Appellate stays in civil cases: Florida and federal courts offer more security flexibility than believed, but stay violations still have teeth.
In the January 2012 edition of The Florida Bar Journal, Anthony J. Russo published one of the most current, thorough discussions of stays in Florida state courts generally. (3) This article builds on that discussion and addresses Florida and federal law on stays and alternative security in the cases of money judgments. This article does not attempt to rewrite the general rules on appellate stays or discuss appellate stays and bonds in the narrow context of the Florida Tobacco Settlements, F.S. [section]569.23 (2012) and F.S. [section]768.733 (2012), which are left for another day.
Historical Purpose Behind Appellate Stays xxxx The U.S. Supreme Court considers appellate stays to be a vital part of a court's "traditional equipment for the administration of justice." (4) A stay suspends enforcement of an order or judgment, (5) to hold an order or judgment while the appellate court assesses the legality of the order on appeal. (6) While a stay is an inherent power of an appellate court, a stay without the posting of a full bond (discussed below) "is not a matter of right." (7) Appellate courts may grant stays on a case-by-case basis, (8) and may consider 1) a strong showing of the likelihood of success on the merits; 2) whether the aggrieved party will be irreparably injured absent the stay; 3) whether issuance of the stay will irreparably injure other parties; and 4) where the public interest lies. (9) If a stay is not issued, then an order must be obeyed until it is reversed, and this is true even if the act under which the order is issued is unconstitutional. (10)
In particular cases, such as judgments solely for the payment of money, the appellate court may require a bond from the party requesting the stay. (11) This type of bond is called a supersedeas bond or an "appeal bond." The purpose of such a bond is to "protect the party in whose favor judgment was entered by assuring its payment" should the appeal prove unsuccessful. (12)
Rules on Appellate Stays in the Supersedeas Bond Context in Federal Court
Fed. R. of Civ. P. 62 governs federal stays granted in the district courts and sets forth when the actions are permitted. An interlocutory or final judgment in an action for an injunction or a receivership and a judgment or order that directs an accounting in an action for patent infringement may not be stayed. (13) A court may, however, stay an execution of judgment while awaiting the outcome of any of the following: judgment as a matter of law; amending the findings or for additional findings; a new trial or altering or amending a judgment; or relief from a judgment or order. (14) To that end, the aggrieved party may need to obtain a superseadas bond when seeking a stay for any action, except when waiting for the outcome of judgment as a matter of law or when a stay has been granted to amend findings or allow for additional findings. (15) However, the United States, its officers, and its agencies will not be required to post such a bond. (16)
Rule 62(c) authorizes the district court in injunction matters to "suspend, modify, restore, or grant an injunction on terms for bond or other terms that secure the opposing party's rights." Rule 62(d) authorizes the appellant to "obtain a stay by supersedeas bond, except in an action described in Rule 62(a)(1) or (2). The bond may be given upon or after filing the notice of appeal or after obtaining the order allowing the appeal." Under Rule 62(d), the stay takes effect when the court approves the bond.
The Federal Rules of Appellate Procedure also address stays. As in Florida state courts, a party in federal court who wishes to receive a stay is instructed under Fed. R. App. P. 8 to first file a motion in the district court for the stay. (17) If making a motion in the district court would be impracticable, or if the district court denied the motion, then Rule 8(a)(2) permits the aggrieved party to file a motion in the circuit court of appeals. (18) Typically, a panel of judges will consider a motion for a stay filed in the circuit court of appeals. (19)
The good news for practitioners and their clients confronting large money judgments is that the federal rules provide for some flexibility in bonds and security: Fed. R. Civ. P. 62(d) has been construed to provide for the district court's discretion in granting stays without a full bond. In addition, Rule 62(g) recognizes the power of an appellate court to stay proceedings during the pendency of an appeal or to issue an order to preserve the status quo or the effectiveness of the judgment to be entered.
General Rules on Appellate Stays in the Supersedeas Bond Context in Florida Courts
Florida Rule of Appellate Procedure 9.310(a), known as the "supersedeas bond" section, sets forth the bond required of a party seeking to reverse or vacate a judgment on appeal, out of which a money judgment is to be satisfied if the appeal is not successful. That section provides that a "stay pending review may be conditioned on the posting of a good and sufficient bond, other conditions, or both." (20) Fla. R. App. P. 9.310(b) provides that, in the case of a money judgment, the stay is automatic, without the need to file a motion with the trial or appellate court, upon the "posting [of] a good and sufficient bond equal to the principal amount of the judgment plus twice the statutory rate of interest on judgments on the total amount on which the party has an obligation to pay interest." (21)
"A good and sufficient bond" is defined in Rule 9.310(c)(1) as "a bond with a principal and a surety company authorized to do business in the State of Florida, or cash deposited in the circuit court clerk's office." The lower court has the power to determine whether a bond meets these requirements. (22) "Posting" the bond on a money judgment in Florida is construed to be the same as "filing" with the clerk of the court. (23) "The effect of perfecting a supersedeas is that it stays further proceedings, but does not interfere with what has already been done." (24)
Strategies for Stays in the Context of Money Judgments and Supersedeas Bonds
Although in a civil case, the federal district court may require an appellant to file a bond or provide other security in any form and amount necessary to ensure payment of costs on appeal, Fed. R. Civ. P. 62(d) is generally understood to provide for some discretion not just as to the granting of a stay, but also as to security type and amount. (25)
For example, in Trans World Airlines, Inc. v. Hughes, 314 F. Supp. 94 (S.D.N.Y. 1970), the defendants moved for a stay of execution, pending appeal, of a more than $145 million judgment entered in favor of a plaintiff without posting the usual supersedeas bond. The district court held that, when a plaintiff in an antitrust action was awarded single damages of $45,870,478.65, which after tripling and adding costs and reasonable attorneys' fees amounted to $145,448,141.07, and a supersedeas bond was not practicable, the defendant would be granted a stay of execution pending appeal of judgment provided the defendant arranged to post security in an amount of $75,000,000 and secure the balance of $86,447,686.59 by maintaining a net worth at three times the amount of the balance. (26) The Second Circuit Court of Appeals approved this district court's decision, and further allowed for the recovery of more costs after the successful appeal, including costs for obtaining a letter of credit in lieu of a bond and for the "other security" audits. (27)
Other circuits have approved stays without a posting of a full bond, with alternative security, or without any bond at all. (28) In Poplar Grove Planting and Refining Co., Inc. v. Bache Halsey Stuart, Inc., 600 F.2d 1189, 1191 (5th Cir. 1979), the Fifth Circuit Court of Appeals recognized that, "[i]f a judgment debtor objectively demonstrates a present financial ability to facilely respond to a money judgment and presents to the court a financially secure plan for maintaining that same degree of solvency during the period of an appeal," the district court, in its discretion, may substitute some form of guaranty of judgment responsibility for the supersedeas bond. Poplar Grove is still widely cited with approval in the federal courts. The discretion to permit a lesser bond requires that the judgment debtor "objectively demonstrate his ability to satisfy the judgment and maintain the same degree of solvency throughout the appellate process." (29)
Likewise, Miami International Realty Co. v. Paynter, 807 F.2d 871, 874 (10th Cir. 1986), involved an attorney who faced a $2.1 million malpractice verdict. The attorney, three days after the verdict, had drained his checking account and went to Las Vegas to gamble away $60,000, and then had no assets to secure the award. He requested a stay without posting a bond, contending that posting a bond would render him insolvent. In response, the district court ordered the attorney to deposit the proceeds of his malpractice insurance, which totaled about one-quarter of the judgment, into the court's treasury to obtain a stay. (30) The 10th Circuit affirmed the district court, finding that the security posted protected the judgment creditors and did not irreparably injure the judgment debtor. (31) This discretion in financial security remains the exception, not the general rule, but practitioners should appreciate that there is potential flexibility in this current bond market.
This discretion in bond amounts and security has been followed in various state courts as well, including Florida. A stay in Florida is not a prerequisite for appellate review; an appellate court can review an order without a stay. (32) The Second District Court of Appeal held in Platt v. Russek, 921 So. 2d 5 (Fla. 2d DCA 2004), that the automatic bond procedure in subdivision (b)(1) was not the exclusive method of posting a bond, even as to judgments that are solely for the payment of money. Rule 9.310(a) contains an "except as provided by general law" clause, which preserves "any statutory right to a stay." (33) In re Proposed Florida Appellate Rules, 351 So. 2d 981, 1010 (Fla. 1977), expressly stated in the commentary to Rule 9.310 that "[t]he rule preserves any statutory right to a stay."
F.S. [section]45.045 (2012) is one of those statutory bases, expressly recognizing the court's power, "in the interest of justice and for good cause shown, [to] reduce the supersedeas bond or [to] set other conditions for the stay with or without a bond. The court may not reduce the supersedeas bond if the appellant has an insurance or indemnification policy applicable to the case." To protect the judgment creditor during appeal, F.S [section]45.045(3) provides for limited discovery to ensure assets are not being dissipated, diverted, or encumbered:
(3) If an appellant has posted a supersedeas bond for an amount less than that which would be required for an automatic stay pursuant to Rule 9.310(b)(1), Florida Rules of Appellate Procedure, the appellee may engage in discovery for the limited purpose of determining whether the appellant has dissipated or diverted assets outside the course of its ordinary business or is in the process of doing so.
If discovery reveals that assets are being dissipated or encumbered, both the trial and appellate courts have significant, broad powers under F.S. [section]45.045(4) to "enter orders necessary to protect" the judgment creditor, require the posting of the appeal bond after all, and impose sanctions:
(4) If the trial or appellate court determines that an appellant has dissipated or diverted assets outside the course of its ordinary business or is in the process of doing so, the court may enter orders necessary to protect the appellee, require the appellant to post a supersedeas bond in an amount up to, but not more than, the amount that would be required for an automatic stay pursuant to Rule 9.310(b) (1), Florida Rules of Appellate Procedure, and impose other remedies and sanctions as the court deems appropriate.
The Third District Court of Appeal recognized these rules in BDO Seidman, LLP v. Banco Espirito Santo Intern., Ltd., 998 So. 2d 1 (Fla. 3d DCA 2008), in evaluating the then--recently enacted F.S. [section]45.045, and in holding that a statutory cap on supersedeas bonds did not infringe unconstitutionally on court rules governing supersedeas bonds, because the general bond statute, F.S. [section]45.045, "concern[ed] substantive rights to property and to appeal." The Third District stated, "[W]e do not view section 45.045 as an intrusion into the practice and procedure of the judiciary.... Rather, the fifty million dollar bond cap provided in subsection 45.045(1) concerns substantive rights to property and to appeal and not an impermissible intrusion on the procedural practices of the courts." (34)
BDO Seidman, LLP recognized that "Rule 9.310(a) expressly authorizes modifications to its terms as 'provided by general law.'" (35) The Third District further noted that the new bond statute adopting bond caps had been deemed constitutional in states around the country. The Third District stated, "We note that by adopting section 45.045 in 2006, the Florida legislature has joined the legislatures of many other states in reforming the supersedeas bond requirements in civil cases by adopting bond caps, none of which have been held unconstitutional." (36)
In R.J. Reynolds Tobacco Co. v. Hall, 67 So. 3d 1084, 1093 (Fla. 1st DCA 2011), rev. granted, 81 So. 3d 414 (Fla. 2012), the First District Court of Appeal recognized that Rule 9.310(a)
establishes how a stay is to be obtained (by filing a motion), where the motion is to be filed (in the trial court), and what authority the trial court has upon receipt of the motion (to grant, modify, or deny a stay). However, the rule also recognizes that general law and the rule itself may provide different requirements for obtaining a stay because the language quoted above is preceded by a clause stating "except as provided by general law and in subdivision (b)." (37)
As to higher bonds, attorneys should be aware that bonds in federal court that can go down, can also go up. In Young v. New Process Steel, LP, 419 F.3d 1201, 1208 (11th Cir. 2005), the 11th Circuit Court of Appeals held that as a matter of first impression, a district court may require under Fed. R. App. P. 7, as condition for appealing a judgment, that the losing plaintiff in civil rights cases post bond that includes the defendant's anticipated appellate attorneys' fees, if it finds that the would-be appeal is frivolous, unreasonable, or groundless. The 11th Circuit outlined a four-factor test for the imposition of a bond even greater than the amount of the judgment: 1) the appellant's financial ability to post a bond; 2) the risk that the appellant would not pay appellee's costs if the appeal loses; 3) the merits of the appeal; and 4) whether the appellant has shown any bad faith or vexatious conduct. (38) District courts have also looked at a fifth factor in deciding whether to require the posting of a bond, and whether that bond should include appellate fees and costs: the appellant's attorneys' prior actions. (39)
In In re Cardizem CD Antitrust Litigation, 391 F.3d 812, 816-17 (6th Cir. 2004), the Sixth Circuit Court of Appeals endorsed the trial court's imposition of a $50,000 appeal bond, and held that in deciding whether to include attorneys' fees as part of an appeal bond, a court must look to the underlying statute to determine whether attorneys' fees are defined as "costs" and require those fees in advance. In In re Checking Account Overdraft Litig., MDL 2036, 2012 WL 456691 at *2-3 (S.D. Fla. 2012), the district court relied on Fed. R. App. P. 7, 8, and 39, to require the appellants not only to post a supersedeas bond--even though the objecting appellants were not seeking a stay--but required them to "post a bond in the amount of $616,338.00 to ensure payment of costs to the class plaintiffs for defending the appeal and the resulting delay of distribution of funds to the class." The objector appellants cited cases in which courts in other circuits declined to require a bond under Fed. R. App. P. 7 to cover lost interest. (40) The district court noted that the 11th Circuit had not yet resolved this issue one way or another and at least one court in the Southern District of Florida had previously exercised its discretion to impose such a bond. (41)
Under Rule 39, the federal appellate courts have the authority to tax costs against the nonprevailing party. (42) If there is no indication from the record, however, that an appellant would be unable to afford these potential costs at the time of the disposition of the appeal, and if filing the appeal does not prevent further action--for example, the distribution of settlement proceeds because of an objector's filing of an appeal--the appeal bond ordered, if any, will likely not include anticipated attorneys' fees. (43)
Violations of Appellate Stays
Beyond the financial security context, appellate stays also have "teeth" in the appellate courts. Anyone who violates a stay may be charged with civil contempt, and this includes not only the plaintiff or defendant, but also counsel and the judge of a case. (44) This disobedience is considered to be in contempt of an appellate court's lawful authority. (45) The power to punish for contempt exists independent of any statutory grant of authority because it is deemed to be so essential to the execution and maintenance of judicial authority and the appellate process. (46)
When a person violates a stay, he or she may be charged with civil contempt and punishment will follow. To be charged with contempt for violation of a stay, the stay must be clear and unambiguous. (47) An aggrieved party need not prove intent of violation as long as the stay is clear as to its effect and operation. (48) Civil contempt is used as a remedy when the person violating the stay is a party to the suit, including an attorney or the judge involved in the action. (49) When the offender is exparte but has full knowledge of the stay in violating it, then the action is considered "in contempt of the power and the dignity of the court," and contempt charges may follow. (50)
If a person is involved in a lawsuit as counsel or as the judge, he or she is not immune from contempt for violating a stay. In State ex rel. Schwartz v. Lantz, 440 So. 2d 446 (Fla. 3d DCA 1983), the Third District Court of Appeal explained that it could find a trial court judge in contempt for unintentionally violating a clear and unambiguous stay order of which he was aware. (51) The appellate court decided not to charge the trial court judge in contempt because it was sure he would never act "so imprudently" again.
The judicial sanctions in civil contempt proceedings may have either or both of the following purposes. (52) First, these sanctions may be used to coerce the person who violated the order into obeying the order. When the court imposes sanctions to make a party comply, the court will use its discretion, considering the character and magnitude of the harm threatened by continued disobedience and the "probable effectiveness of any suggested sanction in bringing about the result desired." (53) These sanctions may also be used to compensate the aggrieved party for the losses he or she sustained. In that case, the fine would be payable to the aggrieved party--not the court. When imposing a fine for contempt, the court considers "the amount of defendant's financial resources and the consequent seriousness of the burden to that particular defendant." (54)
An appellate stay is an effective tool that preserves the status quo while the appellate court decides whether to enforce an order or judgment. An appellate stay is the equivalent of hitting the "pause" button. Both state and federal courts have discretion and there are increasing numbers of cases where the courts allow flexibility in alternative security to allow judgment debtors to appeal with alternative security to the judgment creditor. Those violating a stay will be charged with civil contempt, and may face monetary fines or other sanctions. Even attorneys and judges are not immune to this. The presence of contempt charges as a remedy ensures that the integrity of an appellate stay is maintained and that the stay is observed by all involved and by the lower courts.
(1) Fla. R. App. P. 9.310; Florida Coast Bank of Pompano Beach v. Mayes, 433 So. 2d 1033 (Fla. 4th DCA 1983).
(2) See Friedman v. Friedman, 825 So. 2d 1010, 1011 (Fla. 4th DCA 2002) ("There is no need, either for purposes of finality, or for obtaining a writ of execution, for a money judgment to provide for execution to issue.... Execution only needs to be addressed if the court wishes to stay execution."); GEICO Fin. Services, Inc. v. Kramer, 575 So. 2d 1345 (Fla. 4th DCA 1991) (finding that executory language in a final judgment is not essential to the finality of the judgment).
(3) See Anthony J. Russo, The Stay of Judgments and Proceedings in Florida State Courts, 86 Fla. B. J. 31 (Jan. 2012).
(4) Scripps-Howard Radio, Inc. v. FCC, 316 U.S. 4, 9-10 (1942); see also Nken v. Holder, 556 U.S. 418, 419 (2009).
(5) Philip J. Padovano, Florida Appellate Practice [section]11:1 (2011 ed.).
(6) Nken, 556 U.S. 418 at 419.
(9) Hilton v. Braunskill, 481 U.S. 770, 776 (1987); see also Nken, 556 U.S. at 419.
(10) United States v. United Mine Workers of Am., 330 U.S. 258, 294 (1947) (citations omitted); see also Howat v. Kansas, 258 U.S. 181 (1922); Russell v. United States, 86 F.2d 389 (8th Cir. 1936); Locke v. United States, 75 F.2d 157 (5th Cir. 1935).
(11) See, e.g., Fla. R. App. P. 9.310 (2012); Fed. R. Civ. P. 62(d); Fed. R. App. P. 8(a).
(12) See, e.g., Pabian v. Pabian, 469 So. 2d 189, 191 (Fla. 4th DCA 1985).
(13) Fed. R. Civ. P. 62(a).
(14) Fed. R. Civ. P. 62(b).
(15) Fed. R. Civ. P. 62(d), (e).
(17) Fed. R. App. P. 8(a)(1).
(18) Fed. R. App. P. 8(a)(2).
(19) Fed. R. App. P. 8(a)(2)(d).
(20) Fla. R. App. P. 9.310(a) (emphasis added).
(21) Fla. R. App. P. 9.310(b).
(22) Fla. R. App. P. 9.310(c).
(23) Fla. R. App. P. 9.310(b)(1); City of Miami v. Arostegui, 616 So. 2d 1117, 1120 (Fla. 1st DCA 1993) (observing that under Rule 9.310(b)(1), the "filing of the appropriate bond triggers the automatic stay").
(24) Freedom Insurors, Inc. v. M.D. Moody & Sons, Inc., 869 So. 2d 1283 (Fla. 4th DCA 2004); Fla. Steel Corp. v. A.G. Spanos Enters., Inc., 332 So. 2d 663, 664-65 (Fla. 2d DCA 1976) (holding that when judgment has been superseded pending appeal, a garnishment proceeding directed at that judgment should be stayed, and not dissolved).
(25) See Cunningham v. Ariel's Gas & Food, Corp., No. 06-21459-Civ, 2007 WL 3274451 at *1 (S.D. Fla. Nov. 5, 2007); Avirgan v. Hull, 125 F.R.D. 185, 186 (S.D. Fla. 1989), aff'd, 932 F.2d 1572 (11th Cir. 1991).
(26) Trans World Airlines, Inc., 314 F. Supp. at 98.
(27) Trans World Airlines, Inc. v. Hughes, 515 F.2d 173, 177 (2d Cir. 1975).
(28) See, e.g., Olympia Equip. Leasing Co. v. W. Union Tel. Co., 786 F.2d 794 (7th Cir. 1986); Townsend v. Holman Consulting Corp., 929 F.2d 1358, 1367 (9th Cir. 1990); Miami Int'l. Realty Co. v. Paynter, 807 F.2d 871 (10th Cir. 1986) (district court properly granted stay of execution of judgment pending appeal without requiring supersedeas bond for full amount of judgment).
(29) Avirgan, 125 F.R.D. at 187; Federal Prescription Service, Inc. v. American Pharmaceutical Assoc., 636 F.2d 755, 761 (D.C. Cir. 1980); accord Northern Indiana Public Service Co. v. Carbon County Coal Co., 799 F.2d 265, 281 (7th Cir. 1986).
(30) Paynter, 807 F.2d at 872-873.
(31) Id. at 873.
(32) Alexander v. Adams, 501 So. 2d 15 (Fla. 4th DCA 1986).
(33) Wait v. Florida Power & Light Co., 372 So. 2d 420 (Fla. 1979).
(34) BDO Seidman, LLP, 998 So. 2d at 2 (citations omitted).
(36) BDO Seidman, LLP, 998 So. 2d at 3 (extensive citations to other states' statutes omitted).
(37) The Florida Supreme Court has granted review of Hall, 67 So. 3d 1084, to determine whether Fla Stat. [section]569.23(3) (2011), should be declared null and void for favoring tobacco companies. See R.J. Reynolds Tobacco Co. v. Hall, 81 So. 3d 414 (Fla. 2012) (granting review). That issue, however, is beyond the scope of this article.
(38) Id. at 1208.
(39) See In re Checking Account Overdraft Litig., MDL 2036, 2012 WL 456691 (S.D. Fla. 2012); In re Initial Pub. Offering Sec. Litig., No. 21 MC 92(SAS), 2010 WL 2505677 at *2 (S.D.N.Y. June 17, 2010).
(40) Id. at *3.
(41) See Allapattah Servs., Inc. v. Exxon Corp, 2006 WL 1132371 (S.D. Fla. 2006).
(42) Fed. R. App. P. 39(e) specifies that the district court may tax the following costs: "(1) the preparation and transmission of the record; (2) the reporter's transcript, if needed to determine the appeal; (3) premiums paid for a supersedeas bond or other bond to preserve rights pending appeal; and (4) the fee for filing the notice of appeal."
(43) Schied v. Davis, 08-CV-10005, 2008 WL 3852264 (E.D. Mich. 2008).
(44) See, e.g., State ex rel. Schwartz v. Lantz, 440 So. 2d 446, 448 (Fla. 3d DCA 1983).
(45) United Mine Workers of Am., 330 U.S. at 294.
(46) See Ducksworth v. Boyer, 125 So. 2d 844, 845 (Fla. 1960); see also In re Hayes, 73 So. 362, 365 (1916) (recognizing inherent power of Supreme Court, independent of statutory authority, to punish for contempt of court).
(47) See Project B.A.S.I.C. v. Kemp, 947 F.2d 11, 16 (1st Cir. 1991) ("[C]ivil contempt will lie only if the putative contemnor has violated an order that is clear and unambiguous."); Lantz, 440 So. at 448.
(48) See, e.g., Lantz, 440 So. 2d at 448.
(49) Garrigan v. United States, 163 F. 16, 19 (7th Cir. 1908); see also id. at 446.
(50) Garrigan, 163 F. at 19.
(51) Lantz, 440 So. 2d at 450.
(52) United Mine Workers of Am., 330 U.S. at 303-04.
Dorothy F. Easley earned her J.D., with honors, in 1994 from the University of Miami School of Law and her M.S., with highest honors, in 1986 from SUNY/ CESF. She is board certified in appellate practice; managing partner of Easley Appellate Practice, PLLC, concentrating in appellate substantive areas of business, family, health, intellectual property, and criminal law; and in 2009-2010 served as the Appellate Practice Section chair.
This column is submitted on behalf of the Appellate Practice Section, Jack R. Reiter, chair; Brandon Christian, editor, and Chris McAdams and Kristi Rothell, assistant editors.
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|Title Annotation:||Appellate Practice|
|Author:||Easley, Dorothy F.|
|Publication:||Florida Bar Journal|
|Date:||Dec 1, 2012|
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