ORMOND et al v. ANTHEM, INC. et al

Filing 811

ORDER ON REQUEST FOR APPEAL BOND - Plaintiff's motion is GRANTED, in part. Mr. DeJulius, by and through his attorney John W. Pentz and Mr. Paul, c/o attorney Darrell Palmer, are required to each post a bond, jointly and severally in the amount of $250,000.00, which is comprised of: (1) $15,000.00 for the direct taxable costs of the appeal and (2) $235,000.00 for the administrative costs of the delay caused by the appeal. Mr. DeJulius and Mr. Paul shall file within 10 days of the date of this Order, proof that they have secured the bonds directed by this Order. Signed by Judge Tanya Walton Pratt on 2/27/2013. Copy Mailed. (JD)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF INDIANA
INDIANAPOLIS DIVISION

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Plaintiffs,
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vs.
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ANTHEM, INC.,
ANTHEM INSURANCE COMPANIES, INC., )
KEVIN T. HEEKIN,
MARY E. ORMOND,
ESTATE OF MARY A. MOORE
On behalf of Themselves and all Others
Similarly Situated,

Case No. 1:05-cv-01908-TWP-TAB

Defendants.
ORDER ON REQUEST FOR APPEAL BOND
This matter is before the Court on Plaintiffs’ Motion to Require Objectors to Post Appeal
Bonds (Dkt. 797). On November 16, 2012, the Court approved the Class Settlement in this case
(Dkt. 780), which included a $90 million common fund settlement to be paid out pro rata to the
over 707,000 Class Members. On November 20, 2012, the Court granted Plaintiffs’ motion for
attorney’s fees and costs (Dkt. 786). On December 10 and 19, 2012, respectively, interested
parties and objectors Franklin DeJulius and Edwin Paul filed separate Notices of Appeal to the
Seventh Circuit Court of Appeals. Mr. DeJulius is appealing the Court’s Entry for attorneys’
fees, costs and contribution awards (Dkt. 787) and Mr. Paul appeals the final approval of the
settlement, the allocation plan, and the attorney fee and representative incentive awards (Dkt.
791). Plaintiffs request an appeal bond in the amount of $550,000.00 for each objector, or jointly
and severally. For the reasons set forth below, the Court GRANTS, in part, Plaintiffs’ motion.

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I.

DISCUSSION

This action arises from Anthem, Inc.’s demutualization of Anthem Insurance and failure
to offer stock for sale to the public at a higher IPO price. A thorough background of the facts in
this case can be found in the Court’s Entries mentioned above (Dkt. 780, 786).
A. Costs Allowed in an Appeal Bond
Federal Rule of Appellate Procedure 7 states: “In a civil case, the district court may
require an appellant to file a bond or provide other security in any form and amount necessary to
ensure payment of costs on appeal.” Rule 7 exists to protect the rights of appellees by appellants
who pose payment risks. See Adsani v. Miller, 139 F.3d 67, 75 (2d Cir. 1998). The award and
amount of an appeal bond is within the discretion of the district court. Appeal bonds only apply
to costs relating to the appeal. The Circuits are split as to whether costs under Rule 7 include all
costs or only those available under Federal Rule of Appellate Procedure 39(e).1 See Walton v.
City of Carmel, No. 05-902, 2008 WL 2397683, *3 (S.D. Ind. June 10, 2008) (noting split). The
Seventh Circuit has not squarely addressed the issue of whether only Rule 39(e) costs can be
secured by an appeal bond under Rule 7. Id.
As noted by the District Court of Minnesota, “[a]ppeal bonds are often required on
appeals of class action settlements or attorneys’ fee awards because the appeal effectively stays
the entry of final judgment, the claims, process, and payment to all class members.” In re
Uponor, Inc., No. 11-MD-2247ADM/JJK, 2012 WL 3984542, at *2 (D. Minn. Sept. 11, 2012).
In class action cases, therefore, bonds are used to cover excess administrative costs that
otherwise would not have been incurred. See, e.g., id.; In re Pharm. Indus. Average Wholesale
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Rule 39 enumerates the taxable costs on appeal. Such costs include the preparation and transmission of the record,
the reporter’s transcript, premiums paid for a supersedeas bond or other bond to preserve rights pending appeal, and
the fee for filing the notice of appeal. The Circuit split deals more specifically with whether attorneys’ fees can be
secured by an appeal bond, which Plaintiffs do not request in this case. The majority view is espoused by the Ninth
Circuit in Azizian v. Federated Dep’t Stores, Inc., 499 F.3d 950, 953 (9th Cir. 2007).

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Price Litig., 520 F. Supp. 2d 274, 279 (D. Mass. 2007); Allapattah Servs., Inc. v. Exxon Corp.,
No. 91-0986, 2006 WL 1132371, at *18 (S.D. Fla. Apr. 7, 2006).
Mr. DeJulius argues that courts in this Circuit only give bonds for the cost of copying the
briefs and records, but he cites only one case, In re Starlink Corn Products Liability Litigation,
No. 1403, 01 C 1181, 2002 WL 1291790, at *1 (N.D. Ill. June 11, 2002), to support this position.
In In re Starlink, Plaintiffs asked for an appeal bond to cover $2,500.00 for costs of appeal as
part of a total $100,000.00 appeal bond that also included attorney’s fees and lost interest. The
Court found that $100,000.00 was excessive and granted only the $2,500.00 costs of appeal. Id.
That said, In re Starlink is not relevant to the bond before the Court. Unlike In re Starlink, here
Plaintiffs request their taxable costs on appeal and administrative costs caused by the appeal.
These delay costs, as noted above, have been recognized by other courts as appropriate for
appeal bonds.

The Court concludes that in this case, like those cited above, the excess

administrative costs created by the delay incident to the appeal, can be characterized as a “cost of
appeal” under Rule 7.
B. Determining Appropriateness of Appeal Bond
While the Seventh Circuit has not enumerated a test for when an appeal bond is
appropriate, courts generally consider the following factors in determining whether an appeal
bond is appropriate:

(1) the appellant’s financial ability to post a bond, (2) the risk of

nonpayment of appellee’s costs if the appeal is unsuccessful, (3) the merits of the appeal, and (4)
bad faith or vexatious conduct on the part of the appellants. In re Uponor, 2012 WL 3984542, at
*2. As an initial matter, the trial Court recognizes that it is its place to determine whether an
appeal is frivolous. However, the merits of an appeal may be relevant to the risk of nonpayment,
“in that if the appellant is pursuing a clearly frivolous appeal one might infer that the appellant is

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abusing the judicial process and thus has no intention of paying any costs taxed on appeal.” In re
Lawnmower Engine Horsepower Mktg. & Sales Practices Litig., MDL No. 08-1999, 2010 WL
4630846, at *1 (E.D. Wis. Nov. 2, 2010).
In this case, the Court finds that a bond is appropriate. First, neither Mr. DeJulius nor Mr.
Paul has submitted to the Court that they are unable to financially sustain a bond.
Second, Plaintiffs have supplied the Court with cases from outside this district in which
Mr. DeJulius’s counsel and Mr. Paul’s counsel2 have been ordered to pay bonds, yet have failed
to do so, indicating a risk that appeal costs will likewise not be paid. Moreover, Plaintiffs argue
the risk of nonpayment is compounded when Mr. DeJulius and Mr. Paul have insubstantial
stakes in the outcome—Mr. DeJulius’s total share of the gross settlement is approximately
$43.20 and Mr. Paul’s share is approximately $433.80. Both are also geographically dispersed
from this Circuit, which would present additional expense to Plaintiffs should collection actions
be required.

While geographic diversity alone will not sustain an appeal bond, see In re

Lawnmower, 2010 WL 4630846, at *1, taken with the other factors, there is a risk of
nonpayment.
Third, Plaintiffs argue the appeals are frivolous and lack merit. For the purposes of Rule
7, the Court is inclined to agree the appeals lack merit. Plaintiffs point to Mr. Paul’s surface
objection to the cy pres award and to Mr. DeJulius’s objection to attorney’s fees as meritless.
Mr. Paul did not directly respond to Plaintiffs’ contention, and the Court agrees with Plaintiffs
that Mr. Paul’s objection did not indicate thorough research or understanding of the applicable
law and facts. In Mr. DeJulius’s response, he relies heavily on the argument that the Court was
required to apply a mandatory sliding scale when awarding attorneys’ fees. As it found in
2

While Mr. Paul ostensibly is representing himself, the Court has reason to believe he has been assisted by counsel,
a matter which will be addressed shortly.

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previous entries, the Court finds this argument disingenuous and a misapplication of the Seventh
Circuit law.3 While the Court does not make a finding the appeals are frivolous, this factor
weighs heavily in favor of requiring an appeal bond.
Finally, the Court does find evidence of bad faith or vexatious conduct on the part of
appellants. Mr. Paul appears to be represented by an attorney who has not entered an appearance
in this case. It is worth noting that attorney Darrell Palmer (“Mr. Palmer”), previously requested
leave to appear pro hac vice in this case (Dkt. 747). However, this request was withdrawn after
the Court scheduled a teleconference to address Mr. Palmer’s motion (Dkt. 754). Despite this,
Mr. Palmer is listed as the payor of Mr. Paul’s Notice of Appeal filing fee. Mr. Palmer’s office
also emailed Plaintiffs a notice and copy of Mr. Paul’s most recent filing (Dkt. 809-3). Plaintiffs
have produced evidence that Mr. Palmer is likely a serial objector and other courts have
recognized similar behavior. See, e.g., In re Uponor, 2012 WL 3984542, at* 3 (in reference to
Mr. Palmer, stating, “the Palmer Objectors appear to be represented by an attorney who has not
entered an appearance in this case and who is believed to be a serial objector to other class-action
settlements”).

As in In re Uponor, this Court finds such behavior in bad faith and also

potentially violative of local and ethical rules.
Moreover, Mr. DeJulius has shown bad faith and vexatious conduct by insisting upon
arguments that mischaracterize and misapply Seventh Circuit case law. In his objection, Mr.
DeJulius argued that the Court was required to apply the mandatory sliding scale fee structure
discussed in In re Synthroid Marketing Litig., 325 F.3d 974 (7th Cir. 2003). While a sliding
scale fee structure was applied in that case, it was not made mandatory for all class action cases.
Mr. DeJulius now argues that his position is supported by Chief Judge Easterbrook’s questioning
at oral argument in an attorney’s fees case. This shift in argument shows that Mr. DeJulius, on
3

This is discussed in more detail as evidence of bad faith and vexatious conduct below.

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some level, acknowledges that he misrepresented the law to the Court and presented a vexatious
argument. Furthermore, the Chief Circuit Judge’s questions during oral argument are just that,
questions, which in no way are determinative or binding on the trial Court. In short, the Court
finds that Mr. DeJulius has acted in bad faith.
C. The Amount of the Appeal Bond
Because the factors discussed above heavily favor Plaintiffs, the Court finds an appeal
bond is appropriate in this case. Due to the appeal, Plaintiffs estimate they will face $15,000.00
in taxable costs, $273,460.00 in excess administrative expenses, and $300,000.00 to send a
supplemental notice to all Class Members about the appeal and delay in the settlement
distribution. The total administrative costs are $573,460.00. However, Plaintiffs request only a
total of $550,000.00 appeal bond.
Plaintiffs have made a request for an amount lower than their actual estimated costs;
however, the Court finds that even $550,000 is a bit excessive. Mr. DeJulius argues that
additional notice to the class at a cost of $300,000.00 is unnecessary. Plaintiffs argue that
supplemental notice is proper: class members “have never been informed that the distribution
process might be held hostage for two years, and the settlement fund potentially diminished, by a
meritless appeal.” Dkt. 809 at 9–10. The Court agrees with Plaintiffs that an additional notice to
the class would be beneficial, but such notice, especially a mailed notice, is not required. The
Court will therefore decrease the amount of the bond by $300,000. The remaining $250,000.00
covers much of the administrative costs that will allow the Fund’s hotline and website to
continue serving Class Members who seek information. This amount is reasonable and is
sufficient to protect Plaintiffs against the risk of nonpayment.4

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This amount is also within the range given in other class action cases that include excess administration costs. See,
e.g., In re Cardizem CH Antitrust Litig., 391 F.3d 812, 818 (6th Cir. 2004) (affirming $174,429 bond); In re

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II. CONCLUSION
For the reasons set forth above, Plaintiff’s motion is GRANTED, in part. Mr. DeJulius,
by and through his attorney John W. Pentz and Mr. Paul, c/o attorney Darrell Palmer, are
required to each post a bond, jointly and severally in the amount of $250,000.00, which is
comprised of: (1) $15,000.00 for the direct taxable costs of the appeal and (2) $235,000.00 for
the administrative costs of the delay caused by the appeal. Mr. DeJulius and Mr. Paul shall file
within 10 days of the date of this Order, proof that they have secured the bonds directed by this
Order.
SO ORDERED.
02/27/2013
Date: ______________

________________________
Hon. Tanya Walton Pratt, Judge
United States District Court
Southern District of Indiana

Uponor, 2012 WL 3984542, at *6 (requiring $170,000 bond); In re Checking Account Overdraft Litig., No. 1.09MD-02036-JLK, 2012 WL 456691, at *3 (S.D. Fla. Feb. 14, 2012) (requiring $616,338 bond); Allapatah, 2006 WL
1132371, at *18 (requiring $13.5 million bond)

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Distribution:
Christopher G. Scanlon
FAEGRE BAKER DANIELS LLP Indianapolis
[e-mail]

EDWIN PAUL
603 N. Highway 101, Suite A
Solana Beach, CA 92075
Eric Hyman Zagrans
[e-mail]

Kevin M. Kimmerling
FAEGRE BAKER DANIELS LLP Indianapolis
[e-mail]

John J. Pentz
ATTORNEY AT LAW
[e-mail]
H. Laddie Montague, Jr
BERGER & MONTAGUE P.C.
[e-mail]

Matthew Thomas Albaugh
FAEGRE BAKER DANIELS LLP Indianapolis
[e-mail]

Neil F Mara
BERGER & MONTAGUE, P.C.
[e-mail]

Paul A. Wolfla
FAEGRE BAKER DANIELS LLP Indianapolis
[e-mail]

Peter R. Kahana
BERGER & MONTAGUE, P.C.
[e-mail]

Adam K. Levin
HOGAN LOVELLS US LLP
[e-mail]

Todd S Collins
BERGER & MONTAGUE, P.C.
[e-mail]

Craig A. Hoover
HOGAN LOVELLS US LLP
[e-mail]

Edward O’Donnell DeLaney
DELANEY & DELANEY LLC
[e-mail]

Peter R. Bisio
HOGAN LOVELLS US LLP
[e-mail]

Kathleen Ann DeLaney
DELANEY & DELANEY LLC
[e-mail]

Thomas M. Fisher
INDIANA OFFICE OF THE ATTORNEY
GENERAL
[e-mail]

Dennis Paul Barron
DENNIS PAUL BARRON LLC
[e-mail]

Cari C. Laufenberg
KELLER ROHRBACK L.L.P.
[e-mail]

Anne Kramer Ricchiuto
FAEGRE BAKER DANIELS LLP Indianapolis
[e-mail]

Lynn L. Sarko
KELLER ROHRBACK, L.L.P.
[e-mail]
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Michael F. Becker
THE BECKER LAW FIRM CO., L.P.A.
[e-mail]

T. David Copley
KELLER ROHRBACK, L.L.P.
[e-mail]

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