Branch Banking and Trust Company (a North Carolina banking corporation) v. Jarrett et al
Filing
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ORDER Motion for Attorney Fees 71 is granted in part and denied in part with a fee award of $207,978.00. Motion to Stay Execution on Judgment 78 is granted on the condition Defendants post a bond in the amount of $3,343,412.62 within 20 days with a qualified third-party financial institution. Motion to Seal 83 is granted. Signed by Judge Robert C. Jones on 9/16/14. (Copies have been distributed pursuant to the NEF - JC)
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UNITED STATES DISTRICT COURT
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DISTRICT OF NEVADA
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BRANCH BANKING AND TRUST
COMPANY, a North Carolina banking
corporation,
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Plaintiff,
vs.
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MICHAEL E. JARRETT et al.,
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Defendant.
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3:13-cv-00235-RCJ-VPC
ORDER
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Before the Court is Plaintiff’s Motion for Attorneys’ Fees (ECF No. 71) as well as
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Defendants’ Motion to Seal (ECF No. 83) and Defendants’ Motion for Stay of Execution on
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Judgment (ECF No. 78).
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I.
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BACKGROUND
Clock Tower Center, LLC (“Clock Tower”) borrowed $3,400,000.00 from Colonial
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Bank, N.A. secured by property located in Gardnerville, Nevada. Colonial Bank’s interest in the
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loan was acquired by Plaintiff. Clock Tower defaulted on the loan and eventually filed for
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bankruptcy. The Bankruptcy Court for the District of Nevada confirmed Clock Tower’s plan for
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reorganization and Plaintiff subsequently filed a lawsuit seeking recovery for the unpaid
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principle due on the loan plus interest. (Compl., ECF No. 1). Plaintiff received a $3,488,129.29
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judgment in its favor when this Court granted Plaintiff’s summary judgment motion (ECF
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No. 69). Plaintiff now requests attorneys’ fees in the amount of $239,594.40 for expenses
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incurred during the litigation. (Pl.’s Mot. Att’y Fees 1, ECF No. 71).
Defendants have filed a Notice of Appeal (ECF No. 73) and now move to have the
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judgment stayed pending the appeal. Instead of obtaining a supersedeas bond to secure the
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judgment while the appeal is pending, Defendants request that the Court waive the bond
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requirement, or alternatively, that they be allowed to use the Clock Tower property as security
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for the judgment. (Defs.’s Mot. Stay of Execution on J. 4–5, ECF No. 78). To support their
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request, Defendants submitted financial records from 2013 for Defendant Bing to demonstrate
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ability to pay the judgment. Plaintiff’s Opposition does not object to Defendant’s request of a
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stay, but instead it argues against waiving the bond requirement or allowing Defendants to use
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alternative security to secure the judgment. (Pl.’s Opp’n to Defs.’s Mot. Stay of Execution on J.
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1–2, ECF No. 88).
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II.
DISCUSSION
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A. Plaintiff’s Motion for Attorneys’ Fees
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Federal courts sitting in diversity award attorneys’ fees in accordance with state law
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when state substantive law applies. Johnson v. Incline Vill. Gen. Imp. Dist., 5 F. Supp. 2d 1113,
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1114 (D. Nev. 1998). The calculation of the amount of attorneys’ fees is a substantive state
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right. Mangold v. Cal. Pub. Utils. Comm’n, 67 F.3d 1470, 1478 (9th Cir. 1995). Under Nevada
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law, “the method upon which a reasonable fee is determined is subject to the discretion of the
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court” and “is tempered only by reason and fairness.” Shuette v. Beazer Homes Holdings Corp.,
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124 P.3d 530, 548–49 (Nev. 2005) (quoting Univ. of Nev. v. Tarkanian, 879 P.2d 1180, 1188,
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1186 (Nev. 1994)). The court is not limited to one specific approach when calculating fees, but
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it must consider factors such as the advocate’s professional qualities, the nature of the litigation,
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the work performed, and the result of the litigation. Id. at 549 (citing Brunzell v. Golden Gate
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Nat’l Bank, 455 P.2d 31, 33 (Nev. 1969)).
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The Guarantee Agreement (“the Agreement”) governing Clock Tower’s loan states that
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“[i]f any legal action or any arbitration or other proceeding (including a proceeding in
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bankruptcy) is brought for the enforcement of any provisions of this Guarantee . . . the successful
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or prevailing party shall be entitled to recover reasonable attorneys’ fees and other costs incurred
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in that action or proceeding . . . .” (Guarantee Agreement ¶ 9, ECF No. 71-1). Defendants’
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Opposition does not challenge whether this provision of the Agreement entitles Plaintiff to
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attorneys’ fees. (Defs.’s Opp’n to Pl.’s Mot. Att’y Fees 2, ECF No. 84). Rather, Defendants
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argue that the amount of fees that Plaintiff seeks is unreasonable. (Id.)
Plaintiff’s motion addresses the Brunzell factors, and it includes an affidavit signed by
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counsel authenticating the billing records attached to the motion as required by LR 54-16.
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However, Defendants argue that the “block billing” style of Plaintiff’s Fee Report makes it
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impossible to determine whether Plaintiff’s counsel’s work was reasonable or necessary. (Id. at
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2–4). They also argue that without an unredacted billing statement, Defendants and the Court
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cannot fully evaluate the requested fees. (Id. at 4). The Court disagrees with both arguments.
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Block billing is problematic only if it inhibits the court’s ability to determine whether the time
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spent and the work accomplished were reasonable. See Welch v. Metro. Life Ins. Co., 480 F.3d
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942, 948 (9th Cir. 2007) (noting that black billing “makes it more difficult to determine how
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much time was spent on particular activities”). The burden on Plaintiff’s counsel is to list the
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hours worked and identify the general subject matter of the time expended. See Fischer v. SJB-
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P.D. Inc., 214 F.3d 1115, 1121 (9th Cir. 2000) (citation omitted).
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In this case, Plaintiff’s counsel’s Fee Report contains over 350 time entries. The majority
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of the entries are either single actions or activities that appear logically related to one another,
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such as researching law and drafting motions, (see, e.g., Fee Report 10, ECF No. 71-2), or
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editing motions and drafting declarations, (see,e.g., id. at 16). The Court acknowledges that
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there are entries containing multiple activities in a block billing format. Defendants, however,
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do not cite to any entries that they feel are problematic. They instead take issue with Plaintiff’s
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time keeping reflected in the Fee Report as a whole, which the Court finds unpersuasive
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considering the low number of true block entries relative to the 356 total entries. Moreover, the
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Court’s independent review of the Fee Report did not reveal any block entries of particular
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concern. Those blocks containing the largest amounts of time expended also include time
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intensive activities such as drafting motions, (see, e.g., id. at 4, 10), conducting depositions, (see,
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e.g., id. at 16), and attending hearings, (see, e.g., id. at 16, 21). The explanations contained in the
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block entries sufficiently allow the Court to determine the reasonableness and necessity of each
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activity. See Secalt S.A. v. Wuxi Shenxi Constr. Mach. Co., 668 F.3d 677, 690 (9th Cir. 2012)
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(citing Hensley v. Eckerhart, 461 U.S. 424, 437 n.12 (1983)) (stating that counsel is not required
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to record in great detail “how each minute of his time was expended”).
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The Court also finds that the majority of the redacted portions of the Fee Report do not
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unduly inhibit its ability to determine the reasonableness of Plaintiff’s counsel’s entries. Not
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every entry is redacted and the entries that do contain redactions present pertinent information
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except the specific subject of conversations, conferences, and in some instances, research.
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(See,e.g., Fee Record 2, 5, 16). Cf. Arndell v. Robinson, Belaustegui, Sharp & Low, No. 3:11-cv-
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469-RCJ-VPC, 2013 WL 1121802, at *2 (D. Nev. Mar. 14, 2013) (stating that the party seeking
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attorneys’ fees had redacted every description of work performed making it impossible for the
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court to determine reasonableness). Plaintiff’s counsel believes the redactions necessary since
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Defendants are appealing the judgment awarded in this case to the Ninth Circuit, and the entries
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in question contain information covered by the attorney-client privilege and the work-product
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privilege. (Pl.’s Reply to Defs.’s Opp’n 6, ECF No. 89). Defendants contend that Plaintiff’s
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counsel possessed extensive knowledge on the legal issues involved in this case. (Defs.’s Opp’n
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to Pl.’s Mot. Att’y Fees 5). They assert that Plaintiff’s redactions to their Fee Report
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demonstrate a failure to explain why additional research was necessary in this particular case or
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whether the research conducted was reasonable.
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Counsel certainly benefits from familiarity with a specific area of law. It is that
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familiarity that increases the value an attorney contributes to a client’s case. Knowledge and
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previous experience with particular legal issues surely aid attorneys when addressing similar
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problems for other clients. However, familiarity with an area of law does not equate to mastery
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of all legal intricacies as they relate to a client’s unique situation. The legal issues presented in
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this case were sufficiently complex that Defendants’ themselves invested considerable resources
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in defending against Plaintiff’s complaint. The Court finds that Plaintiff’s counsel’s previous
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participation in the Clock Tower bankruptcy and litigation involving personal guarantees, NRS
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Chapter 40, and Assembly Bill 273 is not dispositive evidence that the research conducted in this
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case is unreasonable. Even where there may be overlap between legal questions between cases,
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the specific facts of a particular case generate new questions and ideas that require inquiry.
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Thus, the Court finds that Defendants’ arguments regarding Plaintiff’s counsel’s previous
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experience does not require Plaintiff to submit a completely unredacted copy of its counsel’s Fee
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Record. See MGIC Indem.Corp. v. Weisman, 803 F.2d 500, 505 (9th Cir. 1986) (holding that
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certain redactions were allowable concerning matters of attorney-client privilege).
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The exhibit shows that Plaintiff’s counsel used a partner-associate approach to complete
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the work and that lead counsel who is a partner at the firm used an associate at a lower billing
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rate to complete most of the work. The litigation in this case lasted for just over a year and
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included five separate motions, three of which were filed by Defendants, in addition to several
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hearings. Plaintiff prevailed on every one of those motions, including its motion for summary
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judgment in which it was awarded complete repayment plus interest on the loan at issue. The
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fees Plaintiff seeks are roughly 6% of the value of the overall $3,488,129.29 judgment. The total
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hours billed by all attorneys and staff working on the case during its course totaled 826.7 hours,
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which Plaintiff’s counsel attributes to document review, research, drafting pleadings and
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motions, drafting correspondence, conducting discovery, and preparation and attendance at
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various hearings. The narratives contained in the Fees Report support these assertions made by
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Plaintiff’s counsel. Nevertheless, the Court finds that a few of Plaintiff’s counsel’s redactions do
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make it difficult to determine the reasonableness of certain entries.1 The Court reduces its award
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of fees accordingly by $31,616.40.
Therefore, the Court in its discretion DENIES in part and GRANTS in part Plaintiff’s
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motion for attorneys’ fees in the amount of $207,978.00.
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The Court could not determine reasonableness due to redactions for the following entries: Frank LaForge,
8/13/2013; Frank LaForge, 8/15/2013; Frank LaForge, 8/28/2013; Frank LaForge, 8/30/2013; Frank LaForge,
9/4/2013; Timothy Lukas, 9/9/2013; Cyndy Arnold, 9/9/2013; Frank LaForge, 9/13/2013; Tamara Reid, 9/13/2013;
Frank LaForge, 9/18/2013, Tamara Reid, 9/19/2013; Timothy Lukas, 9/26/2013; Frank LaForge, 10/11/2013;
Timothy Lukas, 10/14/2013; Cyndy Arnold, 10/14/2013; Tamara Reid, 10/15/2013; Frank LaForge, 10/16/2013;
Timothy Lukas, 10/16/2013; Tamara Reid, 10/21/2013; Tamara Reid, 10/23/2013; Frank LaForge, 10/30/2013;
Cyndy Arnold, 11/7/2013; Timothy Lukas, 11/24/2013; Stephan Hollandsworth, 11/27/2013; Frank LaForge,
12/4/2013; Tamara Reid, 12/4/2013; Timothy Lukas, 12/5/2013; Timothy Lukas, 12/6/2013(a); Timothy Lukas,
12/6/2013(b); Stephan Hollandsworth, 12/6/2013; Tamara Reid, 12/6/2013; Stephan Hollandsworth, 12/9/2013;
Tamara Reid, 12/11/2013; Timothy Lukas, 12/12/2013; Tamara Reid, 1/24/2014; Tamara Reid, 2/13/2014; Frank
LaForge, 3/28/2014; Tamara Reid, 3/28/2014; Frank LaForge, 4/21/2014; Timothy Lukas, 5/22/2014; Timothy
Lukas, 5/28/2014; Timothy Lukas, 6/5/2014.
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B. Defendants’ Motion for Stay of Execution on Judgment
Pursuant to Rule 62(d), the Court may grant a motion to stay the execution on a
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judgment pending an appeal. Fed. R. Civ. P. 62(d). The movant is entitled to the stay if it
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complies with the bond requirement under Rule 62(d). Bass v. First Pac. Networks, Inc., 219
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F.3d 1052, 1055 (9th Cir. 2000). The bond amount ordinarily includes the full judgment total,
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costs on the appeal, interest, and any damages for delay. Trs. of N. Nev. Operating Eng’rs Health
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& Welfare Trust Fund v. Mach 4 Contr., LLC, No. 3:08-cv-00578-LRH-WGC, 2013 WL
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5838711, at *1 (D. Nev. Oct. 29, 2013) (Hicks, J.). “The purpose of a supersedeas bond is to
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preserve the status quo while protecting the non-appealing party’s rights pending appeal.” Poplar
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Grove Planting & Ref. Co. v. Bache Halsey Stuart, Inc., 600 F.2d 1189, 1190–91 (5th Cir. 1979).
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The judgment debtor may use the bond to avoid paying the judgment just to have it reversed on
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appeal and then find that restitution is impossible. Id. at 1191. The bond also protects the
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prevailing party against any loss resulting from being forced “to forgo execution on the judgment
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during the course of an ineffectual appeal.” Id. A party is entitled to waiver of the bond
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requirement only in extraordinary cases. See Bemo USA Corp. v. Jake’s Crane, Rigging &
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Transport Int’l Inc., No. 2:08-cv-745-JCM-PAL, 2010 WL 4604496, at *1 (D. Nev. Nov. 5,
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2010) (Mahan, J.) (citing Townsend v. Holman Consulting Corp., 929 F.2d 1358, 1367 (9th Cir.
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1990)). Moreover, the party requesting a waiver of a full security supersedeas bond has the
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burden of objectively demonstrating to the court the reasons why a full bond should not be
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required. Poplar Grove Planting & Ref. Co., 600 F.2d at 1191. The court generally will not
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grant a waiver unless the filing of a supersedeas bond “would irreparably harm the judgment
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debtor and, at the same time, such a stay would not unduly endanger the judgment creditor’s
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interest in ultimate recovery.” Quiroz v. Dickerson, No. 3:10-cv-00657-LRH-WGC, 2013 WL
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5947459, at *1 (D. Nev. Nov. 1, 2013) (Hicks, J.) (quoting Cayuga Indian Nation of N.Y. v.
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Pataki, 188 F. Supp. 2d 223, 254 (N.D.N.Y. 2002)).
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Defendants request that the bond requirement be waived because Defendant Bing has
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provided the Court with a record of his financial status, which Defendants argue demonstrate
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their ability to satisfy the judgment should they lose on appeal. (Defs.’s Mot. Stay of Execution
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on J. 4). The 2013 financial report shows that Defendant Bing claims to have a net value of over
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$20,000,000.00. This is well above the judgment amount of $3,488,129.29. However, the vast
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majority of Defendant Bing’s assets are illiquid. Waiving the bond requirement based solely on
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a private individual’s financial status at the beginning of an appeal would be irresponsible
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considering the uncertainty of business investments and the stock market. Further, Defendants
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present no type of plan to explain how Defendant Bing will maintain his current level of
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solvency during the appeal. See Poplar Grove Planting & Ref. Co., 600 F.2d at 1191 (stating that
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a judgment debtor should present to the court “a financially secure plan for maintaining that
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same degree of solvency during the period of an appeal”). Defendant Bing’s current financial
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stability convinces the Court that he would not suffer irreparable harm if required to obtain a
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bond. Accordingly, Defendants’ request for waiver is denied.
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Defendants alternatively seek to use the Clock Tower property to secure the judgment
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during the appeal rather than a bond. (Defs.’s Mot. Stay of Execution on J. 5). The Court notes
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that this is the same property that is the subject of the judgment Defendants are appealing. It is
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within a court’s discretion whether to allow other forms of judgment guarantees. Townsend, 929
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F.2d at 1367 (citing Int’l Telemeter v. Hamlin Int’l Co., 754 F.2d 1492, 1495 (9th Cir. 1985)).
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“Nonetheless, only ‘extraordinary circumstances’ will support the provision of security other
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than a supersedeas bond.” U.S. ex rel. Small Bus. Admin. v. Kurtz, 528 F. Supp. 1113, 1115 (E.D.
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Pa. 1981) (citations omitted). For instance, the court may allow other forms of judgment
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guarantees when the judgment debtor demonstrates the “financial ability to facilely respond to a
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money judgment and presents to the court a financially secure plan for maintaining that same
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degree of solvency during the period of an appeal.” Poplar Grove Planting & Ref. Co., 600 F.2d
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at 1191.
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Defendants assert that requiring them to purchase a bond would be a waste of money
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because bond issuers typically charge a 10% fee merely to issue the bond. (Id.). The size of the
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judgment in this case would thus cost Defendants around $400,000 regardless of whether they
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prevail on appeal. (Id.). Defendants claim that this amounts to a penalty for simply exercising
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their right to appeal this Court’s ruling. (Id. at 5). The Court disagrees. The dual purpose of a
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supersedeas bond protects the interests of both parties while the case in on appeal. The cost to an
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appellant to obtain a bond is what the appellant pays for the peace of mind that if the appellant is
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successful on appeal, he or she will not have to rely on the opposing party’s ability to repay the
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judgment in order to recoup what was spent to originally satisfy the judgment. It is no penalty.
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Defendants provide no evidence that the 10% fee is the only rate available or that when they
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went looking for a bond, 10% was the rate at which they would have been charged.
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But even if the Court assumes that Defendants will be out 10% of the bond’s value, that
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alone does not persuade the Court that Defendants’ situation reflects an extraordinary
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circumstance. Defendant Bing has the ability to obtain a bond as represented in his financial
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records and payment of the bond issuer’s fee would not cause irreparable harm even if
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Defendants ultimately prevail on appeal. Defendants provide no sort of plan to accompany the
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financial statement showing that Defendant Bing will remain at his current level of solvency
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throughout the appeal. The parties dispute over the actual value of the Clock Tower property,
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and there is no guarantee of what the property’s value will be at the conclusion of Defendants’
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appeal. Finally, the fact that the current bankruptcy reorganization plan would need to be
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amended before the Clock Tower property could be used as security for the judgment further
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convinces the Court that requiring Defendants to post a full bond is the appropriate method here.
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Therefore, the Court grants Defendants’ motion to stay the execution of judgment on the
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condition that Defendants post a full supersedeas bond in the amount of $3,343,412.62. This
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amount reflects the total judgment against Defendants less the $20, 673.81 payments made to
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Plaintiff from March 2014 through September 2014 as per the reorganization plan. If this
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Court’s judgment is affirmed, Plaintiff is to receive the amount of the bond less any payments
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made by Defendants on the Clock Tower property from October 2014 to the end of the appeal.
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CONCLUSION
IT IS HEREBY ORDERED that Plaintiff’s Motion for Attorneys’ Fees (ECF No. 71) is
GRANTED in part and DENIED in part with a fee award of $207,978.00.
IT IS FURTHER ORDERED that Defendant’s Motion for Stay of Execution on
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Judgment (ECF No. 78) is GRANTED on the condition Defendants post a bond in the amount of
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$3,343,412.62 within twenty (20) days of the issuance of this Order with a qualified third-party
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financial institution. Defendant’s Motion to Seal (ECF No. 83) is also GRANTED.
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IT IS SO ORDERED.
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Dated: _______________________
September 16, 2014.
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_____________________________________
ROBERT C. JONES
United States District Judge
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