Opinion
No. 3-99-CV-1196-R.
August 19, 2004
MEMORANDUM ORDER
Defendants Import Warehouse, Inc. and Ravi Bhatia have filed a motion to reduce the amount of the supersedeas bond required to stay a $2,476,099.92 judgment entered against them for willful contempt and infringement of two federally registered trademarks. For the reasons stated herein, the motion is denied.
The federal rules permit a party to stay the execution of a judgment pending appeal by giving a supersedeas bond. See FED. R. CIV. P. 61(d). Under Local Rule 62.1, such bond "shall be in the amount of the judgment, plus 20% of that amount to cover interest and any award of damages for delay, plus $250.00 to cover costs." N.D. Tex. LCivR 62.1. Although a district court has discretion to stay the execution of judgment without a supersedeas bond or to reduce the amount of bond required for such a stay, the burden is on the moving party to objectively demonstrate the reasons for such a departure. Poplar Grove Planting Refining Co. v. Bache Halsey Stuart, Inc., 600 F.2d 1189, 1191 (5th Cir. 1979). Among the factors relevant to deciding whether to waive the requirement of a full supersedeas bond are: (1) the complexity of the collection process, (2) the amount of time required to obtain a judgment; (3) the availability of funds to pay the judgment; (4) whether the debtor's ability to pay the judgment is so obvious that to require a bond would be a waste of money; and (5) whether the debtor's financial condition is so precarious that the requirement to post a bond would place other creditors in an insecure position. Wykle v. City of New Orleans, 1997 WL 266615 at *4 (E.D.La. May 20, 1997), citing Wilmer v. Board of County Commissioners of Leavenworth County, Kansas, 844 F. Supp. 1414, 1419 (D. Kan. 1993), aff'd, 28 F.3d 114 (10th Cir. 1994).
The amount of the judgment in this case is $2,476,099.92. Therefore, in order to stay execution of the judgment, defendants must post a supersedeas bond in that amount, plus 20% to cover interest and $250.00 to cover costs, for a total of $2,971,570.00. N.D. Tex. LCivR 62.1. Defendants have been unable to secure a loan to obtain the funds necessary to post a full supersedeas bond. As a result, defendants allege that they cannot obtain a bond "without extreme hardship upon [their] personal and business finances." (Def. App. at 003, ¶ 7; see also Def. Mot. at 2, ¶ 5). In order to alleviate this burden, defendants want the court to set a bond in the amount of compensatory damages, interest, and costs that does not exceed half the value of their net worth. Calculating compensatory damages at $200,000.00, or $100,000.00 per counterfeit mark, the amount of statutory damages for non-willful infringement under the Lanham Act, 15 U.S.C. § 1117(c), defendants argue that the amount of the bond should be reduced to $200,000.00, plus 20% to cover interest and $250.00 to cover costs, or $240,250.00. ( See id. at 3, ¶¶ 6-7).
This formula derives from the Texas Rules of Appellate Procedure, which provides, in pertinent part:
When the judgment is for money, the amount of the [supersedeas] bond, deposit, or security must equal the sum of compensatory damages awarded in the judgment, interest for the estimated duration of the appeal, and costs awarded in the judgment. But the amount must not exceed the lesser of:
(A) 50 percent of the judgment debtor's current net worth; or
(b) 25 million dollars.
TEX. R. APP. P. 24.2(a)(1).
The court rejects defendants' proposal for two reasons. First, defendants fail to present sufficient evidence to justify any departure from the usual requirement of a full security supersedeas bond. The only evidence offered by defendants in support of their motion is the conclusory, self-serving declaration of Ravi Bhatia that "[w]ithout a loan from a financial institution, I am unable to obtain the amount of money required for the bond without extreme hardship upon my personal and business finances." (Def. App. at 003, ¶ 7). No objective evidence, such as audited financial statements and net worth information, are presented to demonstrate "extreme hardship." Nor do defendants address the five factors relevant to deciding whether to waive the requirement of a full supersedeas bond. See Wykle, 1997 WL 266615 at *4. Second, defendants' proposed alternative bond amount is grossly inadequate to protect plaintiff's interests. The court awarded damages to plaintiff in the amount of $2,000,000.00 as a result of defendants' willful contempt and infringement of two federally registered trademarks. Another $435,608.78 was awarded in attorney's fees, together with $40,491.14 in investigative fees and expenses. A supersedeas bond in the amount of $240,250.00, as suggested by defendants, represents less than 10% of the amount of the judgment and is wholly inadequate to protect plaintiff in the event this case is affirmed on appeal.
As plaintiff correctly notes in its response, the court has previously found that Bhatia is not credible. ( See Findings of Fact and Conclusions of Law Nos. 18, 34, 43 65, 6/27/03).
Accordingly, defendants' motion to reduce amount of bond to stay execution of judgment is denied.
SO ORDERED.