AIRFX.com et al v. AirFX LLC

Filing 132

ORDER denying 123 Motion to Stay of execution on attorneys' fees pending appeal. See order for details. Signed by Senior Judge Frederick J Martone on 6/6/13.(SJF)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE DISTRICT OF ARIZONA

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Plaintiffs,
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vs.
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AirFX, LLC,
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Defendant/Counterclaimant, )
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vs.
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AirFX.com and Marc Lurie,
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Counterdefendants.
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AirFX.com and Marc Lurie,

No. CV 11-01064-PHX-FJM
ORDER

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The court has before it defendant’s motion for stay of execution on attorneys' fees

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pending appeal (doc. 123), plaintiffs’ response (doc. 125), and defendant's reply (doc. 126).

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Defendant moves for a stay pursuant to Rule 62(d), Fed. R. Civ. P ., which provides

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for an automatic stay once an appellant posts a supersedeas bond. However, defendant has

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not posted a supersedeas bond, and instead seeks a waiver of the bond or in the alternative,

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an order reducing the amount of the bond required to stay the execution of the attorneys’ fees

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judgment. Defendant contends that the following four equitable factors justify its request

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that the supersedeas bond requirement be either waived or reduced: “(1) whether the

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petitioner is likely to prevail on the merits of the appeal; (2) whether, without the stay, the

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petitioner will be irreparably injured; (3) whether issuance of the stay will substantially harm

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other parties interested in the proceeding; and (4) wherein lies the public interest.” Motion

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at 4. Plaintiffs argue that these factors apply only to appeals pending from injunctive relief

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under Rule 62(c), Fed. R. Civ. P. Defendant counters that other district courts have applied

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the four equitable factors in circumstances similar to the ones here. In Hilton v. Braunskill,

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481 U.S. 770, 107 S. Ct. 2113 (1987), the Court noted that equitable factors govern the

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district court’s power to stay an order under Rule 62(c), not Rule 62(d). Id. at 776, 107 S.

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Ct. at 2119. Under Rule 62(c) we have discretion to “suspend, modify, restore, or grant an

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injunction during the pendency of the appeal.” Fed. R. Civ. P. 62(c). But here, a money

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judgment is involved, and thus Rule 62(d), not Rule 62(c) applies.

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Pursuant to Rule 62(d), Fed. R. Civ. P, an appellant may obtain an automatic stay by

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posting a supersedeas bond. The posting of a bond is itself “a privilege extended to the

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judgment debtor as a price of interdicting the validity of an order to pay money.” Biltmore

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Associates, L.L.C., as Trustee v. Twin City Fire Ins. Co., CV-05-04220-PHX-FJM, 2007 WL

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2422053, *1 (D. Ariz. 2007) (citation omitted). Accordingly, to depart from “the usual

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requirement of a full security supersedeas bond” the moving party must “objectively

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demonstrate the reasons for such a departure.” Id. We consider several grounds for waiving

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the bond requirement: “(1) the complexity of the collection process; (2) the amount of time

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required to [collect] a judgment after it is affirmed on appeal; (3) the degree of confidence

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that the district court has in the availability of funds to pay the judgment; (4) whether the

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defendant’s ability to pay the judgment is so plain that the cost of a bond would be a waste

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of money; and (5) whether the defendant is in such a precarious financial position that the

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requirement to post a bond would place other creditors of the defendant in an insecure

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position.” Id. We may also substitute another form of adequate security for the supersedeas

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bond. See Townsend v. Holman Consulting Corp., 929 F.2d 1358, 1367 (9th Cir. 1991).

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Defendant has failed to show that any relevant factor favors a waiver of the bond.

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Plaintiffs argue that the collections process will be difficult and complex because defendant

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is a foreign entity with no known assets in Arizona. Defendant does not argue otherwise.

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Therefore this factor weighs against defendant. Moreover, defendant concedes that even if

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it dismantled its operations, sold its assets, and laid off employees, it may not have the full

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funds available to pay the judgment. See Doc. 122-1 ¶ 11. Thus, the third and fourth factors

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weigh against waiving the supersedeas bond requirement. Finally, defendant argues that it

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will suffer great financial hardship if it is required to post a supersedeas bond. However,

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defendant has not offered specific evidence demonstrating that it is in such a precarious

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financial position that the bond requirement would place it or its creditors in an insecure

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position. Because defendant has not articulated sufficient grounds to stay execution pending

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appeal without posting the supersedeas bond, we decline to waive the bond requirement.

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Alternatively, defendant requests that we consider its “flagship Hayabusa” motorcycle

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as sufficient security to protect the judgment creditor's interest. Mr. Schwindt’s affidavit

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states that the motorcycle has a current market value of approximately $30,000. See Doc.

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122-1 ¶ 6. The stated value of the motorcycle does not cover the $103,972.50 judgment in

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this case. Moreover, we have no way of knowing whether the value of the motorcycle will

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be the same at the end of the appeal. Defendant has also offered to enter an agreement that

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it will not sell or mortgage any of its assets while the appeal is pending. Mr. Schwindt

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affirms that none of defendant’s assets are currently mortgaged, and that no creditors stand

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ahead of plaintiffs in securing an interest in the company’s assets. See Doc. 126-1 ¶¶ 14-15.

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However, the record contains no evidence which allows us to determine the value of

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defendant’s assets. We decline to permit defendant to post security of uncertain value in

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place of a full supersedeas bond.

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THEREFORE, IT IS ORDERED DENYING defendant’s motion for stay of
execution on attorneys' fees pending appeal (doc. 123).

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DATED this 6th day of June, 2013.

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