Dawe v. Corrections USA et al

Filing 610

ORDER signed by Judge Lawrence K. Karlton on 8/31/2011 ORDERING that Dft's 603 Motion to Post Alternative Security is GRANTED with conditions. In addition to the four recorded deeds of trust already submitted to the Clerk, dfts SHALL deposit s ecurity in the amount of $500,000 within 14 days. Dfts SHALL make quarterly deposits in the amount of $500,000 as security with the Clerk, until the amount of cash deposited reaches 125% of the total judgment. Once the amount of cash deposited with the Clerk is equal to 125% of the total judgment, dfts may request for the deeds of trust for the four pieces of real property to be returned to CCPOA. The stay of execution is continued until further of this court. (Zignago, K.)

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UNITED STATES DISTRICT COURT

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FOR THE EASTERN DISTRICT OF CALIFORNIA

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BRIAN DAWE; FLAT IRON
MOUNTAIN ASSOCIATES, LLC,
formerly known as FLAT
IRON MOUNTAIN ASSOCIATES,
a Partnership,

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NO. CIV. S-07-1790 LKK/EFB
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Plaintiffs,
v.
O R D E R

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CORRECTIONS USA, a California
Corporation; CALIFORNIA
CORRECTIONAL PEACE OFFICERS'
ASSOCIATION, a California
Corporation; JAMES BAIARDI,
an individual; DONALD JOSEPH
BAUMANN, an individual,
Defendants.
/

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AND CONSOLIDATED ACTIONS &
RELATED COUNTERCLAIMS
/

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Defendants Corrections USA, CCPOA, Biardi, and Baumann move

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to allow posting of alternative security for a $4.9 million

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judgment awarded to plaintiffs. Defendants seek to submit as

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security four pieces of real property with an aggregate value as

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determined by their appraiser of $6,202,500. For the reasons stated
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herein, defendants’ motion is granted in part, but subject to

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further conditions.
I. Background

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On April 25, 2011, this court entered an order modifying a

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jury verdict for plaintiffs, ECF No. 574. Pursuant to that order,

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the total amended judgment in this matter is $4,959,815. Of this

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amount, $4,574,815 is against CCPOA, $328,001 is against CUSA,

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$25,001 is against Baumann, and $32,001 is against Bairdi. Although

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this judgment is apportioned among the defendants, CCPOA seeks to

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post security for the entirety of the judgment. Def.s’ Mot. 2, ECF

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No. 603. On May 18, 2011, defendants filed a notice of appeal. ECF

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No. 579.

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Pursuant to stipulations approved by this court, execution of
judgment is currently stayed.
II. Standard
Fed. R. Civ. P. 65(d) permits an appellant to obtain a stay

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of enforcement of judgment by posting a superseas bond. Local

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Rule 151(d) states “when required, a supersedeas bond shall be

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125 percent of the amount of the judgment unless the Court

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orders otherwise.” District courts have inherent discretionary

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authority in setting supersedeas bonds. Rachel v. Banana

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Republic, Inc., 831 F.2d 1503, 1505 (9th Cir. 1987). The purpose

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of the bond is to protect the appellees from the risk of a later

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uncollected judgment, and to compensate appellees for any loss

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resulting from the stay of execution. Id.; See also United

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States v. Uptergrove, 2008 U.S. Dist. LEXIS 101944 (E.D. Cal.
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2008).
III. Analysis
Although Fed. R. Civ. P. 62 provides for the posting of a

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supersedeas bond, district courts have discretion to “allow

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other forms of judgment guarantee.” International Telemeter,

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Corp. v. Hamlin International Corp., 754 F.2d 1492, 1495 (9th

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Cir. 1985). The burden is on the moving party to objectively

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demonstrate reasons for a departure from Rule 65(d)’s

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supersedeas bond requirement, Bemo USA Corp. v. Jake's Crane,

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Rigging & Transp. Int'l Inc., 2010 U.S. Dist. LEXIS 122688 (D.

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Nev. 2010), and a departure should only be granted if the

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superseades bond requirement “would irreparably harm the

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judgment debtor and, at the same time, such a stay [without

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bond] would not unduly endanger the judgment creditor's interest

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in ultimate recovery,” Cayuga Indian Nation of N.Y. v. Pataki,

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188 F. Supp. 2d 223, 254 (N.D. N.Y. 2002). See also Bolt v.

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Merrimack Pharms. Inc., 2005 U.S. Dist. LEXIS 46591 (E.D. Cal.

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2005) (“the burden is on the appellant to demonstrate the

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reasons for departing from the usual requirement of a full

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security supersedeas bond.” (Internal citations omitted.)

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Plaintiffs assert that “the Eastern District appears to

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recognize only two instances where the exercise of [the court’s

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authority to waive bond is warranted.” Pls.’ Opp’n. 6. Those two

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instances, according to plaintiffs, are (1) where the

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defendant’s ability to pay is so plain that the cost of the bond

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would be a waste of money, and (2) where the requirement is
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impracticable because it would force appellant into bankruptcy

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or paralyze the business. Pls.’ Opp’n (quoting Bolt v. Merrimack

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Pharms. Inc., 2005 U.S. Dist. LEXIS 46591 (E.D. Cal. 2005).

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Although those are certainly instances in which a court is

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likely to waive the bond requirement, Local Rule 151(d) grants

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the court wide equitable discretion to depart from the normal

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bond requirement. In fact, in Bolt, Judge Shubb indicated that

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he would allow a form of surety other than a bond in the full

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amount of the judgment, even though the defendants did not meet

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the criteria set forth above. Id. at *12 (“Defendant is thus not

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entitled to a stay without posting supersedeas bond. In the

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event that defendant does follow through with its pledge to file

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such a bond to stay execution of judgment, the bond must be in

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the full amount of the judgment, as described below, unless

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defendant proposes some other form of surety acceptable to the

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court.”(emphasis added)).

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A. Whether requiring a superseades bond would cause

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harm or undue burden on defendants

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irreparable

In this case, defendants claim that posting a superseades

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bond would not only impose an undue burden on CCPOA, but also

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that it is “essentially impossible” for CCPOA to do. To support

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this assertion, defendants submit the declaration of CCPOA’s

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chief operations officer and general counsel David Sanders. Mr.

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Sanders’ reply declaration names five surety companies from whom

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he attempted to get a bond. All of them required liquid

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collateral of 100% of the amount of the bond, which CCPOA does
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not have. Sanders Reply Decl., ECF No. 608-1.
Although defendants have not stated the amount of bond that

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they could obtain, given CCPOA’s current liquid assets,

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defendants stated in their papers and at hearing that CCPOA is

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currently setting money aside, which they plan to use to pay the

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judgment if their appeal is ultimately unsuccessful. Defendants

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stated at the hearing that there is $500,000 currently set

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aside, and that CCPOA intends to add $500,000 per quarter to

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this account.

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The court finds that defendants have demonstrated that

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requiring a superseadas bond in the amount of 125% of the

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judgment would impose an undue hardship on defendants because

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that requirement would deprive defendants of the ability to

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appeal their case.

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B. Whether waiver of the bond requirement would unduly endanger

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plaintiff’s interest in ultimate recovery

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If departure from the usual bond requirement is warranted

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because of undue hardship to plaintiffs, any alternative

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security should “furnish equal protection to the judgment

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creditor.” Poplar Grove Planting & Refining Co. v. Bache Halsey

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Stuart, Inc., 600 F.2d 1189, 1191 (5th Cir. La. 1979).

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Plaintiff argues that the four properties offered by

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defendant do not furnish protection equal to that of a bond,

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since the value of the properties is tied to a “volatile” real

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estate market. In the case of the most valuable property, which

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functions as CCPOA’s headquarters, plaintiffs argue that, if it
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became necessary to execute on the security, plaintiffs would

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only be able to extract value from the building by renting it to

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defendants, especially in light of the monument to California

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Peace Officers affixed to the property. Pls.’ Opp’n 8.

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Plaintiffs’ argument, in essence, is “if the property is not

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good enough security for the bonding companies, why is it good

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enough for us?”

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The court concludes that the real property offered by
defendants, without more, do not provide adequate security to

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plaintiffs. In order to provide adequate security to plaintiffs,

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the court will require defendants to augment the property with

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cash deposits.

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IV. Conclusion

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For the forgoing reasons, the court ORDERS as follows:

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[1] Defendant’s motion to post alternative security,

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ECF No. 603, is GRANTED with conditions.

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[2] In addition to the four recorded deeds of trust

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already submitted to the Clerk of court, defendants

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SHALL deposit security in the amount of $500,000

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within fourteen (14) days of the issuance of this

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order, pursuant to the procedures set forth in Local

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Rule 151.

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[3] Defendants SHALL make quarterly deposits in the

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amount of $500,000 as security with the Clerk, until

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the amount of cash deposited reaches 125% of the total

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judgment.
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[4] Once the amount of cash deposited with the Clerk

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is equal to 125% of the total judgment, defendants may

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request for the deeds of trust for the four pieces of

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real property to be returned to CCPOA.

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[5] The stay of execution is continued until further

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of this court.

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IT IS SO ORDERED.

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DATED:

August 31, 2011.

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