Solis v. El Tequila, LLC et al

Filing 357

OPINION AND ORDER by Judge John E Dowdell granting in part and denying in part Defendants' Motion for Stay of Execution and Waiver of Supersedeas Bond or, in the Alternative, Approval of a Supersedeas Bond Consisting of Irrevocable Letters of Credit in the Total Amount of $300,000 (Doc. 319). ; setting/resetting deadline(s)/hearing(s): ( Miscellaneous Deadline set for 4/6/2016); granting in part and denying in part 319 Motion to Stay (Re: 313 Judgment, Entering Judgment, ) (SAS, Chambers)

UNITED STATES DISTRICT COURT FOR THE
NORTHERN DISTRICT OF OKLAHOMA
THOMAS E. PEREZ, Secretary of Labor,
United States Department of Labor,
Plaintiff,
v.
EL TEQUILA, LLC, and
CARLOS AGUIRRE, Individually,
Defendants.

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Case No. 12-CV-588-JED-PJC

OPINION AND ORDER
Before the Court are Defendants’ Motion for Stay of Execution and Waiver of
Supersedeas Bond or, in the Alternative, Approval of a Supersedeas Bond Consisting of
Irrevocable Letters of Credit in the Total Amount of $300,000 (the “Motion”) (Doc. 319) and
plaintiff’s (the “Secretary”) Response in Opposition to the Motion (Doc. 326). On March 10,
2016, the Court held a hearing on the parties’ filings.
Background
On December 22, 2015, following a jury trial, the Court entered a judgment granting the
Secretary’s renewed motion for judgment as a matter of law, based on its conclusion that
defendants willfully violated the Fair Labor Standards Act. (Doc. 307). On January 6, 2016, the
Court entered an Amended Judgment in the amount of $2,137,627.44. (Doc. 313). Defendants
appealed on January 7, 2016. (Doc. 314). On January 12, 2016, defendants filed the Motion,
seeking a stay on execution of the judgment pending appeal and waiver of a supersedeas bond or,
alternatively, a reduced supersedeas bond in the amount of $300,000, consisting of irrevocable
letters of credit. The Court granted the Motion in part, as to the stay of execution pending a

hearing on the supersedeas bond issue. (Doc. 334). The Court also authorized expedited postjudgment discovery pursuant to Rule 69 of the Federal Rules of Civil Procedure. (Id.).
Defendants’ positions both in the Motion and at the March 10 hearing, remained that
posting the full amount of the bond would be impossible and impracticable. In support of their
position, defendants relied solely on a one page signed affidavit from defendant Carlos Aguirre
which stated that “Defendants do not have such assets” to post the full bond. The affidavit
further stated that requiring payment of the bond in full would force the restaurants “to seek
bankruptcy,” and “to [] close[] and all the employees would be without jobs.” (Doc. 319-1, ¶ 4).1
The Secretary opposed the Motion on several grounds. The Secretary argued that Mr.
Aguirre’s single affidavit was not enough to serve as credible evidence in support of waiving or
reducing a supersedeas bond. (Doc. 326 at 3). Next, the Secretary took issue with the fact that
defendants’ Motion only cited to the restaurants’ alleged financial situation and made no mention
of defendant Carlos Aguirre’s own financial solvency, or lack thereof. (Id.). The Secretary also
stated that defendants erred in filing the Motion without providing any evidence of “diligent
efforts undertaken to secure the full supersedeas bond.” (Id.).
At the March 10 hearing, the Secretary introduced substantial evidence obtained from
Rule 69 discovery regarding the finances of both defendants in the form of deposition testimony,
bank statements, tax returns, safety deposit box information, lines of credit, balance sheets, real

1

To be clear, the affidavit contained five numbered statements in support of defendants’ claim
that they lacked sufficient assets to post a full bond: the first stating “I am a Defendant in this
civil suit”; the second stating that the facts in the affidavit “are based on [Aguirre’s] personal
knowledge”; the third stating that the Amended Judgment amount was $2,137,627.44; and the
fifth stating “Further Affiant sayeth not.” The fourth paragraph was only marginally relevant
and its substance is fully stated above. (Doc. 319-1, ¶¶ 1-5)
2

estate mortgages, life insurance, property taxes, car titles, and insurance statements. (See Exs. 16).2 Defendants provided no additional evidence in support of their Motion.3
Standard
Rule 62(d) of the Federal Rules of Civil Procedure provides:
When an appeal is taken the appellant by giving a supersedeas
bond may obtain a stay . . . . The bond may be given at or after the
time of filing the notice of appeal or of procuring the order
allowing the appeal, as the case may be. The stay is effective when
the supersedeas bond is approved by the court.
Fed. R. Civ. P. 62(d). The Tenth Circuit has recognized that “the purpose of a supersedeas bond
is to secure an appellee from loss resulting from the stay of execution and that a full supersedeas
bond should be the requirement in normal circumstances.” Miami Int’l Realty Co. v. Paynter,
807 F.2d 871, 873 (10th Cir. 1986) (citations omitted).

The district court has “inherent

discretionary authority in setting supersedeas bonds.” Id.; see also Strong v. Laubach, 443 F.3d
1297, 1299 (10th Cir. 2006) (“The bond secures the judgment against insolvency of the judgment

2

At the March 10 hearing, the Secretary introduced six exhibits into the record: charts
summarizing Aguirre’s finances admitted pursuant to Rule 1006 of the Federal Rules of
Evidence (Ex. 1), the transcript of Aguirre’s March 3, 2016 deposition (Ex. 2), a CD with 1225
pages of financial documents produced by defendants in response to Rule 69 discovery, such as
bank statements, tax returns, safety deposit box information, lines of credit, balance sheets, real
estate mortgages, life insurance, property taxes, car titles, and insurance statements (Ex. 3),
additional Rule 69 discovery documents provided by defendants on March 7, 2016 (Ex. 4), El
Tequila, LLC’s balance sheet as of December 31, 2015 (Ex. 5), and documents related to
properties owned by Aguirre obtained from the Tulsa County Assessor’s website (Ex. 6).
3

At the hearing, defendants sought to introduce an expert witness to testify regarding El Tequila,
LLC’s projected financial solvency in 2016. The Court did not allow the expert to testify
because (1) defendants failed to comply with Local Rule 43.1 by not disclosing the witness to the
Court prior to the hearing, and (2) the Court determined that predictions regarding the
restaurants’ financial state in the coming months have little, if any, relevance to the defendants’
ability to post the bond at this time.
On March 22, 2016, with permission from the Court, defendants supplemented the record with
interrogatories and requests for production propounded by the Secretary pursuant to Rule 69.
(Doc. 356).
3

debtor and is usually for the full amount of the judgment, though the district court has discretion
in setting the amount.”).
Discussion
The Court having considered the parties’ briefing, the argument from the March 10
hearing, the evidence, and applicable law, finds that waiver or reduction of the supersedeas bond
will not be granted in this case. As discussed further herein, defendants’ request is denied given
their abject failure to satisfy their burden of objectively demonstrating financial difficulty and
thus the Court cannot depart from the normal rule of requiring defendants to post the full bond.
In stark contrast to the defendants’ showing, the Secretary introduced substantial evidence
demonstrating that defendant Carlos Aguirre’s net worth alone exceeds the amount of the
supersedeas bond.
Defendants’ evidence
There is no question that defendants failed to make the requisite showing of financial
difficulty in support of the Motion. In fact, defendants were unable to provide any objective
evidence of financial difficulty for either defendant Aguirre or defendant El Tequila, LLC.
Including the El Tequila LLC assets available from the four restaurants, the defendants’ ability to
post a full bond is even more so beyond dispute.4
Tenth Circuit law makes clear that the party seeking waiver or reduction of a supersedeas
bond has the burden to objectively demonstrate financial difficulty in posting the entire bond
amount. See Paynter, 807 F.2d at 873-74; Poplar Grove Planting & Ref. Co. v. Bache Halsey
Stuart, Inc., 600 F.2d 1189, 1191 (5th Cir. 1979) (“If a court chooses to depart from the usual
requirement of a full security supersedeas bond to suspend the operation of an unconditional

4

El Tequila, LLC is comprised of four restaurants.
4

money judgment, it should place the burden on the moving party to objectively demonstrate the
reasons for such a departure.”); see also Farm Bureau Life Ins. Co. v. Am. Nat. Ins. Co., 2009
WL 961171, at *1 (D. Utah Apr. 8, 2009) (“The appealing party has the burden of demonstrating
objectively that posting a full bond is impossible or impractical.”); United States v. Kurtz, 528 F.
Supp. 1113, 1115 (E.D.Pa.1981) (“It is the appellant’s burden to demonstrate objectively that
posting a full bond is impossible or impractical; likewise it is the appellant’s duty to propose a
plan that will provide adequate (or as adequate as possible) security for the appellee.”).
As stated above, defendants’ Motion is premised solely upon a one-page affidavit signed
by defendant Aguirre. Case law that defendants themselves rely on makes clear that an affidavit,
without more, is not enough to justify waiving the full supersedeas bond requirement.5 Paynter,
807 F.2d at 874 (affidavit in combination with additional evidence of limited financial assets
ascertained at hearing warranted reduced bond amount); see also Am. Bank & Trust Co. v. Bond
Int’l Ltd., 2007 WL 1187997, at *4 (N.D. Okla. Apr. 19, 2007) (“Paynter does not suggest that a
judgment debtor’s bare assertion that he lacks sufficient funds to post a full supersedeas bond
justifies waiving [the full supersedeas bond] requirement.”).
The affidavit itself merely states a claim that defendants “do not have assets” to post the
full bond. (Doc. 319-1, ¶ 4). The case law is clear that an affidavit of this type is not enough,
yet no objective evidence of any kind was provided from the defendants. Further, the Court
notes defendants’ utter failure to mention Aguirre’s financial status in his affidavit, despite the
fact that both Aguirre and El Tequila, LLC are jointly and severally liable for the judgment.6

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The Court’s February 17, 2016 Order (Doc. 334) setting the hearing made clear that, based on
the affidavit alone, defendants’ Motion could not be granted. (Doc. 334 at 2).
6

At his deposition, Aguirre acknowledged that he is responsible for the entire judgment amount.
(Ex. 2, at 12:7-13).
5

Equally troubling is defendants’ inability to produce evidence in support of their assertion that
they are only financially capable of providing $300,000 in irrevocable letters of credit. At the
hearing, defendants were unable to explain to the Court how they determined the reduced
amount of $300,000. While the Court recognizes that alternative security to a supersedeas bond
may be appropriate in some circumstances, it is not in this case, as defendants failed to
demonstrate that their “present financial condition is such that the posting of a full bond would
impose an undue financial burden” that justifies “some other arrangement for substitute
security.” Poplar Grove, 600 F.2d at 1191.
The Secretary’s evidence
The Secretary provided an abundance of evidence at the March 10 hearing which
unquestionably demonstrates that defendant Aguirre is financially secure and certainly capable
of posting the entire supersedeas bond. Importantly, defendants did not contest the Secretary’s
evidence, nearly all of which came from the defendants themselves.
The Court may take into account evidence from the party opposing waiver or reduction of
a full supersedeas bond that contradicts the movant’s assertions of financial difficulty. See
Paynter, 807 F.2d at 874. The Secretary’s evidence shows that Aguirre maintains twenty bank
accounts in his name—one account for each of the four restaurant locations, and the remaining
sixteen accounts for personal use.7 Based on Aguirre’s bank statement balances from December

7

It should be noted that while Aguirre maintains separate accounts for his personal use and
business use, the money is not treated as though separate. For example, Aguirre testified that he
did not regularly make his federal income tax payments from a specific account, but could have
made payments from “any of the accounts.” (Ex. 2, at 170:5-12). Further, Aguirre recently
opened a personal Central Bank of Oklahoma account, but records show that the flow of money
to and from this account includes funds from both Aguirre’s personal and restaurant accounts.
(Ex. 2, at 84:1-85:6).
6

2015 through February 2016, Aguirre has available approximately $586,792 in cash across these
accounts.

(Ex. 1). Aguirre also stores cash in safety deposit boxes at his home and at two

restaurant locations, in the total amount of $62,000. Aguirre’s estimated total cash on hand is
thus $648,792.8 (Id.).
Aguirre owns thirteen properties: eight homes and one vacant plot of land in Oklahoma,
two homes in South Carolina, and two homes in Guatemala, the second of which is being built at
this time.9 (Ex. 1; Ex. 6; Ex. 2, at 43:21-25). Aguirre owns all of the fixtures and equipment at
each of the four El Tequila, LLC locations (Ex. 2, at 188:17-25), which he valued at a total
amount of $396,532.56. (Ex. 5). Aguirre also owns three cars, each of which he bought with
cash, with a total value of $107,000. (Ex. 2, at 155:23-158:18; Ex. 1). The Secretary’s summary
exhibit demonstrates that Aguirre’s total net worth—comprised of cash and property—is
approximately $2,891,142 (Ex. 1).

Taking into account Aguirre’s deposition testimony,10

however, this amount is more likely $2,991,142 or more. This number alone is more than the
full value of the supersedeas bond.
But that is not the extent of Aguirre’s wealth. In addition to the nearly $3 million Aguirre
has readily available at this time, he regularly receives income from two sources: profits from his
four restaurants and rental payments from his seven rental properties. (Ex. 1; Ex. 2, at 168:138

This number is significantly higher as of March 3, 2016, based on Aguirre’s deposition
testimony. Aguirre’s testimony suggests that the additional funds deposited in each restaurant
account may equal an additional $100,000. (See Ex. 2, at 76:20-77:3, 81:17-21, 85:18-86:3;
91:23-92:3). This implies that Aguirre’s estimated total cash on hand is closer to $750,000 or
more.

9

Aguirre purchased one of the Guatemala properties, which he referred to as a vacation property
“[r]ight in front of the water,” in December 2015 for $265,000 in cash. Aguirre admitted that he
bought the property after the $1.7 million judgment had been entered against him. (Ex. 2, at
21:22-25, 24:13-25:2, 38:2-24).
10

See supra note 8.
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14). Aguirre’s tax returns indicate that the restaurants have done extremely well in the past few
years, netting gross sales of between $4.6 million and $8.6 million per year from 2009 through
2014. (Ex. 3, at 1009, 1033, 1092, 1115, 1149; Ex. 1). Aguirre testified that his adjusted gross
income from 2009 to 2014 was $4,011,391. (Ex. 2, at 214:3-7).11
Moreover, the evidence shows that Aguirre is virtually debt free. He testified that of his
thirteen properties in Oklahoma, South Carolina, and Guatemala, only one of his properties has a
mortgage, and that mortgage has a balance of $62,601.70.12 (Ex. 2, at 129:21-130:1; Ex. 3, at
1183-84; Ex. 4, at 1254).

Aguirre also has a single line of credit in the amount of $200,000.

(Ex. 3, at 1168-69). The evidence thus clearly demonstrates that Aguirre’s wealth—nearly $3
million in cash and equity, in addition to regular income from his restaurants and rental
properties—far exceeds the amount of the supersedeas bond. 13
Analysis
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Aguirre’s ability to loan, donate, or give large sums of money to others is also indicative of his
significant wealth. For example, Aguirre’s charity donations equaled $125,357 in 2014 (Ex. 3,
at 1008), $92,941 in 2013 (Ex. 3, at 1032), $77,529 in 2012 (Ex. 3, at 1073), and $79,340 in
2011 (Ex. 3, at 1091). Aguirre also transferred a total of $116,900 to family members from
December 2014 through December 2015. (Ex. 1). The El Tequila, LLC balance sheet as of
December 31, 2015 lists $1,328.67 in employee loan/advance assets. (Ex. 5).

12

This debt is not a conventional debt, however. Aguirre bought the property for his brother and
his brother makes regular payments to Aguirre toward the mortgage. (Ex. 2, at 124:15-25).

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In addition to the fact that defendants ignored Aguirre’s substantial wealth in filing the
Motion, the Court is also troubled by the actions Aguirre took in relation to his finances both
during the litigation and pending resolution of the supersedeas bond matter. Specifically,
Aguirre testified that he opened a new personal account with the Central Bank of Oklahoma
upon counsel’s advice—“in case any of the other accounts were to be frozen”—so that he may
“cover any kind of expenses.” (Ex. 2, at 85:7-12; see also Ex. 2, at 47:22-48:6). On January 19,
2016, just after the Amended Judgment was entered against him, Aguirre transferred $530,000
from the four restaurant accounts and one personal account into the new Central Bank of
Oklahoma account. (Ex. 3, at 984; see also Ex. 2, at 83:23-85:12). Additionally, Aguirre placed
seven pieces of his property into a revocable living trust on November 17, 2015. (Ex. 4, at 122231).
8

In light of the overwhelming and uncontroverted evidence the Secretary has provided
demonstrating Aguirre’s financial stability, compared to the lack of objectivity of Aguirre’s
affidavit in support of the Motion and defendants’ failure to provide the Court with any
additional evidence, the Court finds defendants will not suffer irreparable harm as they
repeatedly assert if required to post the full supersedeas bond. The Court further finds that
alternative security of $300,000 in letters of irrevocable credit is unwarranted.
The Court notes that Paynter, which defendants cite in support of the Motion (Doc. 319),
is particularly instructive here. In Paynter, the Tenth Circuit upheld the district court’s order
allowing the judgment debtor to post $500,000 in lieu of the full supersedeas bond payment of
$2.1 million, because the evidence ascertained at the supersedeas bond hearing “indicate[d] that
[the debtor] did not have any significant assets.” 807 F.2d at 872 (noting that after the verdict
was entered against him, the debtor withdrew all the funds from his bank account, lost between
$60,000-$70,000 gambling, and shut down his law practice). The exact opposite is true in this
case. In their filings and at the March 10 hearing, defendants have provided nothing more than
empty assertions that the El Tequila, LLC restaurants will face insolvency if defendants are
required to post the full bond. Aguirre himself has experienced no recent financial hardship, as
is evident by his purchase of a vacation property after judgment was entered against him. The
Court cannot find, as defendants repeatedly contend, that any “extraordinary and unusual
circumstances” (Doc. 319 at 2) exist to justify waiving or reducing the supersedeas bond. In the
absence of such evidence, the Court may not ignore its duty to ensure that the Secretary’s
judgment is protected during appeal. See Paynter, 807 F.2d at 873.
The Court’s holding is consistent with decisions issued by other district courts faced with
motions to waive or reduce supersedeas bonds. See, e.g., Arriaga v. Jess Enterprises, 2014 WL

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1875917 (N.D. Tex. Apr. 10, 2014) (denying motion to file irrevocable letter of credit in lieu of
supersedeas bond where parties failed to objectively demonstrate reasons from departing from
the full bond); Farm Bureau Life Ins. Co. v. Am. Nat. Ins. Co., 2009 WL 961171 (D. Utah Apr.
8, 2009) (ordering debtor to post full supersedeas bond because the debtor’s net worth was
greater than the judgment, and thus “requiring the company to post a bond in the amount of the
full award would not financially compromise the company”); Am. Bank & Trust Co. v. Bond Int’l
Ltd., 2007 WL 1187997 (N.D. Okla. Apr. 19, 2007) (finding waiver of full supersedeas bond
based on a single affidavit improper, but granting reduced bond because other evidence in the
record demonstrated defendants faced “significant financial difficulties”); Slaby v. Berndt, 2007
WL 5517473 (W.D. Wisconsin Apr. 5, 2007) (stating that defendants provided “no basis” to
justify “substitut[ing] the line of credit for a [supersedeas] bond”); Evolution, Inc., v. Sun Trust
Bank, 2005 WL 1041348 (D. Kan. Jan. 10, 2005) (rejecting irrevocable letter of credit in lieu of
the full supersedeas bond where debtor failed to satisfy burden); Sierra Club v. El Paso Gold
Mines, Inc., 2003 WL 25265871 (D. Colo. Apr. 21, 2003) (denying defendant’s proposal of
alternative security in lieu of a full supersedeas bond where defendant did not provide sufficient
evidence in support of the proposal, and failed to objectively demonstrate financial inability to
post the full bond). Accordingly, waiver of the full bond requirement is not appropriate in this
case.
Conclusion
Defendants’ Motion (Doc. 319) requests that the Court waive the entire supersedeas bond
of $2,137,627.44 or alternatively, grant a reduced supersedeas bond consisting of $300,000 in
letters of irrevocable credit. There is no question that defendants, by producing only a singlepage affidavit and only cursory argument at the March 10 hearing, have failed to meet their

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burden to demonstrate that they are entitled to waiver of the standard requirement to post a
supersedeas bond for the full amount of the monetary judgment issued by the Court. The
absence of credible evidence to support defendants’ Motion stands in stark contrast to the
voluminous records introduced by the Secretary which indisputably show that defendant
Aguirre’s wealth renders him able to post the entire bond. Accordingly, the Court denies the
defendants’ request to waive or reduce the supersedeas bond amount.
IT IS THEREFORE ORDERED that defendants’ Motion (Doc. 319) is granted in
part and denied in part.

The Motion is granted as to the defendants’ request to stay

enforcement of the judgment pending appeal, but defendants’ request to waive the entire bond
amount or alternatively, post a reduced supersedeas bond of $300,000 in irrevocable letters of
credit, is denied.
The stay of execution herein ordered is conditioned upon defendants’ compliance with
the following terms:
1. Defendants shall post a supersedeas bond in the entire amount of $2,137,627.44 plus
0.66 percent interest14 within fifteen (15) days of the date of this Order. If the
supersedeas bond plus interest is not posted in full, the Secretary is entitled to execute
on the Amended Judgment.
2. From the date of this Order until the appeal of the judgment in this matter is resolved,
defendants are prohibited from transferring any assets, including but not limited to
money and/or real property, other than what is reasonably necessary for purposes of
14

The interest rate of 0.66 percent was the weekly average 1-year constant maturity treasury
yield for the calendar week preceding January 6, 2016, the date of the Amended Judgment. See
28 U.S.C. § 1961(a). Post-judgment interest is to be calculated from the date of entry of the
judgment order. Id. The rate is published by the Board of Governors of the Federal Reserve
System at http://www.federalreserve.gov/releases/h15/current/.
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providing for costs of living and operating the El Tequila, LLC restaurants within the
regular course of business and operation.

This requirement applies to all bank

accounts held by defendant Carlos Aguirre, defendant El Tequila, LLC, defendant
Carlos Aguirre’s spouse and/or children, and/or held in trust.
SO ORDERED this 22nd day of March, 2016.

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