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OMNIOFFICES, INC. v. KAIDANOW
March 24, 2002
OMNIOFFICES, INC. AND CARRAMERICA REALTY CORPORATION, PLAINTIFFS,
JOSEPH KAIDANOW AND ROBERT A. ARCORO, DEFENDANTS. ROBERT A. ARCORO AND JOSEPH KAIDANOW, COUNTERCLAIM-PLAINTIFFS, V. OMNIOFFICES, INC. AND CARRAMERICA REALTY CORPORATION, COUNTERCLAIM-DEFENDANTS, AND THOMAS A. CARR, PHILIP L. HAWKINS, RONALD BLANKENSHIP, OLIVER T. CARR, JR., GARY KUSIN, AND RONALD WHITEHOUSE, ADDITIONAL COUNTERCLAIM-DEFENDANTS.
The opinion of the court was delivered by: Ricardo M. Urbina, United States District Judge.
DENYING THE PLAINTIFFS' AND COUNTERCLAIM-DEFENDANTS'
MOTION TO STAY JUDGMENT PENDING APPEAL
I. INTRODUCTION AND BACKGROUND
This matter comes before the court upon the plaintiffs' motion pursuant
to Federal Rule of Civil Procedure 62(d) to stay this court's judgment
granting the defendants' and counterclaim-plaintiffs' motion for summary
judgment. The plaintiffs and counterclaim-defendants, OmniOffices, Inc.
("Omni") and CarrAmerica Realty Corp. ("CarrAmerica") (collectively, "the
plaintiffs"), initiated an action for declaratory relief, anticipating a
challenge to the conversion of CarrAmerica's $111 million loan to Omni
into equity by the defendants and counterclaim-plaintiffs Robert Arcoro
("Arcoro") and Joseph Kaidanow ("Kaidanow") (collectively, "the
defendants"). The defendants did, in fact, file a counterclaim asserting
derivative and individual claims against CarrAmerica, Omni, and the
individual directors who were on the Omni Board at the time of the
conversion. The defendants alleged that the conversion of the $111
million loan to Omni into equity at the price of $20 per share was
improper. In a Memorandum Opinion dated September 12, 2001, the court
determined that the plaintiffs had violated Delaware General Corporation
Law when they delegated statutory duties to the company's officers and
found that the plaintiffs' failure to secure board authorization for the
issuance of the conversion shares rendered the shares void. Therefore,
the court granted the defendants' cross-motion for summary judgment and
denied the plaintiffs' motion for summary judgment.
The plaintiffs currently ask the court to stay its judgment*fn1
pending appeal. The plaintiffs also filed motions for expedited
consideration and briefing of their motion to stay the court's judgment.
The plaintiffs argue that they are entitled to a stay of judgment pending
appeal as a matter of right and, therefore, the court should set the
necessary bond and stay its judgment. See Mot. to Stay at 4. For the
reasons that follow, the court denies the plaintiffs' motion.
Granting a stay of judgment pending appeal in cases involving
non-monetary relief has proven to be an "ill-suited remedy." See 12
James Wm. Moore et al., Moore's Federal Practice § 62.03[b] (3d
ed. 2000). Typically, only appeals from monetary judgments warrant a
stay under Federal Rule of Civil Procedure 62(d). See id. at §
62.03[a]; See FED. R. CIV. P. 62(d). The purpose of posting bond
during a stay of judgment is to compensate the non-moving party for the
delay in execution and to protect their financial interests from the risk
that an unsuccessful appealing party will not be able to pay the original
judgment. See Moore's Federal Practice at § 62.03[a].
Therefore, when a judgment involves costs that cannot be calculated, it
is inequitable to grant a stay and thus to deny the non-moving party
assurance that it will not suffer additional harm.
The D.C. Circuit has criticized stays granted in cases involving
appeals from non-monetary judgments. See, e.g., FTC v. TRW, Inc.,
628 F.2d 207, 210 n. 3 (D.C. Cir. 1980) (criticizing the district court
for granting a stay of an enforcement of a subpoena duces tecum). The
D.C. Circuit has explained "stays of district court enforcement orders
should be governed by the discretionary standards of Rule 62(c), and
should not obtain as a matter of right pursuant to Rule 62(d)." Id.
(emphasis in original). Similarly, other circuits have held that stays
as a matter of right apply only to monetary judgments. See, e.g.,
Herbert v. Exxon Corp., 953 F.2d 936, 938
(5th Cir. 1992) (indicating
that application of Rule 62(d) turns on whether the judgment is monetary
or non-monetary); Donovan v. Fall River Foundry Co., 696 F.2d 524, 526
(7th Cir. 1982) (refusing to stay an order to permit OSHA inspection);
NLRB v. Westphal, 859 F.2d 818, 819 (9th Cir. 1988) (denying stay of an
order to comply with NLRB subpoenas). These courts reasoned that Rule
62(d) does not apply to non-monetary judgments since posting bond is
meaningless when it does not protect the rights of the non-moving party.
See Donovan, 696 F.2d at 526; Westphal, 859 F.2d at 819.
Rather, the court should consider the following factors in deciding
whether a non-monetary judgment warrants a stay: (1) whether the moving
party has made a strong showing that it is likely to prevail on the
merits; (2) whether the moving party has shown that denial of a stay will
cause irreparable harm; (3) whether other interested parties would be
harmed by the stay; and (4) whether the public interest will be served by
granting a stay. See Virginia Petroleum Jobbers Ass'n v. Federal Power
Comm'n, 259 F.2d 921, 925 (D.C. Cir. 1958) (denying stay of an
administrative order); Washington Metro. Area Transit Comm'n v. Holiday
Tours, Inc., 559 F.2d 841, 842 n. 1 (D.C. Cir. 1980) (stating that the
Virginia Petroleum factors apply to motions for stays of district court
orders pending appeal).
In this case, the court has awarded the defendants declaratory relief
on which no monetary value can be placed. Therefore, applying Rule 62(d)
would not fully protect the defendants' interests. For example, the
$1,000 bond proposed by the plaintiffs "would not protect Arcoro's and
Kaidanow's right to their proportionate interest in any future
distributions or consideration received by HQ shareholders." Opp'n at
7. Likewise, the fact that the plaintiffs proposed an amount based solely
upon the costs of appeal demonstrates their own inability to calculate a
bond that protects the defendants' interests. See Mot. to Stay at 7.
Determining a specific monetary amount to offset the burden a stay could
impose on the defendants is not practical.
Finally, the plaintiffs are not entitled to a discretionary stay
because they fail to fulfill the factors traditionally applied by the
D.C. Circuit. See Washington Metro. Area Transit Comm'n, 559 F.2d at
842. A bond cannot adequately protect the defendants' interests and the
bond proposed by the plaintiffs does not preserve the status quo. See
Opp'n at 6-8. Granting the stay could cause the defendants incalculable
harm that cannot be repaired by posting bond. In addition, the
plaintiffs fail to convince the court that a balancing of the equities
supports the issuance of a stay. See Reply at 10. Consequently, this
court will not issue a stay.
ORDERED that the plaintiffs' motion to stay judgment pending appeal is
DENIED; and it is
FURTHER ORDERED that the consent motion for expedited briefing is GRANTED
nunc pro tunc; and it is
ORDERED that the plaintiffs' and counterclaim-defendants' motion for
expedited consideration of its motion to stay judgment ...
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