NEW YORK -- Judge Jed S. Rakoff threw a curveball to the defense team in the $386 million lawsuit against New York Mets owner Fred Wilpon, his family, businesses and charities on Wednesday.
Five days before jury selection begins in the civil trial in U.S. District Court in lower Manhattan, Rakoff ruled the burden is on the Wilpons to convince a jury they did not act in "bad faith" when they profited from convicted swindler Bernard Madoff's Ponzi scheme.
The burden will not be on trustee Irving Picard, who brought the lawsuit, to prove the Wilpons were "willfully blind" to the Ponzi scheme.
Bankruptcy attorney Chuck Tatelbaum of Hinshaw & Culbertson said Rakoff is using the standard from bankruptcy court, where the case originated, that the defendants in a clawback lawsuit bear the burden of proof.
The case had been moved from bankruptcy court to federal district court at the request of the Wilpons' attorneys because the defense team viewed bankruptcy court as Picard's home turf. Rakoff agreed to take the case and move it to his courtroom.
Typically in federal court, Tatelbaum said, the burden of proof lies on the person bringing the lawsuit, so he called Rakoff's ruling "surprising."
In advance of next week's trial, Rakoff already has awarded up to $83 million to Picard -- the profits collected by the Wilpons and their businesses and charities in the immediate two years before Madoff's arrest. Picard now seeks at trial an additional $303 million in principal that the Wilpons invested with Madoff.
It was thought that Picard would need to prove the Wilpons were "willfully blind" to Madoff's fraud and that they acted in bad faith in order for a jury to award that additional sum. With Rakoff's ruling Wednesday, the burden is actually on the defense to show by a preponderance of the evidence that they were not willfully blind to the fraud.
Rakoff previously had expressed skepticism that a willful blindness standard can be proven by Picard, but he allowed the case to go to trial by rejecting a defense motion to toss the lawsuit.
Information from The Associated Press was included in this report.