United States District Court, D. Columbia
August 29, 2005.
STEVEN R. PERLES, P.C., Plaintiff and Counterclaim-Defendant,
ANNE MARIE KAGY, Defendant and Counterclaim-Plaintiff v. STEVEN R. PERLES, ESQ., Third-Party Defendant.
The opinion of the court was delivered by: ALAN KAY, Senior District Judge
Currently before the Court are Plaintiff,
Counterclaim-Defendant Steven R. Perles, P.C. and Third-Party
Defendant Steven R. Perles' (collectively "Perles") motion to
waive posting of a supersedeas bond ("Pl. Mot."),
Defendant and Counter-Plaintiff Anne-Marie Kagy's (hereinafter
"Kagy") opposition and motion for relief from judgment under Rule
60(b) and motion for sanctions in the form of attorney's fees
("Def. Opp'n.") /*fn1 and Thomas Fortune Fay's motion and accompanying brief to intervene to
oppose Perles' motion seeking waiver of the supersedeas bond
("Fay Mot." & "Fay Br.") .
The issues currently before this Court arise out of two
separate but related contract disputes over fees awarded to
Perles based on his work in two wrongful death and
state-sponsored terrorism lawsuits, Flatow v. Islamic Republic
of Iran, No. 97-0396 (D.D.C.) and Eisenfeld and Duker v.
Islamic Republic of Iran, No. 98-1945 (D.D.C.). Anne Marie Kagy,
a recent law graduate at the time, worked for Perles on these
cases with the understanding that Perles would pay her a
percentage of the fees, should any award be forthcoming. The bulk
of Kagy's work on the state-sponsored terrorism cases involved
Flatow, with some work on the Eisenfeld and Duker cases as
Although Judge Royce Lamberth entered judgment for the
plaintiff in Flatow against the Iranian defendants in excess of
$250 million (approximately $23 million of which was
compensatory), the possibility of actually collecting on the
judgment was remote. On January 4, 2001, however, Congress
appropriated money to pay the judgments in the Flatow and
Eisenfeld and Duker cases, among others.
With the subsequent availability of funds to pay the judgment
and attorney's fees, a dispute arose between Kagy and Perles
regarding the compensation to which she was entitled for her work
on the Flatow and Eisenfeld and Duker cases. Unable to
agree on payment for legal services, Kagy asserted an "attorney's
lien" of $2,000,000 on the net proceeds of the judgment payments.
(Fay Br. at 2.) On Jan. 18, 2001, Fay and Perles jointly
transferred $2,000,000 from the escrow account holding the proceeds of the two cases to a
separate trust account,*fn2 (hereinafter "the Greenberg
Traurig trust account"), established specifically in response to
Kagy's equitable lien. Id.; see also Perles v. Kagy,
339 F.Supp.2d 47, 52 (D.D.C. 2004) (hereinafter "Flatow Order")
(explaining that Kagy's lien for attorney's fees caused Perles to
place funds subject to the lien in a separate trust account
pending a determination of the validity of the lien).
On Jan. 19, 2001, Perles filed suit against Kagy, seeking a
declaratory judgment that Kagy was only entitled to hourly
compensation rather than a percentage share of the net fees
received by Perles. Kagy counter-claimed for a one-third
percentage of the fees, or in the alternative, for a judgment in
quantum meruit for the value of her work.
Following a bench trial in January 2003, Judge Thomas Penfield
Jackson (now retired) found the existence of an oral contract
between Kagy and Perles and found that Kagy was entitled to one
third of any net fees paid to Perles in the Flatow case.
Perles v. Kagy, Civ. No. 01-105, (D.D.C. April 10, 2003)
(Docket #60) (hereinafter "Jackson Order"). Judge Jackson
subsequently referred the case to the undersigned for a
determination of the net fees paid to Perles.*fn3 Beginning December 16, 2003, the undersigned held a combined
evidentiary hearing to determine of the "net fees" received by
Perles in the Flatow case,*fn4 and to decide Kagy's
quantum meruit claim regarding her work on Eisenfeld and
Duker. On April 20, 2005, this Court entered an amended final
order and judgment, nunc pro tunc,  awarding Kagy
$1,339,675.35 plus actual accrued interest in the Flatow case
and $47,326.09, plus actual accrued interest for the value of her
legal services provided in the Eisenfeld and Duker case.
On May 20, 2005, Perles filed a notice of appeal . Kagy
cross-appealed  on May 27, 2005. On June 17, 2005, Perles
moved for a stay pending appeal and waiver of the supersedeas
bond . On June 20, 2005, Mr. Thomas Fortune Fay, Perles'
co-counsel in the state-sponsored terrorism litigation, filed a
motion to intervene . Fay has asserted an interest in the
Greenberg Traurig trust account in the amount of $1 million and
opposes the use of the trust fund as an alternative to a
supersedeas bond. Plaintiff's motion to waive the supersedeas
bond, Fay's motion to intervene and Defendant's motion for relief
from judgment are discussed in turn.
1. Perles' Motion to Waive the Supersedeas Bond
The district court has broad discretionary power to stay a
judgment pending appeal without the requirement of a
supersedeas bond in appropriate cases. See FED. R. CIV. PROC.
62(d) & (g); FED. R. APP. PROC. 8(a) (requiring appellant to seek
suspension or modification of the bond requirement in the
district court before seeking such relief in the court of
appeals); see also Federal Prescription Service, Inc. v.
American Pharmaceutical Assoc., 636 F.2d 755, 756-60 (D.C. Cir. 1980) (upholding district court's authority to grant
stay pending appeal without posting of a bond based on
defendant's "continuing ability to satisfy the judgment").
Appropriate circumstances for waiver include cases in which the
net worth of the judgment creditor far exceeds the amount of the
judgment, Federal Prescription, 636 F.2d at 761, where
available alternative security arrangements exist, id. at
758-59, and situations in which posting a bond would place
defendant's other creditors in jeopardy, Olympia Equipment
Leasing Co. v. Western Union Telegraph Co., 786 F.2d 794, 798-99
(7th Cir. 1986).
The purpose of the bond is to protect the prevailing party from
losses that could result if execution of the judgment is delayed.
Federal Prescription, 636 F.2d at 760. A supersedeas bond
should be required therefore, when there is "some reasonable
likelihood of the judgment debtor's inability or unwillingness to
satisfy the judgment in full upon ultimate disposition of the
case." Id. at 760; see also FDIC v. Ann-High Associates,
129 F.3d 113, 1997 U.S. App. LEXIS 35547 at *3 (D.C. Cir. Dec. 2,
1997) (noting burden on the appellant to provide "an acceptable
alternative means of securing the judgment"). Ordinarily, the
existence of a trust account established in response to an
equitable lien and containing sufficient funds to cover the
judgment would constitute adequate alternative security. However,
this does not appear to be the ordinary case.
Fay has asserted a $1 million interest in what is currently an
approximate $1.5 million trust account. In an attempt to protect
that interest, on June 8, 2005, Fay filed a "notice of adverse
claim" against the Greenberg Traurig account with Citibank
pursuant to D.C. Code § 26-803. (Fay Mot. Ex. E.) Upon receiving
a notice of adverse claim, Citibank was obligated to freeze the
account for a brief time. See Stevenson v. First Nat'l Bank of
Washington, 395 A.2d 21, 23 (D.C.App. 1978) (explaining that a financial institution,
upon receiving notice of an adverse claim, may avoid liability
for erroneous payments in one of two ways: by interpleading the
claimants or by briefly freezing the account for enough time to
allow the plaintiff to tie up the deposit by legal action).
Filing a notice of adverse claim merely puts the financial
institution on notice of the existence of competing claims to the
funds on deposit. A claimant must follow up by obtaining a
preliminary injunction or other order from a court barring
further withdrawals from the account. D.C. CODE § 26-803 (West
2001). On June 20, 2005, Fay filed suit directly against Perles
and Greenberg Traurig. Fay v. Greenberg Traurig, Civ. No.
05-1209 (D.D.C. June 20, 2005) (Docket #1).
As far as this Court can tell, Fay has not sought injunctive
relief.*fn5 Nevertheless, Fay's actions demonstrate the
uncertainty surrounding the ownership interests in the Greenberg
Traurig trust account. Even if Fay is ultimately unsuccessful,
the account could be frozen such that it becomes inaccessible to
Kagy beyond the disposition of the pending appeals. This Court
will not approve the use of an account as alternative security
when ownership of the account is at best contested and at worst
imminently the subject of separate legal proceedings.
In the absence of any legal restraint on the use of the funds
in the Greenberg Traurig trust account, the Plaintiff may, if he
so elects, use such funds in a way that protects Defendant's judgment on appeal.*fn6 Should Plaintiff choose to do so,
the Court will accept a cash deposit into its registry in an
amount sufficient to cover the judgments plus interest.
Otherwise, Plaintiff must post a supersedeas bond.
2. Mr. Fortune Fay's Motion to Intervene
As a preliminary matter, it should be noted that this Court's
jurisdiction over Fay's motion to intervene is open to question.
Even if jurisdiction is found to be lacking, however, the result
is the same because Fay's motion to intervene is untimely.
Generally, once a timely notice of appeal is filed,
jurisdiction over all matters pertaining to the appeal passes to
the Court of Appeals, including motions to intervene. See United
States v. Radice, 40 F.2d 445, 446 (2nd Cir. 1930); Elgen
Mfg. Corp. v. Ventfabrics, Inc., 314 F.2d 440, 444 (7th Cir.
1963); but cf. Associated Builders and Contractors, Inc. v.
Herman, 166 F.3d 1248, 1256-57 (D.C. Cir. 1999) (declining to
decide whether district court had jurisdiction to grant
post-judgment motion to intervene and noting conflicting
authority); Schmuck v. Hobson, 408 F.2d 175, 181-82 (D.C. Cir.
1969) (upholding district court's decision to allow intervention
by parents of D.C. school-children for purposes of appealing
judgment that would otherwise not be appealed).*fn7
Post-judgment motions to intervene are disfavored in part
because the appellate court would be "faced with the necessity of considering factual and
legal matters not considered by the trial court." Rolle v. New
York City Housing Auth., 294 F. Supp. 574, 578 (S.D.N.Y 1969).
Here, however, Fay seeks to intervene solely for the limited
purpose of opposing Plaintiff's motion to waive the supersedeas
bond. Whether adequate alternative security exists to justify
waiver of a supersedeas bond is not a question that implicates
the merits of the appeal. Moreover, the district court retains
jurisdiction over motions to waive a supersedeas bond even
after notice of appeal has been filed.*fn8 Thus, on balance,
this Court believes that jurisdiction exists to consider the
merits of Fay's motion to intervene.
b. Timeliness of Fay's Motion to Intervene
Fay seeks to intervene under FED. R. CIV. P. 24(a)(2), which
allows intervention as of right "when the applicant claims an
interest relating to the property or transaction which is the
subject of the action and the applicant is so situated that the
disposition of the action may as a practical matter impair or
impede the applicant's ability to protect that interest, unless
the applicant's interest is adequately represented by existing
parties." Fay, in his supporting memorandum, correctly states the
above three requirements for intervention under Rule 24(a)(1).
(Fay Br. at 5.) He neglects, however, to mention the fourth
requirement, that any such motion be timely. FED. R. CIV. P.
Whether a motion to intervene is timely made is to be
determined from all the circumstances, including "time elapsed
since the inception of the suit, the purpose for which
intervention is sought, the need for intervention as a means of
preserving the applicant's rights, and the possibility of
prejudice to those already parties in the case." Smoke v.
Norton, 252 F.3d 468, 471 (D.C. Cir. 2001) (citing United States v. AT&T,
642 F.2d 1285, 1295 (D.C. Cir. 1980)); see also Stallworth v.
Monsanto, 558 F.2d 257, 263-66 (5th Cir. 1977) (examining
four factors for consideration in assessing timeliness under Rule
The determination of timeliness is committed to the discretion
of the district court. See NAACP v. New York, 413 U.S. 345, 366
(1973) (upholding denial of motion to intervene filed less than
one month after NAACP became aware of the pending lawsuit because
defendant had already consented to entry of summary judgment).
However, "[a] motion for `intervention after judgment will
usually be denied where a clear opportunity for pre-judgment
intervention was not taken.'" Associated Builders and
Contractors, Inc. v. Herman, 166 F.3d 1248, 1257 (D.C. Cir.
1999) (citing Dimond v. District of Columbia, 792 F.2d 179, 193
(D.C. Cir. 1986).
Such is the case here. According to Fay's own motion to
intervene, in January of 2001, he voluntarily contributed $1
million to an account knowing and intending it to be used as
security for Ms. Kagy's assertion of an "attorney's lien" against
$2,000,000 of the net proceeds of the Flatow and Eisenfeld
and Duker cases. (Fay Br. at 2.) Judge Penfield Jackson also
understood Fay and Perles to have jointly set aside the two
million in the Greenberg Traurig account specifically for the
purpose of paying Kagy any amount to which the Court determined
her to be entitled. (Jackson Order at 8.)
In fact, as Fay points out, at the time Perles initially sought
declaratory relief, Kagy had asserted a lien against the net
proceeds of the cases, not against Perles' share of the
proceeds. (Fay Br. at 2.) As such, if Fay believed that he was
not liable to Kagy and that her lien inappropriately encumbered a
portion of Fay's share, it was incumbent on him to make that
assertion at some point in the last five years. Fay offers no
justification for his failure to do so. Fay has been a participant in this litigation, albeit an
informal one, virtually every step of the way. He voluntarily
deposited $1 million into a trust account in response to Kagy's
assertion of a lien against the net proceeds. He was subsequently
deposed in the present litigation. (Fay Mot. Ex. C.) He even
testified as a witness in the bench trial before Judge Jackson.
(Trial Tr., 42-116, Jan. 21, 2003; Id. at 68-92, Jan. 29,
2003.) For Fay to now complain, nearly five years later and after
judgment has been entered, that he wasn't aware that his interest
was precariously situated is absurd.
Moreover, as Fay is certainly aware, an attorney's lien grants
a security interest in specific property, which a plaintiff can
later use to satisfy a money judgment. See Watters v. Washington
Metro. Area Transit Auth., 295 F.3d 36, 40-41 (D.C. Cir. 2002);
BLACK'S LAW DICTIONARY 933 (7th Ed. 1999) (defining
attorney's charging lien as the right "to encumber money . . .
until the attorney's fees have been properly determined and
paid"). Even if Fay had not personally deposited $1 million of
his own funds as security for Kagy's lien, Fay, who is himself a
lawyer, cannot plausibly contend that he was unaware the account
might be used to pay out a judgment in favor of Ms. Kagy. See 7
AM. JUR. 2D, Attorneys at Law § 342 (1997) (charging lien
entitles attorney to apply to court "for a disbursement of the
proceeds realized by the enforcement of the judgment").
That Mr. Fay filed a motion to intervene within two months of
learning that Greenberg Traurig had made disbursements from the
trust account without his approval, (Fay Br. at 3), is of no
consequence. Any understanding Fay had with Perles regarding
management of the account is irrelevant to the issue of the
existence of a lien and the use of the account as security for
the judgment. Nor is intervention necessary to protect Fay's interest. Cf.
Acree v. Republic of Iraq, 370 F.2d 41, 50 (D.C. Cir. 2004)
(allowing government to intervene post-judgment for purposes of
challenging district court's subject matter jurisdiction on a
case with highly sensitive foreign policy implications). Fay has
initiated legal action against Greenberg Traurig and Perles in
this District Court. Fay v. Greenberg Traurig, Civ. No. 05-1209
(D.D.C. June 20, 2005) (Docket #1). Although he has not sought
preliminary injunctive relief, that avenue remains open to him.
For nearly five years, the District Court has relied on
Plaintiff's assertions, uncontested by Fay, that $2 million had
been set aside as security for Kagy's lien. This Court will not
reopen the issue following judgment, particularly when Fay has
adequate alternative means to protect his interest.
3. Kagy's Motion for Relief from Judgment and Attorney's Fees
Kagy has filed a motion for relief from judgment, /,
under FED. R. CIV. P. 60(b) seeking relief from that portion of
the judgment that based the award of prejudgment interest on
actual interest earned rather than the prime rate.*fn9 She
has also moved for sanctions in the form of attorney's fees and
a. Rule 60(b) Motion for Relief from Judgment
When a Rule 60(b) motion is filed during pendency of an appeal,
the district court has jurisdiction to consider the motion and
may deny the motion outright. Hoai v. Vo, 935 F.2d 308, 312
(D.C. Cir. 1991); Piper v. U.S. Dep't of Justice,
374 F. Supp. 2d 73, 2005 U.S. Dist. LEXIS 11369, at *5-7 (D.D.C. June 13,
2005). "If the court is inclined to grant a Rule 60(b) motion
while appellate review is ongoing, `the District Court may consider the
60(b) motion, and, if the District Court indicates that it will
grant relief, the appellant may move the appellate court for a
remand in order that relief may be granted.'" Piper,
374 F.Supp.2d 73, 2005 U.S. Dist. LEXIS 11369, at *6 (D.D.C. June 13,
2005) (citing LaRouche v. Dep't of Treasury,
112 F. Supp. 2d 48, 52 (D.D.C. 2000)).
This Court carefully considered the issue of pre-judgment
interest and ultimately decided that an award of actual accrued
interest was eminently fair and reasonable. See Perles v. Kagy,
339 F. Supp. 2d 47, 52 (D.D.C. 2004), rep. & recom'd. adopted by
Perles v. Kagy, Civ. No. 01-105 (D.D.C. November 29, 2004)
(Docket #99). As discussed above, Perles and Fay jointly set
aside $2 million in a trust account in response to Kagy's lien.
Kagy asserts that Perles' withdrawal of $400,000 from the
Greenberg Traurig trust account for legal fees and expenses
arising from the instant litigation is evidence that the funds
were not set aside for the purpose of paying out any judgment in
her favor. (Def. Opp'n. at 17.) This Court disagrees.
Whether Perles inappropriately "invaded the corpus of the
constructive trust," as Kagy alleges, (id.), may be relevant to
whether the trust account may be used as alternative security on
appeal.*fn10 It does not, however, go to show that the trust
account was not created in response to Kagy's lien in the first
instance. Moreover, even after Perles' withdrawal of $400,000,
the balance of the account exceeds the amount of the judgments
plus interest. Defendant's motion for relief from judgment under
Rule 60(b) is therefore denied. b. Motion for Attorney's Fees and Costs
In light of the pending appeals, Kagy's motion for costs and
attorney's fees is premature and outside the jurisdiction of this
Court. Kagy's motion for relief from judgment and for costs and
attorney's fees is denied without prejudice.
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