J M Smith Corporation v. Cherokee Pharmacy and Medical Supply Inc et al

Filing 16

ORDER denying 2 Motion to Stay; denying 12 Motion for Leave to File Documents. Defendants may stay execution by posting a supersedeas bond, pursuant to Tennessee Rule of Civil Procedure 62.04, in the amount originally determined by the Trial Court, $924,559.10 [Doc. 5-1 at Page ID # 76]. Signed by Magistrate Judge Susan K Lee on 4/5/2017. (BDG, ) Mailed to Betts.

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF TENNESSEE
AT CHATTANOOGA

J M SMITH CORPORATION, d/b/a
SMITH DRUG COMPANY,

)
)
)
Plaintiff,
) Civil Action No. 1:17-mc-6-HSM-SKL
)
V.
)
)
CHEROKEE PHARMACY AND MEDICAL
)
SUPPLY, INC., d/b/a CHEROKEE PHARMACY, )
CHEROKEE HEALTH CARE SUPPLY, INC.,
)
CHEROKEE PHARMACY AND
)
MEDICAL SUPPLY OF DALTON INC.,
)
TERRY FORSHEE, INDIVIDUALLY, And
)
FORSHEE-CARDER PHARMACIES, INC.
)
d/b/a CHEROKEE ADVANCED CARE;
)
)
Defendants.
)

ORDER
Before the Court, is a Rule 62(f) motion for stay of execution pending appeal [Doc. 2]
and supporting memorandum [Doc. 3] filed by Cherokee Pharmacy and Medical Supply, Inc.
d/b/a Cherokee Pharmacy, Cherokee Health Care Supply, Inc., and Terry Forshee, Individually
(collectively “Defendants”).1 J M Smith Corporation d/b/a Smith Drug Company (“Plaintiff”)
filed a response [Doc. 5]. Defendants replied [Doc. 11]. The matter is now ripe and the Court

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In the underlying case, a judgment was rendered against all named defendants—Cherokee
Pharmacy and Medical Supply, Inc., d/b/a Cherokee Pharmacy, Cherokee Health Care Supply,
Inc., Forshee-Carder Pharmacies, Inc. d/b/a Cherokee Advanced Care Pharmacy, Cherokee
Pharmacy and Medical Supply of Dalton, Inc., and Terry Forshee, individually [Doc. 1 at Page
ID # 7-8]. Plaintiff also registered a foreign judgment against all defendants. However, here,
only three of the five defendants filed the Rule 62(f) motion for stay of execution pending appeal
[Doc. 2].

finds that a hearing on the instant motion is not required; rather this issue may be decided on the
briefs.2 Defendants’ motion was referred to the Court pursuant to 28 U.S.C. § 636(b) [Doc. 6].
I.

BACKGROUND
This matter originated in the United States District Court for the District of South

Carolina (“the Trial Court”). Following a jury trial, Plaintiff received a money judgment against
Defendants totaling $739,647.28 [Doc. 3 at Page ID # 55; Doc. 5 at Page ID # 61]. The amount
includes the jury verdict award [Doc. 1 at Page ID # 7-8], as well as pre-judgment interest,
attorney’s fees, and costs [Doc. 1 at Page ID # 48; Doc. 5 at Page ID # 61]. Defendants appealed
to the United States Fourth Circuit Court of Appeals [Doc. 5 at Page ID # 61]. The appeal is
pending [id.].
Defendants filed with the Trial Court a motion to stay execution pending appeal, seeking
to pledge 55 acres of real property as a security instead of filing a supersedeas bond. Id. The
Trial Court did not allow Defendants “to use the 55 acres as alternative security,” citing two
grounds. [Doc. 5-1 at Page ID # 75]. The Trial Court found, first, “Defendants have not shown
that the bond would be an undue financial burden” and second, “the 55 acres’ value is far too
speculative to secure [Plaintiff]’s interest in the monetary judgment.” Id. The Trial Court denied
Defendants’ motion but gave Defendants the opportunity to stay execution by “post[ing] a full
supersedeas bond in the amount of $924,559.10” by February 21, 2017 [id. at Page ID # 76]. If
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Plaintiff also filed a motion to file a surreply under E.D. Tenn. L.R. 7.1(d) [Doc. 12]. Plaintiff
seeks to respond to a portion of Defendants’ reply brief in which Defendants cite to a temporary
restraining order entered by the Chancery Court for Bradley County, Tennessee [Doc. 11 at Page
ID # 101]. Plaintiff states that “this new line of argument appears to potentially assert a res
judicata or collateral estoppel argument that was not presented in the Defendants’ initial motion.”
[Doc. 12 at Page ID # 110-11]. Plaintiff seeks permission “to address this new, potential
argument.” [id. at Page ID # 111]. Plaintiff’s motion [Doc. 12] is DENIED. Defendants did not
assert a res judicata or collateral estoppel argument in their reply brief [Doc. 11]. Further,
Plaintiff’s surreply on the issue of res judicata or collateral estoppel is not necessary for the
Court to address Defendants’ Rule 62(f) motion for stay of execution pending appeal.
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Defendants did not post bond, according to the Trial Court’s order, then the Trial Court would
grant Plaintiff’s motion for leave to register a judgment pursuant to 28 U.S.C. § 1963 [id.].
Plaintiff alleges that soon thereafter, it learned one of the Defendants intended to sell
certain assets and transfer ownership of certain corporate entities. [Doc. 5 at Page ID # 62]. The
Trial Court conducted a telephonic hearing with the parties on February 14, 2017 [Doc. 5 at Page
ID # 62]. In that hearing, Defendants conveyed that they had not and did not intend to post bond
[id.].

Accordingly, the Trial Court entered an order February 15, 2017 granting Plaintiff

permission, for good cause shown, “to register the judgment in Tennessee even though this
matter is currently on appeal with the Fourth Circuit.” [Doc. 1 at Page ID # 6]. Plaintiff
registered a foreign court judgment against Defendants in Tennessee on February 17, 2017 [Doc.
1]. Defendants filed the instant motion to stay execution pending appeal on March 20, 2017
[Doc. 2].
II.

ANALYSIS
Defendants rely on Federal Rule of Civil Procedure 62(f) in support of their motion

seeking a stay of execution pending appeal [Docs. 2, 3]. Rule 62(f) provides that: “If a judgment
is a lien on the judgment debtor’s property under the law of the state where the court is located,
the judgment debtor is entitled to the same stay of execution the state court would give.”
Defendants assert that “[t]he real property owned by Terry Forshee is located in the State of
Tennessee to which a lien has attached.” [Doc. 2 at Page ID # 52]. Citing Tenn. Code Ann. § 255-101, Defendants assert that in Tennessee a registered judgment acts as a lien on real property
[Doc. 3 at Page ID # 56]. Defendants conclude, then, that Rule 62(f) applies, Tennessee law
controls the issue of whether to grant a stay of execution pending appeal, and that Tenn. Code

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Ann. § 26-6-106 provides that enforcement of a foreign judgment must be stayed while an appeal
of the foreign judgment is pending [id.].
In its order entered February 2, 2017, the Trial Court noted that Defendants’ citation to
Rule 62(f) was “inapplicable as it applies when the judgment automatically constitutes a lien on
the judgment debtor’s property.” [Doc. 5-1 at Page ID # 75, n.2]. The Court now finds the rule
is similarly inapplicable in the current motion. Tennessee law provides that “[a] judgment lien
against the judgment debtor’s realty is created by registering a certified copy of the judgment in
the register’s office of the county where the realty is located.” Tenn. R. Civ. P. 69.07(2)
(emphasis added). Tenn. Code Ann. § 25-5-101(b) likewise provides that “. . . judgments and
decrees obtained from and after July 1, 1967, in any court of record . . . shall be liens upon the
debtor’s land from the time a certified copy of the judgment or decree shall be registered in the
lien book in the register’s office of the county where the land is located.” (Emphasis added.)
The court in Cadence Bank, N.A. v. Latting Rd. Partners, LLC, No. 09-2540, 2010 WL 4261230,
at *2 (W.D. Tenn. June 22, 2010), agreed with other holdings from the Sixth Circuit that had
found “Rule 62(f) does not create a basis for a stay where an intermediary step – such as
recordation – is required by state law in order to create a lien against a judgment debtor’s
property.” (citing Kennedy v. City of Zanesville, No. 2:03–cv–1047, 2008 WL 3993894, at *1
(S.D. Ohio Aug. 20, 2008); Lansing Mercy Ambulance Serv. v. Tri-Cty. Emergency Med.
Control Auth., Inc., No. 5:93:CV:25, 1996 WL 34363072, at *1-2 (W.D. Mich. May 20, 1996)).
The Lansing Court found that determining whether the state at issue is one in which the
judgment is a lien on the property of the judgment debtor is a “prerequisite” to determining the
applicability of Rule 62(f). Lansing, 1996 WL 34363072, at *1. Tennessee law requires an

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intermediary step to create a lien against a judgment debtor’s property. See Tenn. R. Civ. P.
69.07(2); Tenn. Code Ann. § 25-5-101(b). Rule 62(f), therefore, does not govern.
The Trial Court allowed Plaintiff to register the judgment in Tennessee pursuant to 28
U.S.C. § 1963.3 [Doc. 1 at Page ID # 5-6]; see Chicago Downs Ass’n, Inc. v. Chase, 944 F.2d
366, 372 (7th Cir. 1991) (holding that “[a] court with jurisdiction to authorize execution if the
appellant does not post a bond – power a district court possesses during an appeal – also may
make the findings that under § 1963 authorize execution in another district.”) Under this statute,
a judgment may be “registered in any district in which the debtor’s property is located,” and once
registered, the judgment will be “treated as if it were a judgment of the court of registration – as
stated earlier, it is no longer a ‘foreign’ judgment. Following registration, a judgment creditor
may secure a writ of execution from the registering court and deliver it to the local Marshal for
execution.” United States v. Palmer, 609 F. Supp. 544, 547-48 (E.D. Tenn. 1985). Accordingly,
then, “judgments registered pursuant to 28 U.S.C. § 1963 must be enforced in accordance with
the laws of the registering state.” Condaire, Inc. v. Allied Piping, Inc., 286 F.3d 353, 357 (6th
Cir. 2002); see also Palmer, 609 F. Supp. at 548 (finding, in part, “under § 1963, the law of the
state in which the court of registration sits controls the proceedings”).
In their reply brief, Defendants cite Condaire to support their position that Tennessee law
applies, and therefore, the judgment must be stayed pursuant to Tenn. Code Ann. § 26-6-106
3

28 U.S.C.A. § 1963 provides, in part:
A judgment in an action for the recovery of money or property
entered in any . . . district court . . . may be registered by filing a
certified copy of the judgment in any other district . . . when the
judgment has become final by appeal or expiration of the time for
appeal or when ordered by the court that entered the judgment for
good cause shown. . . . A judgment so registered shall have the
same effect as a judgment of the district court of the district where
registered and may be enforced in like manner. . . .
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[Doc. 11]. Defendants argue that Tenn. Code Ann. § 26-6-106 “directs this Court to enter a stay
of execution of the subject judgment when an appeal is pending of a foreign federal district court
judgment.” [Doc. 11]. Plaintiff objects to Defendants’ interpretation of Tenn. Code Ann. § 266-106(a), which provides:
If the judgment debtor shows the court of this state that an appeal
from the foreign judgment is pending or will be taken, or that a
stay of execution has been granted, the court shall stay
enforcement of the foreign judgment until the appeal is concluded,
the time for appeal expires, or the stay of execution expires or is
vacated.
Plaintiff asserts that the above statute indicates the stay of execution of the foreign judgment may
be lifted when “the stay of execution expires or is vacated,” meaning “the simple fact that the
appeal is pending does not require the automatic stay of the case pending the entirety of the
appeal before the Fourth Circuit” [Doc. 5 at Page ID # 68-69].
Plaintiff’s position is supported by Tenn. R. Civ. P. 62.04: “Except as otherwise provided
in Rule 62.01,4 when an appeal is taken the appellant by giving a bond may obtain a stay. The
bond may be given at or after the time of filing the notice of appeal. The stay is effective when
the bond is approved by the court.” Tenn. R. Civ. P. 62.04 (footnote added). Previously,
Tennessee state courts have held that “the filing of a notice of appeal, without more, does not
stay execution of the judgment.” Christmas v. Moore, No. 03A01-9705-CV-00188, 1998 WL
372431, at *3 (Tenn. Ct. App. July 6, 1998) (citing Underwood v. Liberty Mutual Ins. Co., 782
S.W.2d 175, 177 (Tenn. 1989)). “In order to obtain a stay of execution, Appellants must move
the trial court for a stay and give an appropriate bond.” Id. (emphasis added).
4

“Rule 62.01 provides certain exceptions for this automatic stay. These include: injunction and
receivership actions; actions that remove a public officer; and actions that change or otherwise
affect the custody of a minor child.” Harden v. Harden, No. M2009-01302-COA-R3-CV, 2010
WL 2612688, at *12 (Tenn. Ct. App. June 30, 2010) (citing Tenn. R. Civ. P. 62.01).
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III.

CONCLUSION
For the reasons set forth in this opinion, Defendants’ Rule 62(f) motion for stay of

execution pending appeal [Doc. 2] is DENIED. Defendants may stay execution by posting a
supersedeas bond, pursuant to Tennessee Rule of Civil Procedure 62.04, in the amount originally
determined by the Trial Court, $924,559.10 [Doc. 5-1 at Page ID # 76].
SO ORDERED.
ENTER.

s/fâátÇ ^A _xx
SUSAN K. LEE
UNITED STATES MAGISTRATE JUDGE

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