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UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

----oo0oo----

ALBERT D. BOLT,

NO. CIV. S-04-0893 WBS DAD

Plaintiff,

v.

ORDER RE: STAY AND APPROVAL OF

MERRIMACK PHARMACEUTICALS, SECURITY PENDING APPEAL, 

INC. PLAINTIFF’S MOTION FOR 

CERTIFICATION OF THE COURT’S 

Defendant. JUDGMENT AND REGISTRATION IN 

THE DISTRICT OF MASSACHUSETTS 

----oo0oo----

On June 17, 2005, the court entered final judgment in

favor of plaintiff. On September 20, 2005, the court granted

further relief under 28. U.S.C. § 2202, requiring defendant to

provide a surety pending appeal. Defendant now proffers and

urges the court to adopt as a surety an Irrevocable Standby

Letter of Credit (“LOC”) in favor of plaintiff. Plaintiff

rejects defendant’s offer of a LOC from the Cambridge Savings

Bank (“CSB”) and moves the court to certify its June 17 and

Case 2:04-cv-00893-WBS-DAD Document 134 Filed 12/01/05 Page 1 of 8
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September 20 orders so that he might execute on the judgment in

the District of Massachusetts. 

I. Factual and Procedural Background

The court and the parties are familiar with the facts of

this case, having reiterated them in several recent motions and

orders. The pending motion requires only a review of the court’s

September 20, 2005 order granting plaintiff’s motion for further

relief and denying defendant’s motion for an unsecured stay. In

that order, the court clarified that plaintiff is entitled to

$524,880 in exchange for his Series A shares of defendant’s stock

and awarded prejudgment interest in the amount of $203,279.55. 

(Sep. 20, 2005 Order at 20-21.) Pending appeal of the court’s

June 17, 2005 order granting plaintiff’s motion for summary

judgment, the court also required defendant to provide a

supersedeas bond in this amount as a surety. (Id. at 9-10.)

The court noted, however, that it had discretion to

entertain an alternative form of surety. (Id. at 9 (citing

Olympia Equip. Leasing Co. v. W. Union, 786 F.2d 794, 796 (7th

Cir. 1986)(noting that both defendants with a clear ability to pay

and those who would be bankrupted by a bond requirement are

“candidate[s] for alternative security”); SIBIA Neurosciences v.

Cadus Pharm. Corp., No. 96-1231, 1999 WL 33554683 at *4 (S.D. Cal.

Mar. 10, 1999)).) Seizing upon this language, defendant urges the

court to accept the LOC issued by CSB as a surety in lieu of a

supersedeas bond. Plaintiff meanwhile moves to certify the

earlier judgments and requests an order for registration in the

District of Massachusetts. 

///

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 Plaintiff persuasively argues that "LOCs are only as 1

valuable as the banks that issue them . . . ." (Opp'n to Mot.

for Stay and Approval of Security Pending Appeal at 2.) 

3

III. Defendant’s Motion for Alternate Security

Generally, under Federal Rule of Civil Procedure 62, the

court is charged with ensuring the preservation of the status quo

while a case is pending in the appellate court. See United States

v. El-O-Pathic Pharmacy, 192 F.2d 62, 79 (9th Cir. 1951). 

Requiring an appellant to post a supersedeas bond is one method to

preserve the status quo pending appeal. Bass v. First Pac.

Networks, 219 F.3d 1052, 1055 (9th Cir. 2000). Because defendant 

elects not to post a supersedeas bond, it bears the burden of

demonstrating to the court that an alternative guarantee is

sufficiently secure. Fed. R. Civ. P. 62(d). In other words, a

court should not place the burden for proving the inadequacy of a

particular alternative on the plaintiff: 

If a court chooses to depart from the usual requirement

of a full security supersedeas bond to suspend the

operation of an unconditional money judgment, it should

place the burden on the moving party to objectively

demonstrate the reasons for such a departure. It is

not the burden of the judgment creditor to initiate

contrary proof. Such a supersedeas bond is a privilege

extended the judgment debtor as a price of interdicting

the validity of an order to pay money. 

Poplar Grove & Refining Co. v. Bache Halsey Stuart, 600 F.2d

1189, 1191 (5th Cir. 1979). 

Furthermore, defendant must establish that this LOC is

sufficiently secure. Although some courts have accepted LOCs 1

from particular banks as adequate surety for a judgment, there is

by no means a general legal principle that all LOCs are

equivalent to supersedeas bonds. See Richmark Corp. v. Timber

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Falling Consultants, 959 F.2d 1468, 1472 (9th Cir. 1992) (because

an appellant failed to post either a supersedeas bond or a letter

of credit, appellee could attempt to collect the judgment before

the appeal was decided); Trans World Airlines v. Hughes, 515 F.2d

173 (2d Cir. 1974) (allowing a LOC from Bank of America in lieu

of a supersedeas bond). 

Defendant has not provided the court with any objective

assessments of CSB’s fiscal health. Instead, defendant contends

that a LOC issued by CSB would fully secure the plaintiff because

CSB is one of New England’s leading community banks, with twentytwo branches in metropolitan Boston, $2 billion in assets, and a

history of over 170 years. (Def.’s Mot. for Stay and Approval of

Security Pending Appeal at 6 (citing St. Jean Decl. ¶ 3).) CSB

has also issued several letters of credit in the past. (Id.) 

However, these assertions are supported only by a declaration

from Michael St. Jean, the Vice-President and Portfolio Manager

for Commercial Lending for CSB. (St. Jean Decl. ¶ 1.) Thus,

defendant is asking the court to rely solely on the word of the

vice president of a relatively obscure bank that the LOC it

issues will preserve the status quo and provide adequate security

for the plaintiff. 

Furthermore, defendant leaves many questions unanswered

and does not provide a sound reason for not posting a supersedeas

bond. Defendant merely claims that because it has only recently

had financial success, it cannot obtain a LOC from a larger bank,

and is only able to do so from CSB because of its history with

the bank. (Def.’s Reply Mot. Stay and Approval of Security

Pending Appeal at 6.) This argument is puzzling when, at the

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same time, defendant seeks to convince the court of its financial

health. Defendant’s claimed inability to provide any other form

of security also fails to bolster defendant’s claim that CSB can

provide a LOC that is equivalent to a supersedeas bond. In light

of defendant’s inconsistent descriptions of its financial

situation, plaintiff’s efforts to expedite its recovery are

understandable. 

CSB is not qualified to issue a LOC under the

California Code of Regulations, Title 7, Section 15215 and the

State of California’s Department of Industrial Relations

Information Bulletin, because both of these authorities require

that an issuing institution have at least an “A” credit rating. 

(Pl.’s Opp’n Mot. Stay and Approval of Security Pending Appeal at

3.) CSB has a “B-” credit rating from Weiss Ratings (the only

company cited that has issued a rating for CSB). (Id.) Although

employment insurance regulations are not dispositive of the issue

before the court, they do provide one method of evaluating the

sufficiency of defendant’s proposed surety. 

Again, defendant bears the burden of proof to establish

that the LOC is sufficient security in lieu of a supersedeas

bond, and has failed to assure the court that the LOC offered

will protect the plaintiff’s interest in the judgment during

appeal. Therefore, defendant must, in accordance with the

court’s September 20, 2005 order, provide plaintiff with security

in the form of a supersedeas bond. However, the court sees no

reason not to allow defendant reasonable time to obtain a

supersedeas bond. The court therefore grants defendant fourteen

days to comply with this order.

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IV. Plaintiff’s Motion for Certification and Registration in the

District of Massachusetts 

A judgment entered by a district court may be enforced

by the prevailing party ten days after the judgment is entered. 

Fed. R. Civ. P. 62(a). “Pending appeal, however, the judgment is

only enforceable in the district in which it was rendered, unless

the judgment is ‘registered’ in another district by court order.” 

Columbia Pictures Television v. Krypton Broad. of Birmingham, 259

F.3d 1186, 1197 (9th Cir. 2001) (citing 28 U.S.C. § 1963 (2001)). 

Registration can occur after the judgment has become final or

“when ordered by the court that entered the judgment for good

cause shown.” 28 U.S.C. § 1963 (2001). As a preliminary matter,

a showing of good cause requires that a judgment debtor has

failed to post a supersedeas bond. Cheminova A/S v. Griffin,

L.L.C., 182 F. Supp. 2d 68, 80 (D.D.C. 2002). To date, defendant

has failed to post a supersedeas bond or to pose an adequate

alternative. 

Plaintiff must make two additional showings to

establish good cause: first, he must demonstrate the appellant’s

“absence of assets in the judgment forum” and second, he must

show “the presence of substantial assets in the registration

forum.” Columbia Pictures, 259 F.3d at 1197-98 (citing Dyll v.

Adams, No. 91-2734D, 1998 WL 60541, at *1 (N.D. Tex. Feb. 6,

1998); Johns v. Rozet, 143 F.R.D. 11 (D.D.C. 1992); Chi. Downs

Ass’n, Inc. v. Chase, 944 F.2d 366, 372 (7th Cir. 1991); Graco

Children's Prods., Inc. v. Century Prods. Co., No. 93-6710, 1996

WL 421966, at *36 (E.D. Pa. July 23, 1996); Bingham v. Zolt, 823

F. Supp. 1126, 1136 (S.D.N.Y. 1993), aff'd, 66 F.3d 553 (2d Cir.

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1995)). 

In Columbia Pictures, the fact that the defendant did

not dispute that he (1) lacked assets in the judgment forum, and

(2) owned assets in the forum of registration, was sufficient

evidence to show good cause. 259 F. 3d at 1198. Here, defendant

similarly does not dispute that it has no assets in California

and does have assets in Massachusetts. (Def.’s Opp’n Mot.

Certification of Judgment at 3.) Furthermore, plaintiff, as a

shareholder of the corporation, attests to the presence of

defendant’s assets in Massachusetts because defendant’s principal

place of business is in Massachusetts. (Bolt Decl. ¶¶ 2-3.) 

Therefore, plaintiff has shown good cause for certification of

the court’s June 17, 2005 and September 20, 2005 orders and for

registration in the District of Massachusetts. 

IT IS THEREFORE ORDERED that defendant’s motion for

stay and approval of alternate security pending appeal be, and at

the same hereby is, DENIED WITHOUT PREJUDICE to the filing of a

supersedeas bond within fourteen days from the date of this

order.

IT IS FURTHER ORDERED that in the event that defendant

posts a supersedeas bond within fourteen days from the date of

this order, the judgment of June 17, 2005 will be stayed; but in

the event that defendant does not post a supersedeas bond within

fourteen days from the date of this order plaintiff’s motion for

certification of this court’s judgment will be GRANTED, and

effective fourteen days from the date of this court’s judgment

///

///

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will be certified for registration in the District of

Massachusetts. 

DATED: November 29, 2005

Case 2:04-cv-00893-WBS-DAD Document 134 Filed 12/01/05 Page 8 of 8