Zimmerman v. Crothall, et al.
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COURT OF CHANCERY
OF THE
STATE OF DELAWARE
D ONALD F. PARSONS, J .
R
New Castle County Courthouse
500 N. King Street, Suite 11400
Wilmington, Delaware 19801-3734
VICE CHANCELLOR
Date Submitted: December 11, 2013
Date Decided: January 23, 2014
Evan O. Williford, Esq.
The Williford Firm LLC
901 N. Market Street, Suite 800
Wilmington, DE 19801
Richard A. Barkasy, Esq.
Schnader Harrison Segal & Lewis LLP
824 N. Market Street, Suite 800
Wilmington, DE 19801-4939
David J. Margules, Esq.
Bouchard Margules & Friedlander, P.A.
222 Delaware Avenue, Suite 1400
Wilmington, DE 19801
Mr. Robert Zimmerman
225 Millers Way
Simsbury, CT 06070
Re:
Zimmerman v. Crothall, et al.
Civil Action No. 6001-VCP
Dear Counsel and Mr. Zimmerman:
Before me is Defendants’ Motion for Stay of Judgment Pending Appeal
(“Defendants’ Motion”)1 seeking to stay the aspect of the October 15, 2013 Final
Order that compels Adhezion to pay $300,000 in attorneys’ fees and expenses to
Plaintiff’s counsel, The Williford Firm (“TWF”), now Intervenor (the “Fee
1
Defendants’ Motion was filed on behalf of all the defendants except the
nominal defendant, Adhezion Biomedical LLC (“Adhezion”). Adhezion
joined the motion formally, however, on November 26, 2013.
Zimmerman v. Crothall, et al.
Civil Action No. 6001-VCP
January 23, 2014
Page 2
Award” or the “Judgment”).
In addition, Defendants request that this Court
waive the requirement that they post a supersedeas bond, or, alternatively, that
the Court reduce the amount of the bond required to an amount less than the
amount of the Judgment. For the reasons set forth below, I deny Defendants’
Motion in its entirety.
I.
ANALYSIS
Court of Chancery Rule 62(d) provides that “[s]tays pending appeal and
stay and cost bonds shall be governed by article IV, § 24 of the Constitution of
the State of Delaware and by the Rules of the Supreme Court.” 2 Article IV, § 24
of the Constitution states, “an appeal or writ shall be no stay of proceedings in
the court below unless the appellant or plaintiff in error shall give sufficient
security to be approved by the court below.” 3 The applicable Delaware Supreme
Court Rules are Rule 32(a) and Rule 32(c). Under Rule 32(a), “[a] motion for
stay must be filed in the trial court in the first instance. . . .
A stay or an
injunction pending appeal may be granted or denied in the discretion of the trial
court.” 4 In addition, Rule 32(a) provides that the trial court may impose “such
terms and conditions . . . as may appear appropriate in the circumstances.” 5 On
2
Ct. Ch. R. 62(d).
3
Del. Const. art. IV, § 24.
4
Supr. Ct. R. 32(a).
5
Id.
Zimmerman v. Crothall, et al.
Civil Action No. 6001-VCP
January 23, 2014
Page 3
the other hand, Rule 32(c) states that “[a] stay or injunction pending appeal shall
be granted upon filing and approval of sufficient security.” 6
This bonding
requirement, known as a supersedeas bond, is triggered where, as here, “an
appellant seeks a stay of the trial court’s power to enforce or to permit execution
on the judgment or decree which has been appealed.” 7
Defendants contend that this Court “has the discretion to waive the
requirement of a supersedeas bond in appropriate circumstances” and then enter
a stay of execution of the Judgment. I question whether the trial court has such
broad discretion, but even if it did, the circumstances of this case do not support
waiving the bond requirement.
Historically, as a bright-line rule, courts in this state required appellants
seeking to stay the execution of a judgment to post a supersedeas bond in an
amount equal to the judgment. 8 At the time of the decision in Blackwell, the
governing Supreme Court Rule was Rule 22(4)(b), which provided that:
In civil causes the form of the bond shall bind the
principal obligor to prosecute his appeal or writ to
effect, according to law and the rules of this Court, and
pay the condemnation money and all costs or otherwise
abide the decree in appeal or the judgment in error, if
he fails to make his plea good. Such indemnity, where
6
Supr. Ct. R. 32(c) (emphasis added).
7
Wiland v. Wiland, 549 A.2d 306, 308 (Del. 1988).
8
See, e.g., Blackwell v. Sidwell, 126 A.2d 237 (Del. 1956); Ownbey v.
Morgan, 105 A. 838 (Del. 1917).
Zimmerman v. Crothall, et al.
Civil Action No. 6001-VCP
January 23, 2014
Page 4
the judgment or decree is for the recovery of money not
otherwise secured, must be for the whole amount of the
judgment or decree, including just damages for delay
and costs and interest on appeal. 9
In 1987, however, Rule 22(4)(b) was revised substantially and renumbered
32(c). 10 Today, Rule 32(c) provides, in part:
A stay or injunction pending appeal shall be granted
upon filing and approval of sufficient security. Such
security shall be presented to and approved or
disapproved in the first instance by the trial court. The
type, amount, and form of the security shall be
determined in the first instance by the trial court, whose
actions shall be reviewable by this Court. 11
Rule 32(c) further specifies that:
[T]he security shall ordinarily equal such sum of money
and all costs and damages, including damages for delay.
The trial court shall have the discretion to set the
security at a lesser amount, with a party seeking the
stay or injunction pending appeal having the burden to
show that a lesser amount is sufficient in the
circumstances. 12
These changes reflect the Supreme Court’s intent to relax the former rule’s
“rigidity,” but only by providing trial courts discretion to approve a supersedeas
9
Supr. Ct. R. 22(4)(b) (1956) (emphasis added).
10
Fletcher v. Ratcliffe, 1995 WL 790992, at *2 (Del. Super. Dec. 7, 1995).
11
Supr. Ct. R. 32(c).
12
Supr. Ct. R. 32(c)(ii).
Zimmerman v. Crothall, et al.
Civil Action No. 6001-VCP
January 23, 2014
Page 5
bond in an amount less than the amount of the judgment in issue. 13 Notably,
Rule 32(c) does not afford the trial courts discretion to waive the security
requirement altogether. 14 On this basis, I conclude, as a threshold matter, that
Defendants must post a supersedeas bond for a stay to issue; therefore, I deny
Defendants’ request to waive the requirement of a bond.
In addition, to the extent Defendants request that the Court require security
in an amount less than the amount of the Judgment, I deny that request. “The
primary purpose of the security, or supersedeas bond, is to protect the appellee
from losing the benefit of the judgment through the delay or ultimate nonperformance by the appellant.” 15 Here, Defendants have not demonstrated that
13
Cf. Fletcher, 1995 WL 790992, at *2 (discussing the revision of former
Rule 22(4)(b)).
14
Delaware courts have held that, pursuant to article IV, § 24 of the
Constitution and the applicable Supreme Court Rules, trial courts are
without authority to waive the supersedeas bond requirement. See, e.g.,
Owens Corning Fiberglass Corp. v. Carter, 630 A.2d 647, 648–52 (Del.
1993); Gates v. Texaco, Inc., 2008 WL 1952162, at *1 (Del. Super. May 2,
2008).
It has been suggested that in certain, narrow circumstances, however, a trial
court conceivably could waive the bond requirement altogether. See State ex
rel. Caulk v. Nichols, 281 A.2d 24, 28–30 (Del. 1971) (Hermann, J.,
dissenting) (discussing the constitutionality of imposing an arbitrary bond
requirement on an indigent appellant). But, there has been no showing that
any such exceptional circumstances exist in this case.
15
DiSabatino v. Salicete, 681 A.2d 1062, 1066 (Del. 1996) (citing Ellis D.
Taylor, Inc. v. Craft Builders, Inc., 260 A.2d 180, 182 (Del. Ch. 1969)).
Zimmerman v. Crothall, et al.
Civil Action No. 6001-VCP
January 23, 2014
Page 6
posting security in an amount that is less than the amount of the Judgment
sufficiently would protect the appellee, TWF.
Indeed, they have stated that
Adhezion is in dire financial condition (having experienced net losses in 2011
and 2012 of $1.88 million and $1.2 million, respectively) and will expend in the
near future more than $1.8 million in cash on taxes and projects. These are the
very circumstances that generally require the posting of security at least equal to
the full amount of the Judgment to sufficiently protect against the risk of nonperformance by the appellant.
II.
CONCLUSION
For the reasons stated, I deny Defendants’ Motion unless they promptly post
a supersedeas bond (or equivalent security) in the amount of $350,000 to cover the
Fee Award and all related costs and damages, including damages for delay and
interest on appeal.
IT IS SO ORDERED.
Sincerely,
/s/ Donald F. Parsons, Jr.
Donald F. Parsons, Jr.
Vice Chancellor
DFP/ptp
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