Hohenberg v. Ferrero USA, Inc

Filing 142

RESPONSE in Opposition re 140 MOTION for Order Imposing Appeal Bond filed by Courtney Drey, Andrea Pridham. (Pridham, Grenville) (ag).

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Grenville Pridham
2522 Chambers Road, Suite 100
Tustin, CA 92780
[phone]
[e-mail]
Counsel for Objectors Drey and Pridham

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UNITED STATES DISTRICT COURT

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FOR THE SOUTHERN DISTRICT OF CALIFORNIA

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IN RE:
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FERRERO LITIGATION

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Case No. 3:11-cv-00205-H-KSC
Pleading Type: Class Action
Objectors’ Opposition to Plaintiffs’ Motion
for Appeal Bond

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TABLE OF CONTENTS

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TABLE OF CONTENTS.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 1

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TABLE OF AUTHORITIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 2

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1.

Even Assuming the Drey-pridham Appeal Is Frivolous, Which it Is Not, the Ninth Circuit Has
Stated it Is Not the District Court’s Role to Attempt to Make Such a Prediction. Movants
“Frivolousness” Argument Is, Ironically, Frivolous.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 4

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2.

Movants Request an Unconstitutionally Punitive Bond.. . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 6

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3.

A Rule 7 Appeal Bond May Not Include Costs of Delay. . . . . . . . . . . . . . . . . . . . . . . . . . . Page 8

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4.

Appeal Bonds Create Needless Obstacles for Objectors in Violation the Supreme Court’s
Reasoning in Devlin V. Scardelletti. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 8

5.
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There Is No Evidence on Ability to Pay; Both Objectors Reside in the State, Thus There Is Little
Risk of Non-payment.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 9

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CERTIFICATE OF SERVICE BY ECF. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 10

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Page 1 of 10

In re Ferrero Litigation, Case No. 3:11-cv-00205-H-KSC
Objectors’ Opposition to Motion for Appeal Bond

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TABLE OF AUTHORITIES
American Presidential Lines, 779 F.2d 714, 718-19, n.38 (D.C. Cir. 1985). . . . . . . . . . . Page 6
Azizian v. Federated Dep’t Stores, Inc., 499 F.3d 950, 960 (9th Cir. 2007).. . . . . . . . . Page 3, 6
Boddie v. Connecticut, 401 U.S. 371, 379-81, 28 L. Ed. 2d 113, 91 S. Ct. 780 (1971). . Page 6
Carnegie v. Household Finance Int’l, Inc. 376 F.3d 656, 661 (7th Cir. 2004). . . . . . . . . Page 3
Clark v. Universal Builders, 501 F.2d 324, 341 (7th Cir. 1974). . . . . . . . . . . . . . . . . . . Page 5, 6
Devlin v. Scardelletti, 536 U.S. 1 (2002). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 8
Embry v. ACER, 2012 U.S. Dist. LEXIS 78068 (N.D. Cal. June 5, 2012). . . . . . . . . . . . Page 8
In re Am. President Lines, 779 F.2d 714, 717 (D.C. Cir. 1985). . . . . . . . . . . . . . . . . . . . . Page 4
In re Wachovia Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 5

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In re Wal-Mart Wage & Hour Empl. Practices Litig., 10-155116, Dkt. No. 11 (9th Cir Jun.
3, 2010).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 8

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Lindsey v. Normet, 405 U.S. 56, 77-79 (1972). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 3, 6, 7

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MagSafe appeal. See Ninth Circuit docket 12-15782 (Order September 2012)
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North Carolina v. Pearce, 395 U.S. 711, 724 (1969). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 6
Thalheimer v. City of San Diego. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 5
Vaughn v. Am. Honda Motor Co., 507 F.3d 295 (5th Cir. 2007). . . . . . . . . . . . . . . . . . . . . Page 8

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Page 2 of 10

In re Ferrero Litigation, Case No. 3:11-cv-00205-H-KSC
Objectors’ Opposition to Motion for Appeal Bond

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Movants ask that this Court require Drey and Pridham to post a $21,970.72 bond to
secure alleged “costs” pending appeal of a class-action settlement involving $3.00 jars of
Nutella. Judge Posner is widely quoted as saying “only a lunatic or fanatic sues for $30”
Carnegie v. Household Finance Int’l, Inc. 376 F.3d 656, 661 (7th Cir. 2004). He made this
remark in the context of explaining why class actions were good, noting the alternative to
a class action was not millions of individual suits, but no individual suits. The same
reasoning can be applied here: only a lunatic or a fanatic would post a $20,000 bond to
proceed with an appeal over $3.00 jars of Nutella. The instant motion should be
recognized for precisely what it is – a transparent attempt to intimidate legitimate
objectors in order to prevent them from pursuing their right to appeal by imposing
needless and punitive financial barriers. This is unconstitutional. Lindsey v. Normet, 405
U.S. 56, 77-79 (1972)(holding conditioning appeal on posting double bond
unconstitutional).
Movants somehow try to claim the “high ground” by name-calling, making ad
hominem attacks, and repeated (and false) allegations of frivolity and bad faith on the
part of Drey, Pridham, and their counsel. They use the word “frivolous” or “bad faith”
more than half-a-dozen times in their 10-page memorandum (Memo at p 1, 3, 4, 5, & 8).
But the Ninth Circuit has made clear the district court cannot gauge appellate
“frivolousness” prospectively, and such considerations are not at all germane to a Rule 7
bond determination. Azizian v. Federated Dep’t Stores, Inc., 499 F.3d 950, 960 (9th Cir.
2007). Movants arguments to the contrary are thus, ironically, frivolous themselves and
directly contrary to the Ninth Circuit’s decision in Azizian.
Movants then compound their frivolous conduct by falsely claiming that
“administrative costs” and “post judgment” interest can be considering in making a Rule 7
determination (Memo at 10). They cannot, and Azizian, made this plain. The two cases
cited by movants in support of their assertions were from 2005 and 1997, respectively;
they both pre-date Azizian. To cite district court decisions rendered prior to a governing
Ninth Circuit decision, without disclosing they have been abrogated by that decision,
Page 3 of 10

In re Ferrero Litigation, Case No. 3:11-cv-00205-H-KSC
Objectors’ Opposition to Motion for Appeal Bond

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violates the duty of candor and Rule 11. Movants also make blatantly false statements

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about the motives of objectors and their counsel. In addition to being factually false, they

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are legally irrelevant; this argument too, is frivolous and sanctionable. Movants’ conduct

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is unprofessional, sanctionable, and should not be countenanced by this Court.

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Even Assuming the Drey-pridham Appeal Is Frivolous, Which it Is Not, the Ninth Circuit
Has Stated it Is Not the District Court’s Role to Attempt to Make Such a Prediction.
Movants “Frivolousness” Argument Is, Ironically, Frivolous.

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First, let’s take the allegations of the movants as true for the purposes of this

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argument. There is, of course, no legal authority that suggests movants would get such a

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presumption (they have the burden of proof after all), but assume it to be true for the sake

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of argument: the appeal is frivolous. The Ninth Circuit has been plain and unequivocal

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on this point, stating:

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1.

While we affirm the district court’s decision on the
merits, we do not conclude that Wilkinson’s appeal
is frivolous. Even if we were to conclude that her
appeal was frivolous however, we would reverse the
district court’s inclusion of appellate attorneys fees
on that basis.
Azizian v. Federated Dep’t Stores, Inc., 499 F.3d 950, 960 (9th Cir. 2007).
The Court explained that frivolousness determinations could not be made
“prospectively, and without the benefit of a fully developed appellate record, whether such
an award is likely.” Id. The Ninth Circuit then stated it has ample methods of dealing
with “frivolous” appeals (including initial screening, motion practice, and authority to
sanction) and it – and it alone – is responsible for dealing with frivolous appeals; it is not
incumbent on the district court to guess about the result. In so holding the Court stated:
We agree with the question of whether, or how, to deter
frivolous appeals is best left to the courts of appeals…Allowing
district courts to impose high Rule 7 bonds where the appeals
might be found frivolous risks “impermissibly encumber[ing]
appellants’ right to appeal and “effectively preempting this
court’s prerogative” to make its own frivolousness
determination.
Id. at 961, quoting In re Am. President Lines, 779 F.2d 714, 717 (D.C. Cir. 1985). In
stressing how important it was not to chill appeals, the Ninth Circuit stressed, “any
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In re Ferrero Litigation, Case No. 3:11-cv-00205-H-KSC
Objectors’ Opposition to Motion for Appeal Bond

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attempt by a court at preventing an appeal is unwarranted and cannot be tolerated.” Id. at

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961, quoting Clark v. Universal Builders, 501 F.2d 324, 341 (7th Cir. 1974).

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Class counsel cites the governing case, Azizian v. Federated Dep’t Stores, Inc., 499

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F.3d 950 (9th Cir. 2007), but only obliquely in its motion. The case is cited, but only as

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“cited in” two district court opinions interpreting and applying the decision: In re

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Wachovia Corp, and Thalheimer v. City of San Diego. As to the latter case, Azizian is

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cited for the proposition that “the costs identified in Rule 39(e) are among, but not

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necessarily the only, costs available on appeal.” The Wachovia citation is to an

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unpublished order against a pro se litigant who did raise the relevant arguments.

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Azizian is especially important because it is the only Ninth Circuit case to discuss

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the issue of imposing a bond on an objector in a class action. There, the question was

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whether attorneys’ fees on appeal could be considered a “cost” in setting the amount of the

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bond. The court went to great lengths to analyze the law throughout the Circuits, and

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extensively analyzed the applicable cases. In framing the issue the court noted,

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Whether attorney's fees are part of ‘costs on appeal’ under Rule
7 is a question of first impression in this circuit. Six other
circuits are split on the question. An older, minority rule, used
by the D.C. and Third Circuits and endorsed by the Wright,
Miller & Cooper treatise, holds that the ‘costs referred to’ in
Rule 7 “are simply those that may be taxed against an
unsuccessful litigant under Federal Appellate Rule 39, and do
not include attorney's fees that may be assessed on appeal.” In
re Am. President Lines, Inc., 250 U.S. App. D.C. 324, 779 F.2d
714, 716 (D.C. Cir. 1985) (per curiam) (footnote omitted); see
also 16A Charles Alan Wright, Arthur R. Miller & Edward H.
Cooper, Federal Practice & Procedure § 3953 (3d ed. 2006). The
more recent, majority rule, adopted by the Second, Sixth, and
Eleventh Circuits, holds that a district court may order security
for appellate attorney's fees in a Rule 7 bond if they would be
treated as recoverable costs under an applicable fee-shifting
statute. See In re Cardizem CD Antitrust Litigation, 391 F.3d
812, 817-18 (6th Cir. 2004); Pedraza v. United Guaranty Corp.,
313 F.3d 1323, 1329-30 (11th Cir. 2002); Adsani, 139 F.3d at 71.
Finally, the First Circuit has held that a district court may
require a Rule 7 bond covering appellate attorney's fees if it
concludes that the court of appeals might award attorney's fees
as costs under Rule 38 because the appeal is frivolous. Sckolnick
v. Harlow, 820 F.2d 13, 15 (1st Cir. 1987) (per curiam).
Azizian, 499 F.3d at 955.

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Page 5 of 10

In re Ferrero Litigation, Case No. 3:11-cv-00205-H-KSC
Objectors’ Opposition to Motion for Appeal Bond

On the question of attorneys’ fees, the Court went on to agree with what it

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described as the “majority rule,” – specifically, adopting the Marek v. Chesney approach to

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determining “costs” under Rule 68: look to the underlying statute. Here, attorneys’ fees

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are not defined as part of costs under any of the underlying statutes, and movants do not

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claim as such. The Ninth Circuit’s discussion and analysis, however, is essential because

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it defines the relevant principles that should underlie making the determination

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requested by movants. Movants could have, and should have, been more forthcoming in

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the way they cited Azizian.

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2.

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Movants Request an Unconstitutionally Punitive Bond.
Punitive bond requirements are unconstitutional. Lindsey v. Normet, 405 U.S. 56,

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77-79 (1972)(holding conditioning appeal on posting double bond unconstitutional). North

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Carolina v. Pearce, 395 U.S. 711, 724 (1969) ("A court is 'without right to . . . put a price

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on an appeal.’”) Moreover, a cost requirement, otherwise valid on its face might be

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unconstitutional as applied to a particular case, see Boddie v. Connecticut, 401 U.S. 371,

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379-81, 28 L. Ed. 2d 113, 91 S. Ct. 780 (1971); Clark v. Universal Builders, 501 F.2d 324,

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341 (7th Cir. 1974)(“any attempt by a court at preventing an appeal is unwarranted and

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cannot be tolerated”); American Presidential Lines, 779 F.2d 714, 718-19, n.38 (D.C. Cir.

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1985). As the cases cited by American Presidential stress, the concern is of constitutional

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import:

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See North Carolina v. Pearce, 395 U.S. 711, 724, 89 S. Ct. 2072,
2080, 23 L. Ed. 2d 656, 669 (1969)(“[a] court is 'without right to .
. . put a price on an appeal. A defendant's exercise of a right of
appeal must be free and unfettered’”), quoting Worcester v.
Commissioner, 370 F.2d 713, 718 (1st Cir. 1966); Short v.
United States, 120 U.S. App. D.C. 165, 167, 344 F.2d 550, 552
(1965) (“punishment could not be increased to penalize a
defendant for exercising his right of appeal”); Poplar Grove
Planting & Ref. Co. v. Bache Halsey Stuart, Inc., 600 F.2d 1189,
1190 (5th Cir. 1979) (“[a] supersedeas bond should not be used
as a penalty for a party availing itself of its appeal rights”);
Clark v. Universal Builders, Inc., 501 F.2d 324, 341-342 (7th
Cir.), cert. denied, 419 U.S. 1070, 95 S. Ct. 657, 42 L. Ed. 2d 666
(1974) (“any attempt by a court at preventing an appeal is
unwarranted and cannot be tolerated”); Jones v. Penny, 387 F.
Supp. 383, 396 (M.D. N.C. 1974) (three-judge court) (“we think it
clear from established decisional law, in both criminal and civil
contexts, that a state in granting the right to appeal an adverse
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In re Ferrero Litigation, Case No. 3:11-cv-00205-H-KSC
Objectors’ Opposition to Motion for Appeal Bond

decision cannot penalize or arbitrarily condition that right”);
Jack Spring, Inc. v. Little, 50 Ill. 2d 351, 280 N.E.2d 208, 211
(1972) (state constitution “having created [a] right of appeal, the
statutes adopted and the rules promulgated in implementation
of that right may not serve to discriminate against appellants by
reason of the inability to furnish an appeal bond”). See also
Starks v. Klopfer, 468 F.2d 796 (7th Cir. 1972).

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Id.
Fed. R. App. Pro. 7 limits the court’s discretion to impose an appeal bond to costs

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available under Fed. R. App. Proc. 39; these costs do not include the costs claimed by

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movants in this case. Movants do not cite to any authority that “administrative costs” or

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“post-judgment interest” can be considered as part of a Rule 7 bond. Even cases they do

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cite, like Embry, hold such “costs” are not recoverable. 2012 U.S. Dist. LEXIS 78068 at * 5

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(“The Court finds, however, that unlike costs, which may be included in the value of a

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bond under Rule 7, such anticipated damages may not be required as part of a bond”).

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The only possible costs are copying and mailing the response brief. Appellants Drey

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and Pridham are the ones responsible for submitting the transcripts and record, thus, the

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only conceivable costs are the costs or reproducing and mailing a response brief. Here, Mr.

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Fitzgerald makes a conclusory assertion – totally without analysis – that he “estimates

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appellate courts to be $15,000.” Where did this number come from? Did he pull it out of

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the air? Citation to other records, in other cases, does not meet even the most

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rudimentary of an evidentiary standard.

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The page limit for a brief in the Ninth Circuit is 30 pages, 9 paper copies need be

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served on the court and opposing counsel, the cost of binding and covers is a few dollars.

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The Ninth Circuit limits copy costs to 10 cents per page. So the costs of a response brief

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are 9 x 30 x .10 = $27.00. Add another $10.00 per brief for binding, postage and a

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supplemental appendix, and the cost is $117.00. It is not conceivable that the response

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brief will cost more than $250.00. Imposing a bond seeking to secure any additional

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“costs” would amount to an unconstitutional penalty. Cf. Lindsey v. Normet, 405 U.S. 56,

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77-79 (1972)(holding conditioning appeal on posting double bond unconstitutional).

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Page 7 of 10

In re Ferrero Litigation, Case No. 3:11-cv-00205-H-KSC
Objectors’ Opposition to Motion for Appeal Bond

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3.

A Rule 7 Appeal Bond May Not Include Costs of Delay
Reflecting a lack of knowledge of the difference between a supersedeas bond and a

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Rule 7 cost bond, movants make the frivolous assertion that Drey and Pridham should be

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held accountable for any delay in distribution of the proceeds. But Drey and Pridham have

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not sought any stay of judgment, so this court is without authority to issue a supersedeas

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bond. American Presidential Lines, 779 F.2d at 717-18;, cited with approval by Azizian,

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499 F.3d at 961; Fleury v. Richemont North America, Inc., 2008 WL 4680033 at *7 (N.D.

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Cal. October 21, 2008 (cost of delay not appropriately included in cost bond); Embry v.

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ACER, 2012 U.S. Dist. LEXIS 78068 (N.D. Cal. June 5, 2012)(same)(cited by movants,

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showing knowledge of the frivolousness of their position).
The reason the claims are not being paid pending appeal is because movants agreed

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to that provision – they secured for themselves, of course, a quick-pay provision that

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ensured that they themselves were paid. They did not insist, of course, on a parallel

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protection for their fiduciaries.

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4.

Appeal Bonds Create Needless Obstacles for Objectors in Violation the Supreme
Court’s Reasoning in Devlin V. Scardelletti
In Devlin v. Scardelletti, 536 U.S. 1 (2002) the United States Supreme Court

established the right of objectors to appeal without first seeking intervention. The court
was motivated by eliminating needless barriers to objector seeking review, stating: formal
intervention would only “add an additional layer of complexity before the appeal of the
settlement approval may finally be heard.” Imposing a bond would likely simply result in
a second appeal of the bond requirement, as it did in In re Wal-Mart Wage & Hour Empl.
Practices Litig., 10-155116, Dkt. No. 11 (9th Cir Jun. 3, 2010), which merely stayed the
motion pending the merits determination. Id. citing Vaughn v. Am. Honda Motor Co., 507
F.3d 295 (5th Cir. 2007). And the Ninth Circuit recently did the same thing in the
MagSafe appeal. See Ninth Circuit docket 12-15782 (Order September 2012).
If movants were truly concerned about the risk of delay from a “frivolous” appeal,
they would have moved to dismiss the appeal instead of initiating collateral litigation in
Page 8 of 10

In re Ferrero Litigation, Case No. 3:11-cv-00205-H-KSC
Objectors’ Opposition to Motion for Appeal Bond

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the district court. Motions such as the instant motion only multiply the proceedings, and

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movants are doing so vexatiously – this is reflected both by the needless and false personal

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attacks, and the frivolous citations to superseded case law.

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There Is No Evidence on Ability to Pay; Both Objectors Reside in the State, Thus
There Is Little Risk of Non-payment.

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Finally, there is no evidence submitted that Drey or Pridham have the ability to pay. No evidence
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is submitted as to Drey. The fact that Pridham happens to be married to a lawyer is not evidence of
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ability to pay. Nonetheless, this is not a concern because there is no evidence that any of Drey, Pridham,
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or their counsel have ever refused to pay costs. And in the Ninth Circuit, if a lawyer fails to pay
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sanctions or costs they can barred from practicing before the court until the sanction is paid. The appeal
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is meritorious, and certainly not frivolous; there is no evidence Drey or Pridham can post a bond, which
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is unreasonable given both the value of the claims and the nature of the anticipated costs – the single
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filing or a response brief. Moreover, if the Ninth Circuit does order costs, there is no evidence Drey or
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Pridham would refuse. There is no genuine lack of security. The lodestar fee spent by class counsel
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preparing the motion likely exceeds the actual “costs” that will be incurred in filing and serving a
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response brief. In any event, there is no evidence whatsoever of those costs.
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For the above reasons, Objectors respectfully request that no appeal bond be imposed.
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Respectfully Submitted, this 29th day of October 2012.

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/s/ Grenville Pridham
Grenville Pridham
2522 Chambers Road, Suite 100
Tustin, CA 92780
[phone]

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[e-mail]
Counsel for Objectors Drey and Pridham

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Page 9 of 10

In re Ferrero Litigation, Case No. 3:11-cv-00205-H-KSC
Objectors’ Opposition to Motion for Appeal Bond

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CERTIFICATE OF SERVICE BY ECF

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I hereby certify that on October 29, 2012, I caused the foregoing Objectors’ Opposition to

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Plaintiffs’ Motion for Appeal Bond to be served via ECF noticing upon those counsel of record who are

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registered for electronic filing.

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/s/ Grenville Pridham
Grenville Pridham

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Page 10 of 10

In re Ferrero Litigation, Case No. 3:11-cv-00205-H-KSC
Objectors’ Opposition to Motion for Appeal Bond