Summary
noting factors the Court may consider when determining whether to waive the bond requirement
Summary of this case from Christensen v. Johnson & JohnsonOpinion
Civil No. 99-651 (RHK/JMM).
October 5, 2000
George L. May and Terence G. O'Brien, May Law Offices, Hastings, Minnesota, for Plaintiffs.
Rachel D. Cramer, United States Department of Justice, Washington, D.C., for Defendant.
ORDER
Before the Court is the Plaintiffs' Motion pursuant to Rule 62(d) of the Federal Rules of Civil Procedure for an Order staying enforcement of this Court's Judgment pending Plaintiffs' appeal to the United States Court of Appeals for the Eighth Circuit. On September 6, 2000, Plaintiffs Richard and Jane Peterson (hereinafter "the Petersons"), on behalf of themselves and the other shareholders of Peterson Turkey Hatchery, Inc. ("PTHI"), appealed from the Judgment and Order entered against them on August 8. 2000. The Petersons now ask that enforcement of the Judgment be stayed without the requirement of a supersedeas bond because, before commencing this action in 1999, they had paid $29,660.00 to the IRS as a good faith estimate of their tax liability as shareholders of PTHI. The Petersons contend that those funds, which the IRS still holds, are adequate security for the total judgment entered against them and the other shareholders of PTHI. The Government, in its responsive briefs notes that the total judgment against the Petersons and the other shareholders of PTHI is unlikely to be more than $100,000,00. (Mem. Opp'n to Pls.' Mot. to Stay Enforcement of J. at 3.)
Rule 62(d) of the Federal Rules of Civil Procedure provides that, where an appeal has been taken.
the appellant by giving a supersedeas bond may obtain a stay subject to the exceptions 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.
Fed.R.Civ.P. 62(d). Thus, the posting of a supersedeas bond results in a stay as a matter of right. See 12 Moore's Federal Practice § 62.03(2) at 62-11 (3d ed.). Although it appears from the language of Rule 62(d) that a supersedeas bond is a necessary step to obtaining a stay. several appellate and trial courts have adopted the view that the a district court has the discretion to waive the bond requirement and stay the enforcement of the judgment pending appeal without a bond. Hurley v. Atlantic City Police Dep't, 944 F. Supp. 371, 374 (D.N.J. 1996) (collecting cases).
The district court may consider the following factors in determining whether a supersedeas bond may be waived: (1) the complexity of the collection process; (2) the amount of time required to obtain a judgment on appeal; (3) the degree of confidence that the district court has in the availability of funds to pay the judgment; (4) whether the defendant's ability to pay the judgment is so plain that the cost of a bond would be a waste of money; and (5) whether the defendant is in such a precarious financial situation that the requirement to post a bond would place the other creditors of the defendant in an insecure position. See Dillon v. City of Chicago, 866 F.2d 902, 904-05 (7th Cir. 1988); see also In re Carlson, No. 98-2454, 2000 WL 1146609 at *2 (7th Cir. Aug. 15, 2000) (concluding that waiver is appropriate where "the appellant has a clearly demonstrated ability to satisfy the judgment in the event the appeal is unsuccessful and there is no other concern that the appellee's rights will be compromised by a failure adequately to secure the judgment."). The Petersons argue that the collection process is not particularly complex here because the IRS has "certain advantages not available to other creditors as well as sophisticated and multiple means for collecting judgments against taxpayers." (Mem. in Supp. of Pls.' Mot. to Stay Enforcement of J. at 4.) To inspire confidence in the Court that funds are available to pay the judgment, the Petersons also argue that their turkey hatchery has been in operation for over 25 years and that they have always met their financial obligations. (Id. at 3-4.)
The Court concludes that the Plaintiffs' showing is not sufficient to warrant waiver of the supersedeas bond requirement. It appears that the shareholders, not the corporation, owe the additional taxes that the Government is seeking. Therefore, the longevity and financial health of PTHI say little about the ability of the shareholders to pay the judgment should Plaintiffs lose the appeal. The Petersons have not shown that the amount they paid to the IRS as a good-faith estimate of their tax liability represents even a majority of the additional tax obligation in dispute. Finally, as for the complexities of the collection process, there is nothing in the record to suggest that the task of collecting a judgment from the shareholders of PTHI will necessarily be straightforward, let alone easy.
Based on the foregoing, and all of the files, records and proceedings herein, IT IS ORDERED that Plaintiffs' Motion to Stay Proceedings to Enforce Judgment (Doc. No. 38) is DENIED.