Opinion
94 Civ. 5693 (FM)
February 14, 2003
ORDER
Shortly after I issued my January 31, 2003 Opinion and Order, Conair made an "emergency" letter-application to dispense with the requirement of a supersedeas bond as a condition for granting a stay on execution against the judgment pending a final disposition of its appeal. Conair also requested that Gaus be required to post security for the expense that Conair will incur to obtain a bond. Gaus opposes both applications but has expressed his willingness to accept an irrevocable letter of credit in lieu of a bond. The Court heard oral argument from the parties during a telephone conference on February 10, 2003. Following that conference, both parties have also made further written submissions.
Rule 62(d) of the Federal Rules of Civil Procedure provides that:
When an appeal is taken the appellant by giving a supersedeas bond may obtain a stay subject to the expectations contained in subdivision (a) of this rule. The bond may be given at or after the time of filing the notice of appeal or of procuring the order allowing the appeal, as the case may be. The stay is effective when the supersedeas bond is approved by the court.
To determine whether to grant a stay of judgment under this Rule, "a court must consider (1) whether the petitioner is likely to prevail on the merits of his appeal, (2) whether, without a stay, the petitioner will be irreparably injured, (3) whether issuance of a stay will substantially harm other parties interested in the proceedings, and (4) wherein lies the public interest." Morgan Guar. Trust Co. v. Republic of Palau, 702 F. Supp. 60, 65 (S.D.N.Y. 1988), vacated on other grounds, 924 F.2d 1237 (2d Cir. 1991). The weight accorded to each of these factors should be "flexible" to ensure a just result "according to the unique circumstances of each case." Id. Moreover, notwithstanding the language of the Rule, a district court in an appropriate case may waive the posting of a supersedeas bond, require only a partial bond, or reach some other workable solution. See Texaco v. Pennzoil Co., 784 F.2d 1133, 1154-55 (2d Cir. 1986), rev'd on other grounds, 481 U.S. 1, 107 S.Ct. 1519, 95 L.Ed.2d 1 (1987).
The supersedeas bond ordinarily required under Rule 62(d) protects an appellee from the risks associated with delaying the enforcement of the judgment during the pendency of an appeal. Accordingly, a party seeking a stay without a bond has the burden of setting forth specific reasons why the court should "depart from the usual requirement of a full security supersedeas bond to suspend the operation of an unconditional money judgment." Teachers Ins. and Annuity Ass'n of America v. Ormesa Geothermal, 1991 WL 254573, at *3 (S.D.N.Y. Nov. 21, 1991) (quoting Poplar Grove Planting Refining Co., Inc. v. Bache Halsey Stuart, Inc., 600 F.2d 1189, 1191 (5th Cir. 1979)). The bond requirement should be eliminated or reduced only when this would "not unduly endanger the judgment creditor's interest in ultimate recovery," Morgan Guar., 702 F. Supp. at 65.
In this case, Conair argues that its financial strength is so great that a supersedeas bond is "unnecessary." (See Feb. 6, 2003 letter from Albert L. Jacobs, Jr., to the Court at 1). Conair also notes that the cost of a bond "could well approach $1 million." (Id. at 2). "A district court may, in its discretion, grant a stay without requiring the posting of a bond if the appellant provides an acceptable alternative means of securing the judgment." F.D.I.C. v. Ann-High Associates, 1997 WL 1877195, at *1 (2d Cir. 1997). As discussed during the telephone conference, one such alternative would be the posting of an irrevocable letter of credit. Although Gaus suggests that such a letter of credit might not entail any cost, Conair indicates that the expense could in fact be "as much as $400,000." (See Feb. 12, 2003 letter from M r. Jacobs, to the Court at 1).
Upon consideration of the relevant factors, I have decided to stay enforcement of the judgment for a period of ten days, during which time Conair may post either a supersedeas bond or an irrevocable letter of credit in the amount of $28,500,000. If such security is furnished, the Court will thereafter enter a stay pursuant to Rule 62(d), provided that Conair furnishes Gaus's counsel on a confidential basis with copies of (1) its Form 10Ks within ten days after they are issued; (2) its audited yearly financial statements within ten days after they are finalized; and (3) the monthly unaudited financial statements and quarterly unaudited financial statements and certifications that Conair provides to its banks on the same day that that they are sent to the banks. If this documentation (or information received from any other source) suggests that there has been a material adverse change in Conair's financial condition, Gaus may apply to the Court at any time for additional security.
Finally, Gaus is directed to settle a judgment on notice within one week, with said judgment to be dated as of February 14, 2003.
SO ORDERED.