TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY v. TOTAL SYSTEMS, INC. et al

Filing 75

OPINION. Signed by Judge Dennis M. Cavanaugh on 6/14/11. (dc, )

NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
:
TRANSAMERICA OCCIDENTAL LIFE :
:
INSURANCE COMPANY,
:
:
Plaintiff,
:
:
v.
:
TOTAL SYSTEMS, INC., and TOTSYS, :
:
INC..
:
:
Defendant.

Hon. Dennis M. Cavanaugh

Civil Action No. 08-CV-1323 (DMC)(JAD)

OPINION

DENNIS M. CAVANAUGH, U.S.D.J.:
This matter comes before the Court upon motion by Total Systems, Inc. and Totsys Inc.
(collectively “Defendants”) for a stay pending appeal of this Court’s March 31, 2011 Opinion and
Order. Pursuant to Fed. R. Civ. P. 78, no oral argument was heard. After considering the
submissions of the parties, the decision of this Court upon this motion is set forth for the reasons
herein expressed separately below.
I.

BACKGROUND
Transamerica Occidental Life Insurance Company (“Transamerica” or “Plaintiff”) sought to

recover $1,978,418.11 that it overpaid to Defendants as death benefits under an individual life
insurance policy (the “Policy”) issued on the life of Robert Hendrickson (“Hendrickson”). The
Policy included an Aviation Exclusion Endorsement providing for reduced payout in the event that
Hendrickson died “as a result of operating, riding in or descending from any kind of aircraft while
. . . a crew member of that aircraft.” Defendants denied that the Policy contained an Aviation

Exclusion Endorsement, but were unable to produce the original Policy. By contrast, Transamerica
produced the Life Policy Invoice, which was automatically generated and printed at the same time
as the policy and is a precise record of each of the forms, amendments, and endorsements contained
within the referenced policy. The Life Invoice Policy for Hendrickson contained several references
to the Aviation Exclusion Endorsement.
Hendrickson died while piloting a private airplane in Alaska on August 6, 2007, and on
November 5, 2007, a claims examiner for Transamerica mistakenly paid $2,003,888.36 in death
benefits to Defendants. Based on the Aviation Exclusion Endorsement, the payment under the
Policy should only have been $25,470.25. On January 2, 2008, a Transamerica claims examiner
advised Defendants of the error and requested return of the overpayment. Defendants refused to
return the alleged overpayment, and Transamerica subsequently filed suit to recover the monies it
overpaid. After discovery, both parties moved for summary judgment. On March 31, 2011, this
Court issued an Opinion and Order granting Plaintiff’s motion for summary judgment and ordering
Defendants to pay Plaintiff $1,978,418.11 within sixty days of the Judgment. Defendants timely
filed for an appeal, which is pending before the Third Circuit. Defendants subsequently filed a
motion to stay this Court’s March 31, 2011 Judgment pending Defendants’ appeal.
III.

JURISDICTION
“[T]he timely filing of a notice of appeal is an event of jurisdictional significance,

immediately conferring jurisdiction on a Court of Appeals and divesting a district court of its
control over those aspects of the case involved in the appeal.” In re Advanced Electronics, Inc.,
283 Fed. Appx. 959, 963 (3d Cir. 2008) (internal citations omitted). However, during the
pendency of an appeal, a district court “is not divested of jurisdiction to... issue orders regarding

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the filing of... supersedeas bonds” or issuing a stay. Id.; see also Fed. R. App. P. 8(a)(1)(A)(B)(“[a] party must ordinarily move first in the district court for the following relief: (A) a stay of
the judgment or order of a district court pending appeal; [or] (B) approval of a supersedeas
bond.”).
Accordingly, this Court has jurisdiction to decide Defendants’ motion, and enter an order
staying the judgment and approving a supersedeas bond as it deems appropriate.
III.

LEGAL STANDARD
Judgment debtors who are appealing a District Court’s decision to a Court of Appeals

may move for a stay of a monetary judgment under Fed. R. Civ. P. R 62(d).1 “If an appeal is
taken, the appellant may obtain a stay by supersedeas bond . . . [T]he bond may be given upon or
after filing the notice of appeal or after obtaining the order allowing the appeal. The stay takes
effect when the court approves the bond.”
A party appealing a decision from the District Court “is entitled to a stay of a money
judgment as a matter of right if he posts a bond in accordance with Fed. R. Civ. P. 62(d).”
Pharmacia Corp. V. Motor Carrier Services Corp., 2008 WL 852255, at *4 (D.N.J. March 28,

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Defendants moved for a stay pursuant to Fed. R. Civ. P. 62(b)(4) and 60(b)(6). Rule
62(b)(4) provides in relevant part, “on appropriate terms for the opposing party’s security, the
court may stay execution of a judgment... pending disposition of ...[a] motion[]... under Rule 60,
for relief from a judgment or order.” Fed. R. Civ. P. 62(b)(4). Rule 60(b)(6) provides in relevant
part, “the court may relieve a party... from a final judgment, [or] order for... any other reason that
justifies relief.” Fed. R. Civ. P. 60(b)(6). Although Defendants have captioned their motion as
one under Rule 60(b)(6), Defendants’ moving papers have failed to address Rule 60(b)(6)
entirely. Accordingly, to the extent Defendants’ moved for relief under Rule 60(b)(6), their
motion is denied. Since Rule 62(b)(4) only applies when a Rule 60 motion is pending, and no
such motion is pending before this Court, Rule 62(b)(4) is not applicable. However, Rule 62(d)
provides authority for this Court to stay judgment pending appeal to the Third Circuit, so this
Court will evaluate Defendants’ motion pursuant to Rule 62(d).
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2008). "A supersedeas bond is any form of security, whether in the form of cash, property, or
surety bond, which a court may require of one who petitions to set aside a judgment or execution
and from which the other party may be made whole if the action is unsuccessful." Id. "In order to
make the other party whole, such a supersedeas bond must normally be in a sum sufficient to pay
the judgment and costs, interest, and damages for delay." Id. (internal citations omitted); see also
AMG Nat’l Trust Bank v. Ries, 2008 U.S. Dist. LEXIS 44014, at *4 (E.D. Pa. June 4, 2008)
(“Given that the purpose of the supersedeas bond is to preserve the status quo during the
pendency of an appeal and to protect the winning party from the possibility of loss resulting from
the delay in execution, the bond should normally be sufficient in amount to satisfy the judgment
in full, plus interest and costs.”). “The amount of the bond -- and in fact, whether to require a
bond at all -- remains within the Court's discretion.” Pharmacia, 2008 WL 852255 at *4.
“While the Third Circuit has not spoken on the issue, district courts in this circuit have
joined Courts of Appeals of sister circuits in holding that Rule 62(d) does not limit district courts
from exercising their discretion to waive the supersedeas bond requirement in certain cases.”
Church & Dwight Co., Inc. V. Abbott Laboratories, 2009 U.S. Dist. LEXIS 64459, at *40
(D.N.J. July 23, 2009)(citing Tomasko v. Ira H. Weinstock, P.C., 2009 U.S. Dist. LEXIS 17334,
at *2 (M.D. Pa. Mar. 6, 2009)). “However, courts have also held that they should only exercise
this discretion in exceptional circumstances and where there exists an alternative means of
securing the judgment creditor’s interest.” Id. (emphasis added) (internal citations omitted). “It
is the appellant's burden to demonstrate objectively that posting a full bond is impossible or
impracticable; likewise it is the appellant's duty to propose a plan that will provide adequate (or
as adequate as possible) security for the appellee." AMG Nat’l Trust Bank, 2008 U.S. Dist.

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LEXIS 44014 at *4.
When determining whether an exceptional circumstance exists, the courts are directed to
consider “(1) the complexity of the collection process; (2) the amount of time required to obtain a
judgment on appeal; (3) the degree of confidence that this Court has in the availability of funds to
pay the judgment; (4) whether the [debtor’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 [debtor] is in such a precarious
financial situation that the requirement to post a bond would place the other creditors of the
debtor in an insecure position.” Grant v. Omni Health Care Systems of NJ, Inc., 2010 U.S. Dist.
LEXIS 82963 at *2 (D.N.J. Aug. 13, 2010)(citing Church & Dwight Co., Inc., 2009 U.S. Dist.
LEXIS 64459 at *41-42).
IV.

DISCUSSION
Defendants are entitled to a stay of the money judgment as a matter of right pending their

appeal of this Court’s Opinion and Order. Fed. R. Civ. P. 62(d); Pharmacia, 2008 WL 852255 at
*4.
Defendants are seeking a waiver of the supersedeas bond requirement. Plaintiff opposes
any waiver of the bond. As noted above, this Court has discretion to waive the bond requirement
provided Defendants demonstrate exceptional circumstances and an alternative means of
securing the judgment creditor’s interest exist.
In determining whether to waive the supersedeas bond requirement, this Court will rely
on the five factors set forth in Church & Dwight Co., Inc. and Grant as stated above. Since
Defendants did not specifically address the factors relevant to determining whether the bond

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should be waived,2 this Court is left to guess as to whether the factors are satisfied. Defendants’
briefs indicate that the collection process would be complex, and that Defendants’ are currently
incapable of paying the judgment because their assets are not liquid. Both of these facts weigh
heavily against waiving the bond requirement. Although Defendants claim that posting a bond
would be cost prohibitive, beyond their bare allegations, they fail to demonstrate why a bond
would be impractical or impossible, particularly since a supersedeas bond may be “in the form of
cash, property, or surety bond.” AMG Nat’l Trust Bank, 2008 U.S. Dist. LEXIS 44014 at *4.
Defendants have also failed to address whether an alternative means for securing the judgment
exists.
Based on the foregoing, this Court finds Defendants have failed to demonstrate that
exceptional circumstances and alternative means of securing the judgment creditor’s interest
exists. Accordingly, this Court find that the supersedeas bond requirement should not be waived
in this case.
V.

CONCLUSION
In accordance with the foregoing, Defendants’ motion for a stay is granted provided

Defendants post a bond in the amount of $1,978,418.11, which represents the amount Defendants
were ordered to pay Plaintiffs in this Court’s March 31, 2011 Order.

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This Court notes that Defendants did not address the five factors that must be considered
in deciding whether to waive the bond requirement. Instead, in both their moving papers and
Reply, Defendants focused on factors used to determine whether a stay is appropriate under Fed.
R. Civ. P. 62(b)(4). As previously stated, pursuant to Fed. R. Civ. P. 62(d), Defendants are
entitled to a stay pending appeal as a matter of right, provided they post a supersedeas bond. At
issue here is whether the bond should be waived, not whether the Judgment should be stayed.
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An appropriate Order accompanies this Opinion.

S/ Dennis M.Cavanaugh
Dennis M. Cavanaugh, U.S.D.J.
Date:
Orig.:
cc:

June 14 , 2011
Clerk
Counsel of Record
The Honorable Joseph A. Dickson, U.S.M.J.
File

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