Lowery et al v. Rhapsody International, Inc.

Filing 290

ORDER GRANTING IN PART AND DENYING IN PART: 277 Motion to Stay Enforcement Of Attorney Fees Award For 90 Days, Without Bond. Signed by Judge Jeffrey S. White on January 28, 2022. (jswlc3, COURT STAFF) (Filed on 1/28/2022)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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United States District Court
Northern District of California

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DAVID LOWERY, et al.,
Plaintiffs,

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Case No. 16-cv-01135-JSW

v.
RHAPSODY INTERNATIONAL, INC.,
Defendant.

ORDER REGARDING RHAPSODY'S
EMERGENCY MOTION TO STAY
ENFORCEMENTS OF ATTORNEYS’
FEES AWARD WITHOUT BOND
Re: Dkt. No. 277

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Now before the Court for consideration is the motion by Defendant Rhapsody

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International, Inc. (“Defendant”) to stay enforcement of the Court’s judgment regarding attorneys’

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fees and costs award pending appeal without the need to post a bond. The Court has considered

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the parties’ papers, relevant legal authority, and the record in this case. The Court finds the

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motion suitable for disposition without oral argument. For the reasons set forth below, the Court

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HEREBY GRANTS IN PART AND DENIES IN PART Defendant’s motion.
BACKGROUND

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On January 4, 2022, this Court issued an order setting out an award of attorneys’ fees and
costs in the amount of $1,720,441.57.
On January 20, 2022, Defendant filed an emergency motion to stay enforcement of the

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attorneys’ fees award for 90 days without the posting of a bond. Defendant contends that it cannot

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afford to post a supersedeas bond in the amount of 125% of the award but within 60-90 days will

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be in a better financial position to do so.
The Court shall address other relevant facts in the remainder of this order.

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ANALYSIS

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A.

Applicable Legal Standard.
Federal Rule of Civil Procedure 62(d) requires that a party appealing a monetary judgment

obtain a supersedeas bond in order to obtain a stay on appeal. See Vacation Village, Inc. v. Clark

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Cty., 497 F.3d 902, 913 (9th Cir. 2007); see also Van v. Wal-Mart Stores, Inc., No. 08-cv-5296-

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PSG, 2015 WL 2345586, at *2 (N.D. Cal. May 14, 2015) (“The plain language of Rule 62(d)

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requires that a bond be posted to stay a judgment pending appeal . . . .”). This requirement is

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designed to protect appellees “from the risk of a later uncollectible judgment and compensate

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United States District Court
Northern District of California

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[them] for delay in the entry of the final judgment.” N.L.R.B. v. Westphal, 859 F.2d 818, 819 (9th

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Cir. 1988). In general, a bond under Rule 62(d) should be sufficient to pay the judgment plus

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interest, costs, and any other relief that the appellate court may award. See Cotton ex rel. McClure

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v. City of Eureka, 860 F. Supp. 2d 999, 1027-28 (N.D. Cal. 2012).

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District courts, however, have inherent authority in setting supersedeas bonds. Rachel v.

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Banana Republic, Inc., 831 F.3d 1503, 1505 n.1 (9th Cir. 1987). This discretion includes the

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authority to set the amount of the bond, to permit an alternative form of security, or to waive the

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bond requirement. See, e.g., Cotton, 860 F. Supp. 2d at 1027. To determine whether to waive

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Rule 62(d)’s bond requirement, courts apply the following factors:

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(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 creditors of
the defendant in an insecure position.

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Dillon v. City of Chicago, 866 F.2d 902, 904-05 (7th Cir. 1988) (internal citations and quotation

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marks omitted); see also Kranson v. Fed. Express Corp., No. 11-cv-05826-YGR, 2013 WL

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6872495, at *1 (N.D. Cal. Dec. 31, 2013) (“Courts in the Ninth Circuit regularly use the Dillon

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factors in determining whether to waive the bond requirement.”); United States v. Moyer, No. 072

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cv-0510-SBA, 2008 WL 3478063, at *12 (N.D. Cal. Aug. 12, 2008) (noting that “courts often

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consider what are known as the Dillon factors” and citing cases). Ultimately, the appellant has a

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burden to “‘objectively demonstrate’ the reasons for departing from the usual requirement of a full

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supersedeas bond.” Cotton, 860 F. Supp. 2d at 1028.

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B.

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The Court Declines to Waive Rule 62(d)’s Bond Requirement Entirely.
The Court finds that Defendant has failed to objectively demonstrate sufficient reasons to

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have the Court depart from Rule 62(d)’s bond requirement in its entirety. In its discretion, the

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Court instead finds that a reduced bond amount would be sufficient to ensure payment and fairness

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to both parties.

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Defendant’s own arguments in support of the motion work against the company for

United States District Court
Northern District of California

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purposes of the third and fourth Dillon factors. Defendant argues that the Court should waive

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Rule 62(d)’s bond requirement because requiring Defendant to secure a supersedeas bond as a

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condition of a stay would place an undue financial hardship on the company. This argument,

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almost by necessity, means that Defendant’s ability to pay the final judgment is not so plain as to

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make a bond a waste of money. It also directly undermines the Court’s confidence in Defendant’s

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ultimate ability to pay the judgment.

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Defendant nonetheless argues that the Court should waive Rule 62(d)’s bond requirement

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precisely because of the financial hardship such a requirement would place on the company. The

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Court is not entirely persuaded. The very purpose of the bond requirement is to protect the

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appellee’s ability to eventually collect on the judgment. See Westphal, 859 F.2d at 819. Given

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that Defendant asserts that the judgment in this case presents an extreme financial burden, the

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Court believes a bond is necessary to protect Plaintiff’s interest in eventual collection of the

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judgment. See, e.g., Inhale, Inc. v. Starbuzz Tobacco, Inc., No. 11-cv-3838-ODW, 2013 WL

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361109, at *2 (C.D. Cal. Jan. 30, 2013) (“The fact that Inhale ‘does not have sufficient liquid

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assets’ to cover the award of attorneys’ fees and costs is precisely why it must post a supersedeas

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bond.”); Sarver v. The Hurt Locker LLC, No. 10-cv-09034-JHN, 2012 WL 12892147, at *3 (C.D.

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Cal. Feb. 2, 2012) (“The Court is sympathetic to the financial hardship to Plaintiff. However, the

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Court cannot place Defendants’ statutory right to recovery at risk solely on the basis of Plaintiff’s
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ability to pay.”); Lewis v. United Joint Venture, No. 07-cv-639, 2009 WL 1654600, at *1 (W.D.

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Mich. June 10, 2009) (“UJV’s alleged illiquidity strengthens, not weakens, the need for an

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appropriate bond.”).
The Court acknowledges that there may be cases in which requiring an appellant to post a

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supersedeas bond as a condition of a stay may pose such an undue financial burden. See, e.g.,

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Townsend v. Holman Consulting Corp., 881 F.2d 788, 796-97 (9th Cir. 1989), vacated on reh’g on

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other grounds in 929 F.2d 1357 (9th Cir. 1990) (“[T]he most common justification for allowing

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alternatives to a supersedeas bond is the financial hardship that the bond may impose on

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appellants . . . .”); see also Poplar Grove Planting & Refining Co., Inc. v. Bache Halsey Stuart,
Inc., 600 F.2d 1189, 1189 (5th Cir. 1979) (“[I]f the judgment debtor’s present financial condition

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United States District Court
Northern District of California

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is such that the posting of a full bond would impose an undue financial burden, the court similarly

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is free to exercise a discretion to fashion some other arrangement . . . which would furnish equal

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protection to the judgment creditor.”). Defendant, however, has not demonstrated that requiring

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the company to secure a supersedeas bond of a lesser amount would constitute such an undue

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burden.
Accordingly, the Court finds that Defendant has not met their burden of demonstrating a

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reason to deviate from Rule 62(d)’s bond requirement in its entirety.

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C.

The Amount of the Bond.

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Traditionally, courts have required that appellants supply a supersedeas bond in the amount

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of 1.25 and 1.5 times the judgment. See Cotton, 860 F. Supp. 2d at 1029. The Court finds there is

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no reason to require a bond at the high end of the range, and given Defendant’s representations

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about its current financial situation, the Court, in its discretion, sets the amount of the bond at half

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of the amount owed. Accordingly, the Court will require Defendant to submit a supersedeas bond

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in the amount of $860,220.00 which is .5 times the amount of the judgment in the amount of

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$1,720,441.57.

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CONCLUSION

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For the foregoing reasons, Defendant’s motion to stay enforcement of the judgment,

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without bond, pending appeal is GRANTED IN PART and DENIED IN PART. If Defendant
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wishes to stay enforcement of the monetary judgment in this action pending appeal, they shall post

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a supersedeas bond in the amount of $860,220.00 by Thursday, February 3, 2022.

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IT IS SO ORDERED.
Dated: January 28, 2022
______________________________________
JEFFREY S. WHITE
United States District Judge

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United States District Court
Northern District of California

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