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refusing to "pre-judge" an appeal from a bankruptcy court judgment despite appellee's claims that appellant's arguments were without merit where the same case had previously been remanded to the bankruptcy court for further proceedings
Summary of this case from Minchala v. Terex CorporationOpinion
No. 05 Civ. 4444 (DC).
June 27, 2005
GOLENBOCK EISEMAN ASSOR BELL PESKOE LLP, Michael S. Devorkin, Esq., New York, NY, Attorneys for Plaintiff-Appellee.
KLEINBERG, KAPLAN, WOLFF COHEN, P.C., Norris D. Wolff, Esq., New York, NY, Attorneys for Defendants-Appellants.
MEMORANDUM DECISION
In this appeal from a judgment dated April 12, 2005 of the United States Bankruptcy Court for the Southern District of New York (Robert D. Drain, J.), plaintiff-appellee Frank G. Sinatra, as Chapter 11 Trustee (the "Trustee") of the Estate of Paolo Gucci et al. (the "Estate"), moves for an order, pursuant to Local Civil Rule 54.2, requiring defendants-appellants Alessandra Gucci and Allegra Gucci ("appellants") to post security of no less than $18,000 to cover taxable costs as a condition for proceeding with this appeal. For the reasons that follow, the motion is denied.
BACKGROUND
On May 22, 2003, the Bankruptcy Court (Blackshear, J.) entered judgment for declaratory relief in favor of the Trustee, based on an opinion dated April 17, 2003, issued after trial in January 2002. The judgment declared void ab initio the registration of a judgment lien in favor of Maurizio Gucci against Paolo Gucci in Italy as well as any other lien or security interest resulting from a certain arbitration award. Appellants appealed, and on May 7, 2004, this Court (Kaplan, J.) affirmed in part and remanded for further findings of fact and conclusions of law with respect to the affirmative defense of laches. In re Gucci, 309 B.R. 679 (S.D.N.Y. 2004).
On remand, the Bankruptcy Court (Blackshear, J.) issued a decision dated March 21, 2005, providing additional findings of fact and conclusions of law. Judge Blackshear rejected the laches defense. On April 12, 2005, the Bankruptcy Court (Drain, J.) issued a new judgment, granting the same relief awarded in the 2003 judgment. It is from this new judgment that appellants have now appealed.
While the first appeal was pending in this Court in front of Judge Kaplan, the Trustee moved for security to cover, in the event he prevailed in defeating the appeal, both taxable costs as well as attorneys' fees. The Trustee apparently was planning on seeking attorneys' fees as sanctions against appellants for filing what the Trustee viewed as a frivolous appeal, and requested security for costs of no less than $18,000 and attorneys' fees of $100,000. By order dated May 5, 2004, Judge Kaplan denied the motion for security, concluding, inter alia, that although the Trustee's concern about the "collectability of costs" was "understandable," the Trustee was probably "overly sanguine about the likelihood of obtaining substantial sanctions from this Court, let alone sustaining them on appeal." In re Gucci, No. 03 Civ. 4484 (LAK), 2004 WL 957723, at *1 (S.D.N.Y. May 5, 2004).
In the instant motion, the Trustee again seeks security, in an amount no less than $18,000, to cover his costs. The Trustee notes that this time he is not seeking security to cover his attorneys' fees. In the meantime, the parties have briefed the appeal on the merits.
DISCUSSION
Local Civil Rule 54.2 provides in relevant part that "[t]he court, on motion or on its own initiative, may order any party to file an original bond for costs or additional security for costs in such an amount and so conditioned as it may designate." S.D.N.Y. Civ. R. 54.2. "Costs" for which security may be required may include attorneys' fees for which a party may be responsible at the conclusion of the litigation. See Selletti v. Carey, 173 F.R.D. 96, 100 (S.D.N.Y. 1997), aff'd in relevant part and vacated and remanded on other grounds, 173 F.3d 104 (2d Cir. 1999). Factors to be considered in deciding whether to require the posting of security include: the financial condition and ability to pay of the party in question; whether that party is present in the United States; the party's compliance with past court orders; the extent and scope of discovery; the legal costs expected to be incurred; and the merits of the underlying claims.Kensington Int'l Ltd. v. Republic of Congo, No. 03 Civ. 4578 (LAP), 2005 WL 646086, at *1 (S.D.N.Y. Mar. 21, 2005);Selletti, 173 F.R.D. at 100-01.
Applying these factors to this case, I conclude that the motion for security must be denied. First, the Trustee does not argue that appellants have insufficient assets to pay costs in the event appellants lose and costs are assessed; he argues only that appellants have residences in Italy and Switzerland and have "no known residence or financial assets of their own in the United States." (Devorkin 6/7/05 Aff. ¶ 18). Second, this is a bankruptcy appeal that has already been briefed. There will be no discovery and it is unlikely that additional substantial legal costs will be incurred. Third, the Trustee has not pointed to any past non-compliance by appellants with any court orders. Fourth, although the Trustee argues that appellants' appeal is meritless, the fact remains that with respect to appellants' last appeal, the Trustee likewise requested security on the grounds that the appeal was frivolous; yet, appellants prevailed, at least in part, and Judge Kaplan remanded the case to the Bankruptcy Court for further proceedings. Under these circumstances, I will not pre-judge the appeal and the application for security will be denied.
CONCLUSION
The Trustee's motion for security for costs pursuant to Local Rule 54.2 is denied.
SO ORDERED.