wrappers began cluttering the room.

Deliberations focused on a special verdict sheet Judge Harvey had distributed the previous day. The paper guided jurors to decide first on the liability of Marriott Corp., then for the other defendants: Chairman J. W. Marriott Jr., his brother Richard Marriott, and Chief Financial Officer Steven F. Bollenbach.

But the jury decided to change the order. It jumped past deciding on the fate of the company and instead went directly to the three other defendants. It was a way to "back into" a decision, as one juror put it. If any or all of the people were found liable, then by extension the corporation would be liable, too, the juror said.

"We were trying everything to reach some sort of consensus," one juror noted.

The majority -- voting 9-1 -- cleared J. W. Marriott Jr. Then they cleared his brother Richard.

The jury concluded both brothers had acted primarily at Mr. Bollenbach's direction.

In fact, Richard Marriott's innocence was the only unanimous decision the group made during all of its deliberations.

But toward the end of that day, a significant shift took place.

Shift takes place

Although still deadlocked, the deliberations had caused a majority to swing. Most of the jurors didn't believe Mr. Bollenbach's testimony that the decision to split the company occurred only after the sale of $400 million in bonds in April 1992.

"Mr. Bollenbach, we decided, was instrumental and certainly influenced the actions of the company, and that he hadn't acted in good faith," a juror said. "His testimony wasn't in agreement with what others presented."

Mr. Bollenbach, in part, was being haunted by his past.

Prior to joining Marriott in early 1992, he had orchestrated the restructuring of New York real estate mogul Donald Trump's debt-laden empire in the late 1980s, as well as the sale of the hotel owner Holiday Corp. to Britain's Bass PLC for $2 billion in 1990. "A few of us thought he had thought about splitting the company the entire time," a juror said.

Eight of the 10 jurors voted to find Mr. Bollenbach liable for failing to adequately inform the bondholders of Marriott's intention to divide, according to the jurors interviewed.

Violations assumed

That meant that the majority now also believed the corporation ++ had violated U.S. securities laws and could face millions of dollars in damages.

But despite those developments, the majority of jurors were unwilling to award financial damages to the group of 11 bondholders.

In fact, far from the $18 million the bondholders sought, seven of the 10 jurors elected to give the bondholders just a single dollar.

"The $1 figure came up because we felt we couldn't award them zero," a juror said. "It was symbolic more than anything."

But the vote against Mr. Bollenbach sparked an angry reaction from the two jurors, both of whom believed he was not responsible, or not required to disclose the company's plans.

One of those jurors announced he would vote against the defendant only "when hell freezes over."

"That was a real show-stopper," one juror recalled. "So everybody said, 'Calm down, calm down,' and we started over and tried again. All of us thought things were going well, that we'd heard the same things. When people wouldn't budge, it was frustrating."

The day ended with an intractable deadlock, and there seemed little chance that it could be snapped.

Like the jurors, Judge Harvey was growing impatient by day three.

That morning, shortly after convening at 9:30, the judge sent a note instructing the jury to compromise, and hinted that the minority should consider the views of the majority.

Prodding no help

But even Judge Harvey's prodding didn't help.

For the next few hours, the jurors scanned crypticly-worded memorandums written by Mr. Bollenbach to J. W. Marriott, debated the evidence and grew more frustrated.

A final tally after lunch produced the same results as the day before.

When informed of that, Judge Harvey pulled the plug on the proceedings and declared a mistrial.

On Nov. 2, the bondholders' attorneys filed a 50-page motion in U.S. District Court seeking a new trial. The judge's decision is expected in January, and both sides maintain they will prevail.

"The fact that the jury was hung shows how difficult it is deciding a case based on intention," said Mark A. Sargent, a professor at the University of Maryland School of Law and a securities law expert.

But that's little consolation to the jurors.

"The case had the opportunity to refine the laws which we all felt were rather vague, and we knew our decision would have become part of the overall case law to help in deciding future cases," a juror said. "When we deadlocked, one of the most frustrating things was that we didn't accomplish that. It's like we got nowhere."

Copyright © 2020, The Baltimore Sun, a Baltimore Sun Media Group publication | Place an Ad
84°