Yenidunya Investments v. Magnum Seeds, et al

Filing 58

ORDER signed by Judge William B. Shubb on 3/30/2012 DENYING 47 Plaintiff's MOTION to Stay Execution of Judgment Pending Appeal. (Kirksey Smith, K)

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UNITED STATES DISTRICT COURT

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EASTERN DISTRICT OF CALIFORNIA

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----oo0oo----

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YENIDUNYA INVESTMENTS, LTD., a
Cyprus, EU Corporation;

NO. CIV. 2:11-1787 WBS CKD

Plaintiff,

MEMORANDUM AND ORDER RE:
MOTION TO STAY EXECUTION OF
JUDGMENT PENDING APPEAL

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v.
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MAGNUM SEEDS, INC., a
California Corporation; and
GENICA RESEARCH CORPORATION, a
Nevada Corporation;

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Defendants.

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/
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----oo0oo---Plaintiff Yenidunya Investments, Ltd. brought this

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action against defendants Magnum Seeds, Inc. (“Magnum”) and

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Genica Research Corporation (“Genica”) for declaratory relief and

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accounting arising out of defendants’ allegedly wrongful

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violation of plaintiff’s rights as a Magnum shareholder.

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granting defendants’ motion to dismiss, the court awarded

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defendants $125,324.75 in attorneys’ fees and $1,002.21 in

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untaxed costs.

(Docket No. 44)

After

Presently before the court is
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plaintiff’s motion to stay execution of the judgment pending

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appeal.

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I.

(Docket No. 47.)

Factual and Procedural Background

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In October 2003, Spiros Spirou & Co. (“SS & Co.”)

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obtained common stock in Magnum by converting a $2,267,995.00

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loan into 2,267,995 shares of Magnum.

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1).)

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outstanding shares of Magnum from the existing shareholders.

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(Id. ¶ 13.)

(Compl. ¶ 7 (Docket No.

In March 2005, Genica offered to purchase all of the

Plaintiff declined to sell its shares, however

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defendants exercised a call-option to purchase plaintiff’s shares

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for $1,133,997.50 to be paid over a ten-year period.

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Magnum no longer recognizes plaintiff as a shareholder.

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¶ 10.)

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(Id.)
(Id.

In order to show its good faith intention to pay

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plaintiff for the sale of its shares, defendants have created a

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special bank account (“Special Account”) into which they have

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deposited payments due to plaintiff under the stock sale.

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(Anastassiou Decl. Ex. A (Docket No. 47-2).)

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notified plaintiff that it

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Defendant has

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will hold the funds in this account until such time as
Yenidunya provides us with the following documents (the
“Required Documentation”):

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(i) the stock certificate,

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(ii) the executed Stock Assignment and Release, and

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(iii) satisfactory proof that Yenidunya is entitled to the
payment, i.e. that the right to the payment has not been
pledged or sold to someone else.

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(Id. at 2.)

Defendant has further informed plaintiff that:

It is our intent to continue to hold money in this
separate account until such time as Yenidunya provides us
with the Required Documentation. Upon receipt, we will
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immediately deliver the Promissory Note and all of the
funds in the special account to the proper party.
Notwithstanding the foregoing, however, we reserve the
right to terminate this account if we determine, in our
sole judgment, that our purpose in setting it up has
failed.

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(Id.)

Plaintiff has not yet provided defendants with the

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Required Documentation.

(Defs.’ Opp’n to Pl.’s Mot. to Stay

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Execution on J. at 2:25-26 (Docket No. 51).)
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On July 6, 2011, plaintiff filed for declaratory relief
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seeking to be recognized as a Magnum shareholder.

Defendants

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moved to dismiss plaintiff’s complaint on the ground that it was
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barred by the statute of limitations.

(Docket No. 12.)

The

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court granted defendant’s motion, finding that the statute of
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limitations had run because “the gravamen of [plaintiff’s]
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Complaint is that the Promissory Note was never a valid
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contract.”

(Oct. 31, 2011, Order at 9:7-9 (Docket No. 23).)

The

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court also denied plaintiff’s motion for reconsideration.

(Dec.

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7, 2011, Order at 7:10-12 (Docket No. 29).)

Defendants moved for

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attorneys’ fees and the court awarded defendants $125,324.75 in
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attorneys’ fees and $1,002.21 in untaxed costs.

(Docket No. 44.)

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Plaintiff filed notices of appeal as to the court’s orders
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granting defendants’ motion to dismiss, (Docket No. 34), denying
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plaintiff’s motion for reconsideration, (id.), and awarding
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attorneys’ fees to defendants, (Docket No. 45).
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II.

Legal Standard

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With a few specified exceptions, Federal Rule of Civil
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Procedure 62(a) provides for an automatic stay of fourteen days
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following entry of a judgment.

Fed. R. Civ. P. 62(a).

A party

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appealing a district court’s entry of a money judgment is
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entitled to a further stay as a matter of right if he posts a

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bond in accordance with Federal Rule of Civil Procedure 62(d).

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Antoninetti v. Chipotle Mexican Grill, Inc., No. 05-1660, 2009 WL

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1390811, at *2 (S.D. Cal. May 15, 2009) (citing Am. Mfrs. Mut.

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Ins. Co. v. Am. Broad.-Paramount Theatres, Inc., 87 S. Ct. 1, 3

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(1966) (mem.)).

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through a supersedeas bond, an unsecured stay is reserved for

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“unusual circumstances” and awarded at the court’s discretion.

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Fed. Prescription Serv., Inc. v. Am. Pharm. Ass’n, 636 F.2d 755,

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While parties have the right to a stay obtained

760-61 (D.C. Cir. 1980).
Where a party wishes to post a bond in an amount less

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than the full judgment, the burden is on the moving party to show

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reasons for the departure from the normal Rule 62(d) requirement.

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See Poplar Grove Planting & Ref. Co. v. Bache Halsey Stuart,

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

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that may justify waiver of the bond requirement are:

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Among the grounds

(1) the complexity of the collection process;
(2) the amount of time required to obtain a judgment
after it is affirmed 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 other creditors of the defendant in an
insecure position.

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United States v. Simmons, No. 96-5948, 2002 WL 1477460, at *1

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(E.D. Cal. May 14, 2002) (citing Dillon v. City of Chicago, 866

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F.2d 902, 904-05 (7th Cir. 1988)); see also Miami Int’l Realty

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Co. v. Paynter, 807 F.2d 871, 873 (10th Cir. 1986) (looking

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instead at whether (1) “there is a showing that the prevailing
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party’s judgment will not be jeopardized” or (2) “a [full] bond

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is impracticable [and other] adequate security is provided”);

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Antoninetti, 2009 WL 1390811, at *2.

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“Courts addressing a motion for an unsecured stay under

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Rule 62(d) have expressed a willingness to grant such requests

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when: (1) ‘defendant's ability to pay is so plain that the cost

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of the bond would be a waste of money’ or (2) ‘the requirement

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would put the defendant’s other creditors in undue jeopardy’ (in

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other words, the requirement is impracticable because it would,

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for example, force appellant into bankruptcy or paralyze the

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business).”

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2005 WL 2298423, at *3 (E.D. Cal. Sept. 20, 2005) (citing cases).

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Even if the moving party persuades the court that a full bond is

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unnecessary, the court typically requires a substitute form of

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judgment guarantee.

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F.2d 794, 796 (7th Cir. 1986).

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entertain a form of security other than a supersedeas bond.

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e.g., Trans World Airlines v. Hughes, 515 F.2d 173, 175-76 (2d

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Cir. 1975) (allowing defendant, in a case awarding plaintiff over

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$145 million, to post a partial bond of $75 million and provide

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regular evidence of net worth greater than three times the

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balance owed -- an arrangement that freed defendant to pursue

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other business opportunities pending appeal).

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III. Discussion

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Bolt v. Merrimack Pharm., Inc., No. CIV. S-04-0893,

See Olympia Equip. v. W. Union Tel. Co., 786
The court, in its discretion, may
See,

Plaintiff requests that the court stay execution on the

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judgment for attorneys’ fees without requiring it to file a

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supersedeas bond pending its appeal of the court’s orders

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granting the motion to dismiss and awarding attorneys’ fees.
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Plaintiff argues that the posting of a bond is not necessary

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because the Special Account that defendant holds on plaintiff’s

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behalf provides an adequate financial assurance of recovery for

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defendants.

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suggesting that it is unable to post a supersedeas bond, nor has

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it shown an ability to pay the attorneys’ fee award without

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reliance on the assets in the Special Account.

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demonstrate that plaintiff’s ability to pay is so plain that the

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cost of a bond would be a waste of money, the court must

Plaintiff has presented no financial information

In order to

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therefore have confidence that the Special Account functions as

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an acceptable alternative to a supersedeas bond.

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the burden of proof to show that defendants’ access to the

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Special Account will adequately compensate it for the attorneys’

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fees that it has been awarded.

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at *2.

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Plaintiff bears

See Antoninetti, 2009 WL 1390811,

The Special Account was created by defendants to

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demonstrate their “good faith” attempts to pay plaintiff for its

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shares.

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of the funds in the account, however, until plaintiff provides

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the Required Documentation.

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plaintiff has yet provided the Required Documentation, nor does

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the court’s order granting the motion to dismiss on statute of

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limitation grounds require that plaintiff provide the Required

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Documentation.

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appeal, it will have a financial interest in submitting the

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Required Documentation in order to collect the funds that

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defendants have set aside for the purpose of purchasing

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plaintiff’s shares.

(Anastassiou Decl. Ex. A.)

Defendants retains ownership

The court does not know that

The court recognizes that, if plaintiff loses on

The parties’ prior behavior, however,
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greatly diminishes the court’s confidence that the parties will

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quickly and efficiently resolve their differences following the

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outcome of the appeal.

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For instance, plaintiff waited for six years after

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Magnum stopped treating it as a shareholder before bringing

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litigation contesting Magnum’s forced buy-out of its shares.

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(Compl. ¶ 10.)

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illustrates a complete inability to reach resolution on even the

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smallest issues.

The correspondence between the parties

(See Anastassiou Decl. Exs. B-E (Docket No. 47-

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2).)

The briefing on motions in this case has frequently

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contained argumentation that is irrelevant to the issues at hand

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and suggests that future interactions between the parties may be

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similarly complex and inefficient.

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suggested that it may file an additional lawsuit in this case.

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(Macaulay Decl. Ex. 2 (Docket No. 51-3).)

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the court granting the parties additional time to reach a

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stipulation on this issue, the parties have been unable to agree

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on their post-appeal obligations.

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Plaintiff has recently

And finally, despite

If plaintiff loses its appeal, the court is not

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confident that plaintiff will submit the Required Documentation

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in a timely manner and without further litigation.

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defendants without an adequate assurance that they will be able

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to easily collect their attorneys’ fees.

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its burden to show that the Special Account is an adequate

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substitute for a supersedeas bond.

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failed to provide an adequate reason for why it is unable to post

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a bond.

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a supersedeas bond.

This leaves

Plaintiff has not met

Furthermore, plaintiff has

Plaintiff is thus not entitled to a stay without posting
In the event that plaintiff files such a
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bond to stay execution of the judgment, the bond must be in the

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full amount of the judgment.

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IT IS THEREFORE ORDERED that plaintiff’s motion to stay

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execution of judgment pending appeal be, and the same hereby is,

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DENIED.

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DATED:

March 30, 2012

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