Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-4_03-cv-03359/USCOURTS-cand-4_03-cv-03359-3/pdf.json

Nature of Suit Code: 410
Nature of Suit: Antitrust
Cause of Action: 15:1 Antitrust Litigation

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United States District Court

For the Northern District of California

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 DSCPs are high-end, prestige or specialty beauty and cosmetic products and product lines (including

color products, treatment and fragrances) sold by the "Manufacturer Defendants" under various brand names

fromMay 29, 1994 through July 16, 2003. These products were sold primarily through traditional department

and/or specialty stores and not through mass distribution channels. The "Manufacturer Defendants" are: The

Estée Lauder Companies Inc., L'Oréal USA, Inc., Conopco, Inc., Christian Dior Perfumes, Inc., Guerlain,

Inc., Parfums Givenchy, Inc., Chanel, Inc., Boucheron (USA) Ltd., and Clarins U.S.A., Inc.

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

FATEMAH AZIZIAN, et al.,

Plaintiffs.

 v.

FEDERATED DEPARTMENT STORES, et al., 

Defendants.

_______________________________________

No. C 03-3359 SBA

CLASS ACTION 

ORDER

[Docket No. 511] 

This matter comes before the Court on Plaintiffs' Motion to Require Objectors Grace Wright and

Kamela Wilkinson to Post a Bond on Appeal ("Motion for Bond on Appeal"). Having read and considered

the arguments presented by the parties in the papers submitted to the Court, the Court finds this matter

appropriate forresolutionwithout a hearing. The Court hereby GRANTS IN PART AND DENIES IN PART

Plaintiffs' Motion for Bond on Appeal [Docket No. 511]. 

BACKGROUND

In 1998,Class Plaintiffs("Plaintiffs") filed a number of class action complaints on behalf ofpersons who

purchasedDepartmentStore Cosmetics Products ("DSCPs")1 in California. The original complaints were filed

in various California Superior Courts and were ultimately coordinated and assigned by the Judicial Council to

the Honorable M. Lynn Duryee, Judge ofthe SuperiorCourt in and forthe County of Marin. Plaintiffs alleged

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 The "Department Store Defendants" are: Federated Department Stores, Inc., The Neiman-Marcus

Group, Inc., Nordstrom, Inc., The May Department Stores Company, Saks Incorporated, Gottschalks Inc.,

Target Corporation, and Dillard's, Inc.

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that certain "Department Store Defendants"2 engaged in anti-competitive practices that discouraged the

discounting of DSCPs in the United States. On May 17, 2000, after extensive discovery, Plaintiffs filed an

Amended Consolidated Complaint, which added the Manufacturer Defendants. The Amended Consolidated

Complaint alleged pervasive joint practices of the Department Store Defendants and the Manufacturer

Defendants to discourage discounting of DSCPs.

On January 5, 2001, Judge Duryee ordered the parties to mediation, and they retained the services of

former Judge Weinstein and Catherine Yanni of JAMS to mediate settlement negotiations. The parties

eventually reached settlement. In order to obtain nationwide settlement and relief, however, a federal complaint

was filed in this Court on July 18, 2003.

Class Counsel promptly sought preliminary approval of their proposed settlement, which this Court

granted on November 21, 2003. Nationwide notice was subsequently disseminated to the putative class

members. Only sixty-one persons purported to opt out of the class; of these, one was a duplicate, a second

was untimely, and a third was later withdrawn. Only twenty-six unique objections made on behalf of a total

of seventy-three persons were submitted to the Court. 

Hearings regarding final approval of the settlement were conducted on January 11, 2005 and March

8, 2005.

On March 30, 2005, the Court entered the FinalJudgmentGranting FinalApprovalto the Class Action

Settlement with All Defendants and Awarding Attorneys' Fees and Costs. 

On April 29, 2005, Objectors Grace Wright and Kamela Wilkinson each filed a Notice of Appeal.

On July 6, 2005, Plaintiffs filed the instant Motion to Require Objectors Grace Wright and Kamela

Wilkinson to Post a Bond on Appeal ("Motion for Bond on Appeal"). 

ANALYSIS

A. Motion for Bond on Appeal

Federal Rule of Appellate Procedure 7 provides the district court with the authority to require an

appellant to file a bond or "provide other security in any formand amount necessary to ensure payment of costs

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on appeal." Fed. R. App. P. 7. In the instant Motion, Plaintiffs request that the Court order Objectors Grace

Wright ("Wright") and Kamela Wilkinson ("Wilkinson") to post a bond in the amount of $12,833,501.80 in

order to "safeguard" the Stipulated Judgment from the potential "harm" that may result from Wright and

Wilkinson's appeals, which Plaintiffs view as frivolous. Plaintiffs' proposed bond is comprised of the following

amounts:

1. All costs on appeal recoverable under Fed. R. App. P. 39: $6,540.00

2. Plaintiffs' estimated attorney's fees on appeal: $300,000.00

3. The estimated interest on the $24 million attorney's fees award: $178,457.68

4. "Delay" damages: $5,931,753.22

SUBTOTAL: $6,416,750.90

Since Plaintiffs allege that the instant appeals lack merit, they contend that the $6,412,750.90 sub-total

may be doubled pursuant to Fed. R. App. P. 38 to reach a total amount of $12,833,501.80. 

1. Reasonableness of the Cost Bond

As a preliminary matter, the Court notes that while the decision to impose a cost bond is within the

sound discretion ofthe Court, the Court may not order an appellant to post a bond in an amount beyond what

is necessary to ensure adequate security if to do so would effectively preclude pursuit of an appeal. See

Lindsey v. Normet, 405 U.S. 56, 77-79 (1972). Although this issue has not been squarely addressed in the

Ninth Circuit, other circuit courts have held thatRule 7 was not intended to be used as a means ofdiscouraging

appeals, even when those appeals are perceived to be frivolous. In re American President Lines, Inc., 779

F.2d 714, 717 (D.C. Cir. 1985); see also Clark v. Universal Builders, Inc., 501 F.2d 324, 341 (7th Cir.

1974) (bond may not be imposed forthe purpose ofdiscouraging exercise ofthe right to appeal). So long as

the bond is appropriately tailored to cover only those costs that may be incurred during an appeal, however,

the impositionof a bond does not offend principles ofEqualProtection or Due Process. Adsani v.Miller, 139

F.3d 67,77 (2nd Cir. 1998). 

This Court must therefore carefully scrutinize Plaintiffs' request and determine whether they have

adequately established that the bond they seek to have imposed is sufficient, but not greater than necessary,

to ensure payment of costs relating to Wilkinson and Wright's appeals. 

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2. Rule 39 Costs

The first component that Plaintiffs contend should be included in the bond is $6,540.00 for certain filing

and copying costs that will be incurred by Plaintiffs during the appeal. In determining the appropriate amount

for the bond, Plaintiffs rely on Fed. R. App. P. 39, which sets forth the types of costs that may be assessed

against the losing party onanappeal. These costs include: (1) the filing fee; (2) the preparation and transmission

of the record;(3) the reporter's transcript; and (4) copying costs relating to the reproduction and service of the

briefs or appendices. Fed. R. App. P. 39(c) and (e). Specifically, Plaintiffs allege that, pursuant to Ninth

Circuit Rule 39-1.2, if found to be the prevailing party, they will be entitled to obtain reproduction costs for

eighteen copies of each brief, plus two copies for each party to be served. They also contend that they will be

entitled to obtain reproduction costs for six copies of the excerpts of record plus one copy for each party

required to be served. Plaintiffs estimate thatthey can recover up to 10 cents per page, and that theywill have

to produce twenty-one copies of a 3,000 page record. Plaintiffs thus conclude that their total potential costs

amount to $6,540.00. 

The costs set forth in Fed. R. App. P. 39 are regularly included in Rule 7 cost bonds, see Downey v.

United Guaranty Corp., 2001 U.S. Dist. LEXIS 24918, * 6 (D. Ga. 2001), and the parties do not dispute

that such costs may be included in the instant bond. However, both Wright and Wilkinson contend that

Plaintiffs'estimated costs are grossly inflated. For example, Wilkinson argues that Plaintiffs' $6,540.00 estimate

is unjustified because she and Wright, as the appellants, are primarily responsible for preparing and filing the

record excerpts and for paying forthe transcripts. Thus, Wilkinson contends that Plaintiffs will only incur costs

in the amount of$240. Wright concurs with Wilkinson, and similarly argues that the amount of the bond should

be no more than $240. Plaintiffs do not provide a meaningful response to Wright and Wilkinson's arguments,

but nevertheless insist that Wright and Wilkinson's estimate is too low. Plaintiffs also cite to In re NASDAQ

Market-MakersAntitrust Litigation, 187 F.R.D. 124, 128 n. 6 (S.D.N.Y. 1999), in which the DistrictCourt

for the Southern District of New York found a $1,500 cost bond to be appropriate after noting that the

appellees would likely incursubstantialcosts in printing and serving the opposition brief in light of the fact that

the service list included over one hundred law firms. 

Wright and Wilkinsonare correct that the appellant bears primary responsibility for producing both the

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record and transcript on appeal, and therefore the Court concludes that Plaintiffs' $6,540.00 estimate, which

is based almost entirely on copying costs relating to the 3,000 page record, is too high. Given that the service

list in this action is fairly extensive, however, it is not inconceivable that the copying costs relating to the briefing

on the appeal will be commensurate with the costs identified in NASDAQ. Accordingly, the Court finds that

it is reasonable and appropriate to include in the bond costs of $1,000 for each appeal. 

3. Attorney's Fees

The second component that Plaintiffs seek to include in the cost bond is the attorney's fees they will

incur on the appeal, which Plaintiffs contend will amount to $300,000. As both parties concede, the Ninth

Circuit has yet to address the question of whether a Rule 7 cost bond may properly include attorney's fees.

However, other circuit courts considering this issue have found that attorney's fees may be included in a cost

bond under two circumstances: (1) where the underlying statute provides for such an award; or (2) where it

is likely that the Court of Appeals will determine that the appeal is frivolous pursuant to Fed. R. App. P. 38.

Downey v. Mortgage Guaranty Ins. Co., 313 F.3d 1341, 1342 (11th Cir. 2002) (approving ofthe inclusion

of attorney's fees in a cost bond when the underlying statute provides for such recovery); In re Cardizem CD

Antitrust Litig., 391 F.3d 812 (6th Cir. 2004) (same); Sckolnick v. Harlow, 820 F.2d 13, 15 (1stCir. 1987)

(approving cost bond that included attorney's fees potentially recoverable under Fed. R. App. P. 38). 

Plaintiffs first argue that the underlying statute in the instant case provides themwith the right to recover

attorney's fees. Both parties concede that the applicable underlying statute here is the ClaytonAct, 15 U.S.C.

§ 15, which permits recovery in an antitrustsuit for "the cost ofsuit, including a reasonable attorney's fee." Id.

Wright and Wilkinson argue, however, that when a plaintiff settles his antitrust claims prior to judgment, he is

not entitled to attorney's fees under the Clayton Act. See, e.g., WilkinsonOpp. at 12 (citing City of Detroit

v. Grinnell Corp., 495 F.2d 448, 468-9 (2nd Cir. 1974) (discussing, in dicta, that the correct basis for

awarding attorney's fees in settled actions brought under the ClaytonAct is the equitable fund theory doctrine).

Whether Wright and Wilkinson are correct on this point is unclear. As Defendants point out, this is not

necessarily a settled question, as district courts within the Second Circuit and other jurisdictions have declined

to follow City of Detroit and have held that attorney's fees pursuant to the Clayton Act may be included in a

cost bond even when a judgment is reached through settlement. See NASDAQ, 187 F.R.D. at 128;see also

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3The Court further findsthatWilkinsonand Wrightshall be jointly and severally responsible for paying

this cost. This is due to the fact that Plaintiffs have not provided the Court with documentation sufficient to

establish that the legal issues raised in Wilkinson and Wright's appeals are notso closely related that there will

not will be substantial duplication in the legal briefing and analysis necessary to oppose the appeals. 

6

In re Compact Disc Minimum Advertised Price Antitrust Litigation, 2003 WL 22417252, * 1-2 (D. Me.

2003) ("In re CDs"). Further, even Wilkinson concedes that 15 U.S.C. § 15 also provides for the recovery

of attorney's fees relating to work performed on an appeal. See Perkins v. Standard Oil Co., 399 U.S. 222,

223 (1970). Accordingly, Plaintiffs have shown that there is some support for their contention that the Clayton

Act entitles them to include attorney's fees in the cost bond. 

Plaintiffs are also arguably entitled to attorney's fees ifthey can prove that the Court ofAppeals is likely

to find that the instant appeals are frivolous. Sckolnick, 820 F.2d at 15. In this regard, Plaintiffs vigorously

contend that such a finding is likely, and in support of their argument, note that: (1) the issues Wright and

Wilkinson raise on appeal were already considered, and rejected, by this Court during extensive settlement

approvalhearings; (2) Wright and Wilkinson are "spoilers" who decided not to opt out ofthe settlementsolely

to maximize the amount of money they and their counselcan obtain individually; and (3) Wright and Wilkinson

are represented by counsel who routinely raise objections to class action settlements in the hopes of getting

"paid off by class counsel." 

Given that attorney's fees may be available under the Clayton Act if Plaintiffs successfully resolve the

instant appeals in their favor, and giventhe proceduralhistory ofthis case, including this Court's and the Special

Master's exhaustive review of the settlement agreement and all objections thereto, and the fact thatWright and

Wilkinson are the only persons out of the entire class to file appeals, a cost bond including a modest amount

of attorney's fees appears to be warranted here. However, Plaintiffs' contention that they will incur

approximately $300,000 in attorney's fees, based on their estimate that Plaintiffs' counsel will be forced to

spend over 750 hours on the appeals, is completely inconsistent with Plaintiffs' assertion that the appeals are

frivolous. Ifthe appeals are truly frivolous, then, presumably, Plaintiffs should be able to dispose ofthe appeals

fairly quickly. The Court therefore cannot fathom how an estimate of 750 hours is reasonable or justified.

Accordingly, the Court hereby finds that the bond shall include costs in the amount of $40,000, based on an

estimate of 100 attorney hours at Plaintiffs' counsel's blended rate of $400.00 per hour.3 

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 This is based on the differentialbetween the statutory interest rate of 3.38% and the interest actually

being earned on the $24 millionsum, which is 2.75%, and Plaintiffs' estimate that the appeal will take fourteen

months to resolve.

5 Fed. R. App. P. 37 states that "if a money judgment in a civil case is affirmed, whatever interest is

allowed by law is payable from the date when the district court's judgment was entered." Id. 

7

 4. Interest on Attorney's Fees Award in the Stipulated Judgment

Next, Plaintiffs seek to include in the bond the amount of post-judgment interest that could be earned

onthe award ofattorney's fees provided for under the Stipulated Judgment, whichPlaintiffs contend willamount

to $178,457.68.4 Plaintiffs argue that, should they prevail on the appeal, they will be entitled to recover this

amount pursuant to Fed. R. App. P. 37.5 This argument is without merit.

First and foremost, Plaintiffs have not provided the Court with any authority in support of their

contention that Fed. R. App. P. 37 confers on them the right to recover interest fromWright and Wilkinson,

who were not the defendants in the underlying suit. Further, as Wright points out, in the instant case, the terms

ofthe Settlement Agreement explicitly provide that the settlement shall only become finalupon the occurrence

of certain events, including the "expiration for the time for appeal 

. . . or, if appealed, the [affirmance of the] final judgment . . . in its entirety by the Federal Court of last resort

to which such appeal has been taken and [when] such affirmance has become no longer subject to further

appeal or review." Settlement Agreement, ¶ 15(b). Given that Plaintiffs anticipated that the $24 million

attorney's fees award would not be available until the judgment is affirmed on appeal, Plaintiffs have not

persuasively shown that they are entitled to include post-judgment interest in the cost bond.

5. "Delay" Damages

The fourth component that Plaintiffs contend should be included in the cost bond is $5,931,753.22 for

certain "delay" damages allegedly caused by the appeals. The $5,931,753.22 amount is comprised solely of

the interest that would be earned on the $175 million Settlement Fund over a fourteen-month period. Again,

given the fact that the Settlement Agreement specifically contemplates the possibility of delay due to appeal,

this argument is without merit. Further, the authorities upon which Plaintiffs rely for their contention that a bond

imposed under Rule 7 can secure damages caused by delay incident to an appeal are either inapposite or

unpersuasive. See Pl's Mot. at 8 (citingNASDAQ, 187 F.R.D. at128 and Livingston v. Toyota Motor Sales

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6 A "supersedeas bond"is a bond imposed pursuant to Fed. R. App. P. 8. A court may require a party

to post a supersedeas bond only after the party seeking relief from the final judgment moves to stay the

judgment pending appeal. See Fed. R. App. P. 8(a)(1) and (2). 

8

USA, Inc., 1997 U.S. Dist. LEXIS 24087, * 12 (N. D. Cal. 1997)); see also Reply at 8 (citing In re CDs,

2003 WL 22417252, * 1). 

While it is true that, in NASDAQ, the court imposed a bond that included projected costs to the

settlement trust resulting fromthe delay incident to the appeal, insupport ofthis conclusion, the NASDAQcourt

relied exclusively on cases dealing withsupersedeas bonds.6 187 F.R.D. at 128-29 (citing Morgan Guaranty

Trust Co. of N.Y. v. Republic of Palau, 702 F. Supp. 60, 65 (S.D.N.Y. 1988) (stating that a "supersedeas

bond . . . provides a guarantee that the appellee can recover . . . damages caused by the delay.") and Omaha

Hotel Co. v. Kountze, 107 U.S. 378, 392 (1883) (discussing measure ofdamages recoverable on "an appeal

bond givenforsupersedeas of execution on a decree of foreclosure.")). As such, NASDAQis ofquestionable

precedential value on this pont. See Adsani, 139 F.3d at 70 n. 2 (noting that cost bonds and supersedeas

bonds are separate and distinct and "should not be confused."). 

Moreover, even if the court in NASDAQwere correct thatsuch "damages"may be included in a Rule

7 cost bond, in NASDAQ, the plaintiffs were able to identify specific administrative expenses thatwere caused

by the delay. Id. at 128 (finding that proposed bond was supported by showing of increased administrative

expenses, including "expenses necessarily incurred in extending the leases on office space and the leases on

equipment, extending insurance and website maintenance, picking up mail and answering inquiries about the

status ofclaims . . ., and rehiring and retraining of the claims administration staff."); see also In re CDs, 2003

WL 22417252, * 1 (finding that bond was supported by showing of certain administrative costs, including

"storage and distribution of the cy pres CDs, fees to the bank administering the settlement fund and tracking

down claimants who move . . . ."). Plaintiffs have made so such showing here. NASDAQ is therefore

inapposite and does not provide persuasive support for Plaintiffs' proposed bond.

Similarly, the Livingston court appearsto have construed the appellee'smotionas brought under either

Rule 7, which covers costs bonds, or Rule 8, which covers supersedeas bonds. Livingston, 1997 U.S. Dist.

LEXIS 24087, * 12. As such, Livingston does compel the conclusion that a Rule 7 cost bond may include

delaydamages. Further, like NASDAQ, Livingston is also distinguishable fromthe instant case. For example,

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in Livingston, the parties did not expressly contemplate a delay in the enforcement ofthe judgment due to the

appeal. Further, in Livingston, the plaintiffs provided the court with specific evidence that the value of the

judgment, i.e. the consumer coupons, would actually decline in the event of a delay. Id. at *13. Again,

Plaintiffs have not produced similar evidence in support of their own proposed bond. 

Given the paucity of authority supporting Plaintiffs' position, a bond in excess of $5 million is simply

unwarranted and unsupportable. Accordingly, the Court hereby declines to impose a bond that includes

Plaintiffs' purported "delay" costs. 

6. "Double Costs" Under Rule 38

Last, Plaintiffs seek to have the totalamount of the cost bond doubled pursuant to Fed. R. App. P. 38

due to their contention thatWright and Wilkinson's appeals are frivolous. While Fed. R. App. P. 38 provides

the Court of Appeals with the authority to "award just damages and [to]single or double costs to the appellee"

upon a finding that the appeal is frivolous, Plaintiffs have not identified any circuit court authoritiesthat hold that

a Rule 7 bond may be doubled at the outset of the appeal by the district court. Moreover, as Wilkinson

correctly notes, courts interpreting Fed. R. App. P. 38 have determined that attorney's fees are

considered"damages" under the rule and are not included in the costs that may be doubled. Cronin v. Town

of Amerbury, 81 F.3d 257, 261 (1st Cir. 1996). Since the possibility that Plaintiffs may recover attorney's

fees pursuant to Fed. R. App. 38 has already factored into the cost of the bond, the Court finds that there is

simply no justification for including this same amount twice.

///

///

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CONCLUSION

IT IS HEREBY ORDERED THAT Plaintiffs' Motion for Bond on Appeal [Docket No. 511] is

GRANTED IN PART AND DENIED IN PART. The Motion is DENIED with respect to Plaintiffs' request

that a bond of $12,833,501.80 be imposed on Grace Wright and Kamela Wilkinson. The Motion is

GRANTED in that Grace Wright and Kamela Wilkinsonshall be jointly and severally responsible for posting

a bond in the amount of$42,000 (the "Bond"). The Bond shall be posted within fourteen (14) days of the date

of this Order. 

IT IS SO ORDERED.

 

Dated: 8-9-05 SAUNDRA BROWN ARMSTRONG

United States District Judge

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