EFTA00617907.pdf

2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 IN THE CIRCUIT COURT OF THE FIFTEENTH JUDICIAL CIRCUIT IN AND FOR PALM BEACH COUNTY, FLORIDA CASE NO.: 502009CA040800SSSSMB JEFFREY EPSTEIN, Plaintiff/Counter-Defendant, vs. SCOTT ROTHSTEIN, INDIVIDUALLY and BRADLEY J. EDWARDS, INDIVIDUALLY, Defendants/Counter-Plaintiffs. / PROCEEDINGS HELD BEFORE JUDGE DONALD HAFELE Epstein's Motion for Fees and Costs HELD: December 8, 2014 Palm Beach County Courthouse West Palm Beach, Florida ORIGINAL -- PAISMEACH REporraro NICE, INC. 361-411:29t PBRS@PahnBeachRepornng.com . . EFTA00617907 2 1 2 1 7 8 9 10 11 12 13 -14 15 16 17 18 19 20 21 22 23 24 25 APPEARANCES: ON BEHALF OF THE PLAINTIFF EPSTEIN: W. CHESTER BREWER, JR., P.A. 250 S. Australian Ave., Suite 1400 West Palm Beach, FL 33401 By: W. CHESTER BREWER, JR. LAW OFFICES OF TONJA HADDAD, P.A. 315 S.E. 7th St. Ft. Lauderdale, FL 33301 By: TONJA HADDAD COLEMAN, ESQUIRE ATTERBURY, GOLDBERGER & WEISS, P.A. 250 S. Australian Ave Suite 1400 West Palm Beach, FL 33401 By: JACK GOLDBERGER, ESQUIRE ON BEHALF OF THE DEFENDANT(S): nvNNEY, gCnvOLA, ot—aL 2139 Palm Beach Lakes Blvd. West Palm Beach, FL 33409 By: JACK SCAROLA, ESQUIRE PA I \1 BEACH RBI,OkTINo SERVICE, INC. 561-fil -2995- PIIRS@PalmBeackRep?rting.com EFTA00617908 3 PROCEEDINGS 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 NM' THE COURT: Okay. Welcome everybody. MR. BREWER: Good morning. MR. SCAROLA: Good morning, your Honor. THE COURT: Thank you. Good morning. This is counter-defendant Epstein's motion for fees and costs pursuant to an offer of settlement and offer of judgment. Mr. Brewer? MR. BREWER: Yes, your Honor. Would you prefer we do this from the podium? THE COURT: Whichever. You can stay there if you want. MR. BREWER: I'll stand here. THE COURT: Thank you. MR. BREWER: For the record, my name is Chester Brewer. I represent Mr. Epstein. We have with us also representing Mr. Epstein Miss Tanya Haddad and Mr. Jack Goldberger. Your Honor, first of all, this motion is only to entitlement. THE COURT: I understand. MR. BREWER: Did your Honor get the different handouts that we had delivered to you? THE COURT: I believe so. I've got a stack of PALM BEACH REPORTING SERVICE, INC. 3614714995 itinis4pahnBeachkep?-4.* EFTA00617909 4 4 5 6 7 8 9 10 11 12 13 14 15 16 materials here from you and I've got the response in opposition filed by Mr. Edwards as well. MR. BREWER: As your Honor might remember, you entered a summary judgment THE COURT: Right. I remember the facts. I presume it's on appeal now; is that correct? MR. BREWER: It is, your Honor. THE COURT: Okay. MR. BREWER: You are also aware then probably that earlier, before the granting of that motion for summary judgment, that Mr. Epstein had received a proposal for settlement on Mr. Edwards. We will not be like the previous hearing. We've only got here two people involved: Mr. Epstein and Mr. Edwards. We don't have to figure out who the parties are. 17 18 19 20 21 22 23 24 25 The amount of -- the proposed amount, I should say, for settlement was $300,000. Attached to the proposal was a written release, a written stipulation, and a written proposed order of dismissal. Those documents were completely or would have completely done away with all of the issues in the case; both the original claim and the counterclaim. It would put judicial effort at an end. PALIA BEACH RBPORTING SERVICE, INC. 561 471-2995 PBRS(o)PS1mBeadtRepotti I$ com EFTA00617910 5 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 The release contained a confidentiality clause, which was a very, very simple one. One paragraph. It essentially said that Mr. Edwards was not to reveal the amount or the reason for the settlement. Only to his attorneys, accountants, et cetera. Case law tells us that if the proposal follows the requirements of the statute and the rule, if any nonmonetary terms are stated with particularity, and if the proposal was made in good faith, then it is mandatory that the court grant the motion requesting attorney's fees and costs. Here, good faith. There's a number of cases cited to you, your Honor, but in essence the cases or the question of good faith normally turn upon • - - • . _ - _ - _ - _ - • • - - • • - - - - . - - - - - - • - - - - _ • the fact -- or normally come up in cases in which Lhere's been a nominal offer; a few hundred dollars or a thousand dollars or something like that. This particular case was for -- the offer was for $300,000. Not much question about good faith. Even if it were -- well, they're not. I'll stop there. The proposal was actually drafted by Joe Ackerman. And if you look at it, it follows the rule and the statute page and line. I mean, bimp, PAIMBEACHREPOMINGSERVICE,Ma 561471-2995 -- EFTA00617911 6 2 6 7 8 9 10 11 12 13 14 15 16 17 18. 19 20 21 22 23 24 25 bimp, bimp, bimp. There is an issue that has been raised as to whether nonmonetary terms had been stated with particularity. A number of cases are cited, which we probably will get into in rebuttal, but there were a number of cases cited, some of which, or one of which, anyway, is a federal court case which really has no bearing here because in federal court they have a completely different rule they follow. And the issue in those, or the standard, is whether it was a more advantageous outcome. Those words do not even appear in our rule. In fact, some of the federal cases that we have cited said that the federal courts are pretty much bound by the Florida state courts when they're looking at our state statute and rule. Additionally, most of the cases that are cited, or I should say some of the cases that are cited, deal with situations in which the actual language of the nonmonetary terms were not attached to the proposal. Here, they were. That is essentially the preferred practice, and that was what was followed. We know that our Supreme Court has said, Well, if you describe essentially with some particularity _ PALM BEACH REPOR11240 SERVICE, Nc. _ 561-471-2995 rilt-S@PahnB4a0R49Ongto, EFTA00617912 7 2 3 4 5 9 10 11 12 13 14 15 16 so that you necessarily itself, but understand what's going on, you don't have to attach the actual language here the actual language was attached. We're not dealing with offerees, we're not dealing insurance coverage in which multiple coverages that are multiple offerors or with cases that deal in there are potentially being available to the insured and perhaps a proposal for settlement was rade with regard to a PIP claim and then there was -- it was ambiguous or unclear as to whether that applied to other potential causes of action like property damage or uninsured motorists. But we're not. So we believe, your Honor, that here everything has been attached -- THE COURT: Really, the core issue here is whether or not this confidentiality clause passes 17 18 19 20 21 22 23 24 25 muster based upon the appellate case law in the State of Florida. So why don't we hit that head on, if you would, please. MR. BREWER: Certainly. Does your Honor have it in front of you? THE COURT: I do. MR. BREWER: Okay. It is abundantly clear that it is a very, very supple confidentiality agreement. It's very clear. It states that PALM MACH REPORTING SERVICE, INC. 561.471-2995 Kilt,S(Val6theachfrteporting.,m EFTA00617913 8 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 Mr. Edwards will not reveal the amount of the settlement or the reason for the settlement except to his accountants, attorneys, et cetera; and if he does reveal it to them, then he will request that they also not reveal it. Plain and simple. It's directed to Mr. Edwards only. It is very clear as to -- I should say that it is clear as to its term or its length. It's not limited. It's forever. In the counter-plaintiff's brief they talked in terms of -- I just lost my train of thought. I'm sorry. THE COURT: That's okay. You were talking about the confidentiality clause. MR. BREWER: Yes. They make reference to the Schwartzle case. 17 18 19 20 21 22 23 24 25 Interestingly enough, he was represented by Mr. Scarola. Also represented by me at one time or another. I know Kathy Schwartzle. In that case, they cite language that talks about, you don't know what the terms of the confidentiality agreement are or who they would apply to, what its term was. These kinds of issues. Well, that is because in that case the proposal for settlement was not attached. It just PALM BEACH REPORTING SERVICE, 561-4717p95. V3RS@PalmBeaOlteporting.coiR _ EFTA00617914 9 2 3 4 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 simply said there -- we will require a confidentiality agreement, without more. Without saying anything more than that. Here the confidentiality agreement is clear. All they would have to do to comply would be sign the release. There would be no need to revert back to or require that the Court spend any time trying to determine exactly what was meant. If the documents that were attached, specifically the Stipulation for Dismal with Prejudice and Order, did not require any additional judicial effort, it was a very simple, very clean proposal for settlement, and we believe, your Honor, that the law in Florida requires that the Court grant the motion. THE COURT: All right. Do you have any cases that specifically relate to a confidentiality clause being upheld under similar language that we have here? MR. BREWER: Tanya has got some brilliant young people who do research, and I said, If you all could find me a confidentiality agreement that was contained within a proposal for settlement that was in writing and attached, I would give them a bonus. We can't find one, your Honor. Certainly _ PALM BEACH REPORTING SERVICE, INC. 561.471-2995 PE,S@PalmEleactilleponipp:pm EFTA00617915 2 3 4 5 6 8 9 10 11 12 13 14 15 :.6 not in the State of Florida. THE COURT: All right. Thank you, Mr. Brewer. Mr. Scarola? MR. SCAROLA: Thank you very much, your Honor. Your Honor, there are five reasons why this Court should not grant the relief that is currently being requested. The first of those is that there is not yet final decision with regard to the liability issues in this matter, as has been acknowledged in response to the Court's question. This case is still on appeal. And I know that your Honor recognitions the significance of the appellate issue that is presented because the Wolfe decision upon which your Honor's summary judgment was based is in fact the only decision in the country that 17 18 19 20 21 22 23 24 25 applies the litigation privilege to destroy the tort of malicious prosecution. I suggest to your Honor that for that reason alone, this motion is premature, and a decision should be deferred until after the appellate court has had an opportunity to address this issue. THE COURT: Is there any stay issue that I have to be concerned about? Has there been a request for stay or -- PALM BEACH REPOICENTO SERVICE, INC. . 561-471-2995 PBRS@PalmBeachReportingcom EFTA00617916 11 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 MR. SCAROLA: No, sir. This is not a matter of jurisdiction. There's no stay issue. The Court has the discretion to entertain this motion at this point in time, and the Court also has the discretion to defer entertaining the motion to conserve the judicial resources that would be necessary in order to resolve this issue now, when the issue may be entirely mooted. The second, third and fourth reasons why this relief should not be granted all focus on the confidentiality provision in the Proposal for Settlement. And if your Honor takes a look at that provision, the key language in the provision is, As further consideration, I agree not to disclose the details of this release in settlement of all - _ - _ • _ - _ • - . - - - • - _ - • - - - • - - • - claims, including the nature or the amount paid, 17 18 19 20 21 22 23 24 25 and the reasons for the payment to any person other than my lawyer, accountant, income tax preparer or by valid order of the court of competent jurisdiction, whether directly or indirectly. Your Honor asked about whether there is any appellate authority that assists the Court in addressing this issue, and the answer to that question is there is Fourth DCA precedent that is in fact very directly on point. PALM BEACH REPORTING SERVICE, INC. 561-471-2995 PJW@PalTseacWPotftscp EFTA00617917 12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 Schwartzle versus Publix Super Markets is a case in which the appellate court, the Fourth DCA, was asked to address the issue of the inclusion of a confidentiality provision in a proposal for settlement. What that opinion says is -- and this is a direct quote from the language of the case it would be crucial to know what is being made confidential, who is covered by the confidentiality, whether there is any period to the confidentiality, and what the remedies are in the event of a breach. There are questions among those identified by the Fourth DCA as necessary to be responded to that remain entirely unanswered under the terms of this proposal. We don't know based upon this proposal what is meant by the language the reasons for the 17 18 19 20 21 22 23 24 25 payment. That phrase could clearly be interpreted as including all of the underlying circumstances that relate to the litigation between Mr. Edwards and Mr. Epstein. And the disclosure that's prohibited is both direct disclosure and indirect disclosure of any of those circumstances relating to the litigation. We don't know what the period of confidentiality is. Presumably, because it's PALM BEACH REPORTING SERVICE, INc. 56:1-471-299 PORS@PakoBeachReporting.com EFTA00617918 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 unspecified, it would be forever. And there is no reference to what the remedies would be. So under the guidance of Schwartzle, the criteria that had been laid out by the Fourth DCA have clearly not been met. That's defect Number 1 in the confidentiality provision. Defect Number 2 is that obviously because this confidentiality provision is expressly identified as part of the consideration for the settlement of this claim, it has some monetary value to the proponent of the proposal. Mr. Epstein was clearly bargaining for secrecy. How much value he placed upon that secrecy is a matter of speculation because the value of the confidentiality provision is not expressly identified. Indeed, the - - • - - - • - • _ • - _ _ • _ - _ - - - • - _ • • - • . - - . . . circumstances of this case are such that it may well have been the entire $300,000 that was being paid for confidentiality in this case. And so when we look at the other appellate court decisions that relate to proposals for settlement and the conditions imposed upon proposals, we are left with an inability to compare the zero result that currently stands with the result under the terms of the proposal for settlement because we don't know whether the value PALM BEACH REpORTING agRyjcp, PplW0Pattapcschfrticorting.com EFTA00617919 1 7 4 6 8 9 10 11 12 13 14 15 16 1./ 18 19 20 21 22 23 24 25 of the confidentiality provision itsolf was all or part of the $300,000. The Fifth DCA in the case of Dryden versus Pedemonti, P-e-d-e-m-o-n-t-i -- and I'm not referencing the page and line citations; they're included in our memo, your Honor -- the Fifth DCA noted, again directly quoting, One might logically posit, in fact, that the only enforceable nonmonetary condition allowable under the rule is one that does not go beyond what the offerer would be entitled to by operation of law upon settlement or, for that matter, upon verdict. It is impossible to do an apples-to-apples comparison when nonmonetary conditions such as confidentiality, which are not assigned a dollar value, are included in the proposal for settlement. There have been other appellate court decisions that address the same issue that talk about the inability to make an apples-to-apples comparison; and that is certainly the circumstance that exists here. The last and very significant defect with regard to this confidentiality provision is that the circumstances under which this proposal for settlement were made made it absolutely unethical _ ..pgam BEACH REPOR.T1NG SERVICE, INC. _561-471-2995 EFTA00617920 15 3 4 6 8 9 10 11 12 13 14 15 16 for Brad Edwards to have accepted this proposal for settlement. That requires an evidentiary basis, and I am prepared to give testimony with regard to that aspect. TEE COURT: Just summarize what your argument would have been. What the evidence would have been. MR. SCAROLA: Yes, sir. Bradley Edwards represents multiple victims, presently represents, and at the time this proposal for settlement was filed represented victims of Mr. Epstein in a federal proceeding under the Crime Victims Rights Act. I think that those are matters that have been addressed at least in argument before your Honor, although I don't know the testimony has been. THE COURT: I recall that I had the active :.8 19 20 21 22 23 24 25 cases that were filed in federal court, now inactive, closed cases in division AB. So I recall that at the last hearing there was some discussion with regard to those cases still pending in federal court, and I don't know if they're still pending. MR. SCAROLA: They are still pending, your Honor. There have been appellate proceedings. The case has been up to the 11th Circuit on issues relating to the Crime Victims Rights Act. That PALM BBACH REP0R17NG SERVICE, INC. . - 7 S11,17i-i995 1431Sel'OnlileicliRep—mtinie.ac EFTA00617921 8 9 10 11 12 13 14 15 16 case is pending before Judge Marra. And one of the threshold issues in that case was whether victims rights attach prior to the filing of a federal indictment. And Judge Marra ruled that they did. That particularly under the circumstances of this case, the victims were required to be consulted before the federal government could enter into the non-prosecution agreement with Mr. Epstein. The issue is whether there will be an invalidation of the non-prosecution agreement that Mr. Epstein entered into with the federal government as a consequence Rights Act. So Mr. of the violation of the Crime Victims Edwards at the time this proposal was made was very much involved in the prosecution of claims that arise out of the same representation of 17 18 19 20 21 22 23 24 25 victims that led to the malicious prosecution claims on Mr. Edwards' behalf against My testimony would confirm those and would explain, as co-counsel with Mr. Epstein. circumstances Mr. Edwards, why Mr. Edwards could not ethically enter into a confidentiality agreement that imposed any restrictions on his ability to represent existing clients. So this wasn't simply a matter that we were _ PALM BEACE1 REPOktTING STAVICB, INC. . 561-411-2995 PBRS@PalmBeachlteporttngsom EFTA00617922 17 4 8 9 10 11 12 13 14 15 16 dealing with a vague and ambiguous confidentiality provision, not simply a matter that we're dealing with a confidentiality provision of unknown, unspecified value that made it impossible to do an apples-to-apples comparison; we were also dealing with a confidentiality provision that made it impossible for Mr. Edwards to accept the proposal for settlement because he would have been imposing an unethical restriction upon his legal obligations to existing clients. Simply couldn't be done. Now, if opposing counsel is willing to accept that proffer without the necessity of my taking the witness stand and swearing to those matters, I will accept that agreement. Otherwise, to complete this record, I believe it's necessary that I take the stand and testify to those matters. 1.1 18 19 20 21 22 23 24 25 THE COURT: Mr. Brewer? MR. BREWER: I think it would have to be Mr. Edwards that would testify to those matters, as opposed to Mr. Scarola. MR. SCAROLA: We're talking about the underlying facts, your Honor. I have direct personal knowledge of those underlying facts, and I am a competent and qualified witness to testify about those matters of which I have personal PALM BEACH REPORTING SERVICE, INC.. .56!-471-29?5 !liRS(0rctImpFacb!epprtinv091 - EFTA00617923 18 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 knowledge. MR. BREWER: I'm sorry? We were conferencing over here. THE COURT: He's indicating he has personal knowledge of these matters, and right now he's simply requesting whether or not you would stipulate to the facts that he has proffered without being under oath. MR. BREWER: Mr. Scarola is an officer of this court. Whatever he says, he says without having to be under oath. I'm still having -- my problem, your Honor, is I'm having a little trouble understanding why in a case in which Mr. Edwards is suing Mr. Epstein there's -- some ethical dilemma arises. THE COURT: I think it's a fair question. MR. SCAROLA: I am prepared to address it by way of argument -- THE COURT: I'd rather hear the argument first so I can make a threshold determination if there's any relevancy. MR. SCAROLA: This is a confidentiality provision which precludes the disclosure directly or indirectly of any matters relating to the reason for the settlement of the claims against PALM BEACH REPORTING SERVICE, INC. 561 471-2995 PB g.00m_ EFTA00617924 19 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 Mr. Epstein by Mr. Edwards. Well, the reason for the settlement clearly relates to the underlying merits of the claim. THE COURT: Well, it actually says, quote, As further consideration, I agree not to disclose the details of this release and settlement of all claims, including the nature or the amount paid and the reasons for the payment, to any person other than my lawyer, accountant, income tax preparer, or by valid order of a court of competent jurisdiction, whether directly or indirectly, end quote. There's further language, but that's the pertinent quote. MR. SCAROLA: Exactly. Reasons for the payment. Reasons for the payment means, why was this case settled? Why this case was settled has 17 18 19 20 21 22 23 24 25 to do with a total analysis of all of the surrounding factual circumstances. Mr. Edwards would have been precluded from disclosing even to his own clients, because there's a specific list of those to whom he can make a disclosure and his own clients are not included on that list, he could not even disclose to his own clients the circumstances that led to the claims between Mr. Edwards and Mr. Epstein, going both _ PALM BEACH REPORT 1}19 sawicEt iNp, _ 561-471-2925. F.931.9(4TalmEleachltepor1:1400m EFTA00617925 1 6 7 8 9 10 11 12 13 14 15 16 ways, which relate to the merits of the underlying case. THE COURT: Unless he chose to seek a court order in that regard. MR. SCAROLA: Which may or may not be granted. Yes, sir. THE COURT: I agree. MR. SCAROLA: So the point is -- THE COURT: Go ahead. MR. SCAROLA: I didn't mean to interrupt the Court. I apologize. THE COURT: No, I was just going to say I would have difficulty managing a scenario where if that was accepted, a judge would not allow disclosure of the fact that Mr. Epstein settled with Mr. Edwards and Mr. Edwards settled with 17 18 19 20 21 22 23 24 25 Mr. Epstein and accepted the amount proffered, that he could not state to his client that, I have accepted whatever was proposed, and I would think that the amount would be included in a court order. Again, you're right; it is speculative. And there is the axiom that these types of offers are to reduce the amount of judicial labor, not to increase it. So I can understand the position you're taking. I'AU4 BEACH REPORTING SERVICE, INC. 561-471-2995 PERS@PalmBeachReporting.com EFTA00617926 21 2 4 8 9 10 11 12 13 14 15 16 And I think that, obviously -- I mean, you understand the underlying reasons for Mr. Scarola's argument, Mr. Brewer, correct? MR. BREWER: No, quite frankly, I don't. THE COURT: Well, my thinking is that there would then be an issue of whether or not Mr. Edwards stands in a conflict with his client once he accepts that amount and is unable to disclose that to the client. Do you understand? In other words -- MR. BREWER: When we talk about apples and oranges -- THE COURT: No, I'm not so sure that's the case because if Mr. Edwards stands in the position to gain through a payment made by Mr. Epstein, and gain hundreds of thousands of dollars but is 17 18 19 20 21 22 23 24 25 precluded from telling his clients that, in my view he stands in a position of potential conflict. I mean, is that the point you made -- MR. SCAROLA: Yes, sir. THE COURT: -- or one of the points you're making? MR. SCAROLA: There are a number of other scenarios that make this even clearer. Your Honor is aware of how high profile a l'A I M BEACH SPORTING SERVICE, INC. 561-471-2995 PERS@PahnBeachReportingsOM EFTA00617927 4 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 matter this has been. THE COURT: Sure. MR. SCAROLA: And one of the aspects of my testimony if I were to testify would be that on a regular basis, even since this lawsuit has been a summary judgment has been granted and there has been no active litigation, I receive telephone calls regularly from members of the International Press continuing to ask about what the status of the lawsuit is, continuing to be concerned about Mr. Epstein, continuing to be concerned about Mr. Edwards, and there is a tremendous focus of public attention that continues to exist with regard to these matters. Now, it would be in Mr. Edwards' clients' best interest to continue that focus of public attention; to hold press conferences, to make disclosures about underlying facts, to talk about the fact that Mr. Epstein has now paid another $300,000 to try to keep quiet the circumstances that led to his criminal prosecution. That would serve Mr. Edwards' client's best interests. THE COURT: I mean, that may or may not be true. And certainly he has the ability to accept or reject the terms and conditions of a given REPORTING SERVICE, INC. 561-471-2995 PBRS@PalmBeacIA9catini.cpu! EFTA00617928 23 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 offer. Whether strategically he finds it better to reject is of no moment to the Court. The ethical issue may have some impact. Strategy and whether or not it is better for him to talk about his case so that in the eyes of public opinion, or whomever he's trying to convince, his clients are in better stead, I'm not really interested in, frankly. MR. SCAROLA: Well, I obviously haven't made my point clear, and let my try again. What I am saying is if it is in Mr. Edwards' client's interest to make statements about the status of this case, the reasons for the settlement, why Mr. Epstein paid and how much he paid, if that's in his clients' interest and he has entered into a contract that prohibits him from doing that, he has entered into an unethical contract because he can no longer take that strategic step. He has for his own purposes that is, to put $300,000 into his own pocket he sold away the strategic ability to be able to advance his client's interests in that manner. He can't do that. He cannot sell away that strategic option. He's ethically prohibited from doing it. THE COURT: I think my argument may make PALM BEACH thIPORTiNG 61.4.7!,4950$ PRS@ThigillegthReporting.cony, EFTA00617929 24 better -- may make more of an ethical statement than yours. But I'll accept the rationale. 9 10 11 12 13 14 15 MR. SCAROLA: I'm not presenting it as an alternative, I'm suggesting to your Honor that there are multiple reasons why this is unethical. THE COURT: I respect that. MR. SCAROLA: That's all that I am suggesting to the Court. THE COURT: Okay. MR. SCAROLA: The last aspect of my objection to this proposal is that it is the burden of the proponent of this proposal for settlement to prove that it was made in good faith. And it is our position that a $300,000 offer, pre-Wolfe, that included a confidentiality provision of obviously - • - • - • • . _ _ • - - - • • . 16 very substantial value to Mr. Epstein, who has been 17 18 19 20 21 22 23 24 25 doing everything he can to avoid publicity regarding this matter, that constitutes a nominal offer and was made in bad faith, considering the fact that a punitive damage claim had been approved, that this case was proceeding on the basis of both compensatory and punitive damages against a billionaire, and there has been no proof that would satisfy the burden of the proponent that this was a good faith offer under those PALfriBEACHREPoiansidi SERVICE, INC. 561471-2995 PB1t5®PatrnBeachlteporting.copi EFTA00617930 25 3 4 5 8 9 10 11 12 13 14 15 16 circumstances. So for all of those reasons: The decision's not final until the mandate issues on the pending appeal; we ought to conserve judicial resources; a failure to assign monetary value, which prohibits an apples-to-apples comparison; the vagueness of the confidentiality provision because we don't know what direct or indirect disclosure of the reasons for the settlement mean; we don't know how long the confidentiality provision is to last; we don't know what the sanctions would be for violation of the confidentiality provision; and because the confidentiality provision is unethical; as well as because there has been a failure to satisfy the good faith burden, the relief being requested should be denied. 17 18 19 20 21 22 23 24 25 THE COURT: All right. Thank you again, Mr. Scarola. All right, Mr. Brewer. I'll give you a few minutes. MR. BREWER: Thank you, your Honor. Your Honor, this ethical thing, quote, dilemma, it's the first time it's been raised. It was not raised in any pleading, nor has it been raised in any of the memorandum. I will attempt, _ _ PALM BEACH REPORTING SERVIcB,1Nc. 561-471-2995 13B4S®PablaBeachR4p6r6pg.con? EFTA00617931 26 3 4 5 7 8 9 10 11 12 13 14 15 16 though, to respond to it. First of all, we are dealing with a situation in which the people that supposedly will be heard are not even parties to this litigation. We're talking about Mr. Edwards' clients. The issue of an ethical dilemma has, I think, very little to do with whether or not the prerequisites of the proposal for settlement had been met. And the prerequisites are, in essence, have the terms -- have the nonmonetary terms been set forth with particularity? And they have. They have. Then we have the argument that was made THE COURT: But what about the Court's concern -- and I think it's a valid one, and I recognize that it was not raised in the spirit of the response -- I recognize also that he took the 17 18 19 20 21 22 23 24 25 affirmative step in a public proceeding -- and there was no, to my recollection, similar to what was done with the minors in the actual abuse cases that were brought by the minors, there was no hiding of-- hiding is a bad word -- but what I meant to say is there was no use of any initials or anything like that. MR. SCRROLA: That's not the case, your Honor. I don't mean to interrupt, but there's still PALM BBACH REPORTING SERVICE, INC. 561-471-2995 PBRS®faltoBeachttcporting.corp EFTA00617932 27 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 anonymity of the plaintiffs in the federal action. THE COURT: I understand that. I'm talking about the anonymity against the claims of Mr. Edwards against Mr. Epstein. There was no attempt at anonymity here in this particular case either by Epstein or Edwards. But recognizing all of that, the thought is that would there not be the potential of an inherent conflict if Mr. Edwards was not permitted to disclose to his clients the fact that he settled with the very individual against whom he is suing in these pending federal actions? MR. BREWER: I don't know that by that language he is precluded from revealing that there was a settlement. It's the terms that are confidential. 17 18 19 20 21 22 23 24 25 THE COURT: But the details, like they say on one of my shows that I watch on CABC, the devil is in the detail. And in this case, a client would have every right to know, in my view, not only that there was a settlement -- because a settlement could be a dollar. There are many cases that just go away for reasons that both sides just want an end to the litigation. But I think it somewhat erodes Mr. Scarola's argument relative to the bad PALM BEACH REPORTING SERVICE, INC. 561.471-2995 PEIRS®PalmBeachReporting.cxn EFTA00617933 28 2 3 4 3 6 7 8 9 10 11 12 13 14 15 18 19 20 21 22 23 24 25 faith -- or the lack of good faith -- it erodes his ethics argument, at least the argument that I find more persuasive, and then the conflict argument by suggesting on the one hand that it would be a detriment ethically to his clients and on the other hand suggest that the offer was not made in good faith if it was accepted. I reject that in terms of the nominal amount. I reject it also because of the presence of the Etchaverria case and the other case that involves the law firm that slips my mind. MS. HADDAD: Levin. THE COURT: The Levin case. So there was language principally used in the Wolfe case -- that's the underlying case that you primarily relied upon, correct? MR. SCAROLA: Yes, your Honor. THE COURT: Okay. So the language was utilized from Levin and Etchaverria in order to support the oral decision in the Fourth District Court of Appeal. But again, the fact that the argument in good faith may erode the ethics argument doesn't dispel the concern that the Court has, and I think it's a valid one, relative to the chilling effect that this may have on Mr. Edwards 'PAID BEACH REPORTING SERVICE, INC. 561.471-2995 PBRS®PalmBeachReponing.com EFTA00617934 29 2 6 '7 8 9 10 11 12 13 14 15 16 if he would have accepted it vis-a-vis discussing the details to his clients, because they would then be in a position to reject or accept his continued representation. But they would have to know about the amount that the settlement was for. Especially lay people. When they hear the sum of $300,000 being exchanged, despite what some of you folks may think is nominal or not in good faith, they think it's a lot of money. And I think it's a lot of money too, frankly. Again, not prejudging the issues here in the case, but just from the standpoint of it's a lot of money. And they're certainly going to think it's a lot of money. And their confidence in their lawyer could be materially affected when they say to themselves, Wait a minute. My lawyer just took $300,000 from a 17 18 19 20 21 22 23 24 75 person that we're suing. How effective is he going to be in his continued representation of me now that he's been satisfied? MR. BREWER: Your Honor, can I interrupt you for one second? THE COURT: Sure. Of course. I'm done. MR. BREWER: I don't know that by the time this offer or this proposal was made if any of those cases were still active or had been settled. PALM BEACH REPORTING SERVICE, INC. 561-471-2995 Pkill.siRPSF:ie,ch!t93.0rtiligm?in EFTA00617935 30 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 I don't know because I was not involved in any of those. THE COURT: All I know is my vague recollection from the initial hearing and this case when I disclosed my involvement in the Division AB cases that dealt with the actual claims by minors and others against Mr. Epstein was that it was brought up for one reason or another that there were still these claims pending in federal court under the statute that Mr. Scarola identified here and also Mr. Scarola brought out -- or Mr. Edwards -- himself at that hearing. MR. BREWER: So you're not speaking to the cases in which he had direct representation and in the state court cases but, rather, you're speaking to the federal cases? 17 18 19 20 21 22 23 24 25 THE COURT: There's a statute that is involved here that is different from, my understanding, is different from the actual direct claims that he had not only in state court but he also had, my recollection is, federal court actions as well that raised essentially the same issues in the state court cases. But now there are federal cases that deal with -- the statute, Mr. Scarola, again is what? -BALM BEACH REPORTING SERVICE, INC. 561-471-2995 PEIRS®PalmBeachltepordng.com EFTA00617936 31 6 7 8 9 10 11 12 13 14 15 11; 17 18 19 20 21 22 23 24 25 MR. SCAROLA: Crime Victims Rights Act, your Honor. THE COURT: Now, the one question I had is, is there limited damages involved in that case? Is there only -- MR. BREWER: They're completely different parties. Mr. Epstein is not a party to that. The entity being sued there is the United States government. The issues are completely different, your Honor, because in that one the issue really is, did the prosecutors have an obligation to converse or confer with the alleged victims prior to entering into any prosecution agreement? Essentially, were happy. And so it's completely, completely different. THE COURT: Well, I have no -- number one -- that sounds familiar, but I have to know, one: Are there any claims currently pending against Epstein, direct claims, brought by any of the alleged victims? MR. BREWER: I think not. No, your Honor. Mr. Goldberger knows better than I. But he's indicating not. THE COURT: Okay. And so, Mr. Goldberger, your understanding of the claims that are PALM BEACH REPoltT1NG SERVICE, INC. 561-471-2995 ..1,131,1N/PabrapaOlteportIng„com EFTA00617937 5 6 8 9 10 11 12 13 14 15 16 pending -- they're not pending against Mr. Epstein, but are brought against the prosecution in failing to do their due diligence and the like? Is that what it is? MR. GOLDBERGER: Exactly correct, your Honor. Under the CVRA -- it's called the Crimes Victims Reporting Act -- Mr. Edwards has sued the United States of America for failing to comply with that statute. Mr. Epstein is not a party to that and has no involvement in the case. THE COURT: And, to your knowledge, Mr. Epstein is no longer a defendant in any claim- brought by any alleged victims -- MR. GOLDBERGER: That is correct, your Honor. THE COURT: -- currently? All right. Mr. Scarola, do you want to address that 17 18 19 20 21 22 23 24 25 briefly so I can get a better handle on your ethical argument then? MR. SCAROLA: My recollection, and I am only going from recollection at this point, is that Mr. Epstein has intervened with regard to multiple issues that have been raised in the federal court action. Obviously, Mr. Epstein is trying to reserve the advantages of the non-prosecution agreement into which he entered. He has got a _ PAI1v. BEACH REPORTING SERVICE, INC. 5617471-25,5 pERS®PalmBeacbReportiarcop EFTA00617938 4 5 6 7 8 9 10 11 12 13 14 15 16 19 20 21 22 23 24 25 tremendous stake in the proceedings before the federal court because if the non-prosecution agreement is upheld, then he does not face federal felony criminal prosecution. If the non-prosecution agreement is struck down, he is facing prosecution by the federal government for multiple felony charges. THE COURT: Right. But what I'm trying to again pin down is whether Mr. Edwards maintains any bona fide active and present attorney-client relationships with any of the alleged victims in these -- what we'll call globally -- Epstein cases. MR. SCAROLA: Yes, sir. He represents the moving parties in the federal proceeding that are trying to strike down the non-prosecution agreement. So his clients are Epstein victims that he continues to represent. THE COURT: Okay. Fair enough. All right. MR. SCAROLA: And clearly -- I think your Honor is absolutely right. I want to know whether my lawyers cut a dollar deal with the guy that I'm asking him to continue to act against. How much? How much did he pay you? Can I still continue to place my confidence in you, or have you been bought off? To put it very bluntly. PALM BEACH REPORTING SERVICE, INC. 561-471-2995 PERS@PahnBepchltep9.riing.", EFTA00617939 3-1 THE COURT: I understand. And that was the 8 9 10 11 12 13 14 15 16 concern I had from the inception. MR. BREWER: Your Honor, if I might, Ms. Haddad told me that the, quote, Epstein cases were all resolved and dismissed prior to the time of the proposal for settlement. At least the state court actions. So we're being kind of -- hearing this at the last instance. And things that I don't know to represent to the Court, things that I don't know, such at what's going on in federal court, whether the state court cases were resolved by the time of this, but the one thing that I do want to say, your Honor, is if Mr. Epstein truly, truly was worried about conflict of interest or unethical behavior -- THE COURT: Mr. Edwards. MR. BREWER: Mr. Edwards. Excuse me. 17 18 19 20 21 22 23 24 25 If he truly was concerned about that, he could have withdrawn from representation or he could have just not sued Mr. Epstein because whether he gets money from a proposal of settlement or judgment, he's still getting money from Mr. Epstein. THE COURT: All right. I'm going to take a closer look at this and decide where you are. I think you're right; the ethical issue is somewhat new to the papers. To the process. PALM BEACH REPORTING SERVICE, INC. S61-471-2995 PBRS®PatmBeachReportingtom EFTA00617940 6 8 9 10 11 12 13 14 15 16 I have a blank order. Thank you. And I thank you both, all of you, for your presentations and input. MR. GOLDBERGER: Thank you, Judge. MR. BREWER: Your Honor, would you like briefs in regard to the ethical? Because we're hearing it just now for the first time today. THE COURT: I think it probably be would helpful, if you can get them to me in about a ten- day span. If you look at December 19th -- MR. SCAROLA: We would then like ten days in which to respond, your Honor. THE COURT: Well, I guess really you would be raising the issue in writing. MR. SCAROLA: We're responding to their 17 18 19 20 21 22 23 24 25 motion. There was no obligation for us to have laid out all of the details of our opposition that I'm aware of. This is their motion. THE COURT: Do you want to deal with the issue first then? Is that what you'd like to do? MR. BREWER: We're not a hundred percent sure exactly what the issue is, your Honor. I think it would probably be more logical for Mr. Scarola to first raise this issue and let us respond to it. MR. SCAROLA: I tried to lay it out in careful Pm..m.p !wiz REPORTING SERVICE, INC. 561-471-2995 pBRs@pahnseachateporting.com EFTA00617941 2 3 4 10 11 12 13 14 15 16 detail during my oral arguments. THE COURT: I think the oral arguments speak for themselves. I'm going to need a copy of the transcript as well; the cost of the Court's transcript to be shared by both parties. And then you can respond to what's been provided orally, and you can respond to that as well. MR. SCAROLA: Your Honor, ten days from when we get the transcript? THE COURT: That's fine. Yeah. There's not a lot going on around the mid or latter part of December anyway, so I should have time to review it and probably get some assistance from our staff attorneys as well. Thank you. Nice to see all. Let me also disclose something on the record 17 18 19 20 21 22 23 24 25 as well. Mr. Scarola is hosting a Catholic Lawyers Guild mass and reception at his home. I usually go to that event and have gone to it when it's hosted by various other people in the past as well. MR. SCAROLA: And the entire defense team is invited. THE COURT: Does anybody -- MS. HADDAD: I think I'm the only Catholic. THE COURT: You're inviting the mainstream PALM BEACH REPORTING SERVICE, INC. 561-47I-?99S PB 4S4WillagI lchR(5,9n4I&ccr. EFTA00617942 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Catholics? MR. SCAROLA: Yes, sir. There's always hope for -- MR. GOLDBERGER: No objection on that. And we'll reciprocate on the Hanukkah party. THE COURT: So, Mr. Goldberger, you're hosting the Hanukkah party, and Mr. Scarola, you have not objection to that? MR. SCAROLA: None at all. As long as I get an invitation also. THE COURT: Other than that, I know you all pretty equally and have a great deal of respect for all of you guys. Appreciate your efforts today. MR. BREWER: Thank you. MR. SCAROLA: Thank you, your Honor. THE REPORTER: Who's ordering the transcript? copy? MR. BREWER: I am. THE REPORTER: Mr. Scarola, would you like a MR. SCAROLA: Yes, please. THE REPORTER: Thank you very much. (Thereupon at 12:27 p.m., the hearing was concluded.) PALM BEACH REPORTING SERVICE, INC. 561-471-2995 PaRS@PalmBeactReporting.com EFTA00617943 38 CERTIFICATE THE STATE OF FLORIDA COUNTY OF PALM BEACH. 6 8 9 10 11 12 13 14 16 17 18 20 21 22 23 24 25 I, Elaine V. Williams, Registered Professional Reporter, State of Florida at Large, do hereby certify that I was authorized to and did report said hearing in stenotype; and that the foregoing pages are a true and correct transcription of my shorthand notes of said hearing. I further certify that I am not attorney or counsel of any of the parties, nor am I a relative or employee of any attorney or counsel of party connected with the action, nor am I financially interested in the action. The foregoing certification of this transcript does not apply to any reproduction of the same by any means unless under the direct control and/or direction of the certifying reporter. -TN WTTNESS- WHEREOFT-T-have-hereunto-set-my---------- nd thi-e-A-64Wa-day-e4-Deeember 2011 1.ert2, 44-1 /-,04)114;"1 • E ne V. Williams, RPR Notary Public - State of Florida My Commission Expires: 03/27/17 My Commission No.: EE 875797 pm.p4ipAcqREPORTING SERVICE, NC. 561-471.2995 PBRS®PalmBeachReporting.com EFTA00617944