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1

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

----oo0oo----

ALBERT D. BOLT,

NO. CIV. S-04-0893 WBS DAD

Plaintiff,

v. MEMORANDUM AND ORDER RE: 

DEFENDANT’S MOTION TO STAY AND

PLAINTIFF’S MOTION FOR FURTHER

RELIEF

MERRIMACK PHARMACEUTICALS,

INC.,

Defendant.

----oo0oo----

Defendant Merrimack Pharmaceuticals, Inc. moves to stay

execution of judgment pending appeal of the court’s declaratory

judgment establishing the net worth of defendant as of December

31, 2001. Plaintiff Albert D. Bolt moves for further relief

based on the same declaratory judgment, pursuant to the

Declaratory Judgment Act, 28 U.S.C. § 2202. Plaintiff requests

$10 per share for each of his redeemable 52,488 Series A shares

plus prejudgment interest accruing from June 28, 2002.

///

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I. Factual and Procedural Background

On March 28, 2002, plaintiff, the owner of 52,488

shares of defendant’s Series A Non-Convertible Preferred Stock,

requested redemption of his shares pursuant to the terms and

conditions of the stock. (Pl.’s Mot. for Summ. J. Attach. 5

(Bolt Decl. ¶¶ 2-3)). These terms provide a right of redemption

at $10 per share if defendant’s net worth equals or exceeds

$5,000,000. (Warne Decl. Ex. G (Description of Capital Stock ¶¶

B5.2, B5.3)). Defendant denied plaintiff’s redemption request,

claiming a negative net worth of $2,400,000. (Id. (Fishkin

Letter)).

Plaintiff then filed suit in federal court on diversity

grounds asking the court to declare, as a matter of law, that

defendant’s net worth on December 31, 2001 exceeded $5,000,000. 

(June 17, 2005 Summ. J. Order at 1). Faced with what was

essentially a contract interpretation case, the court applied

Massachusetts state law, which was appropriate because defendant

is a corporation formed under the laws of that state. (Id. at 6-

7). The real substance of the dispute focused almost entirely on

how to define the term “net worth,” with both sides calling upon

a variety of accounting standards in support of their positions. 

(Id. at 8-14). After a lengthy analysis of the proposed

standards, the court held that plaintiff’s definition was more

consistent with prevailing law and awarded summary judgement in

favor of plaintiff. The court’s order declared that defendant’s

net worth exceeded $5,000,000 as of December 31, 2001. (Id. at

16).

Following this judgment, plaintiff asked defendant, in

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3

a letter dated June 22, 2005, to redeem plaintiff’s 52,488 shares

at $10 per share for a total of $524,880. (Pl.’s Mot. for

Further Relief Ex. A). Plaintiff also requested $187,849.52 in

prejudgment interest, accumulated from June 28, 2002 at a rate of

twelve percent (based on Massachusetts law). (Id.). Defendant

responded, in a letter dated June 23, 2005, that plaintiff’s

request for payment was premature pursuant to Federal Rule of

Civil Procedure 62(a) and again refused plaintiff’s redemption

request, citing its intent to file an appeal and motion to stay

enforcement of the court’s declaratory judgment. (Id. Ex. B). 

Defendant also questioned plaintiff’s assertion that

Massachusetts law controlled the prejudgment interest rate. 

(Id.).

On June 27, 2005, defendant notified the court that it

had filed an appeal of the declaratory judgment with the Ninth

Circuit. (Def.’s Notice of Appeal at 1). That same day,

defendant also filed a motion to stay execution of judgment

pending appeal, requesting that the court grant a stay without

requiring defendant to post a bond. (Def.’s Mot. To Stay at 5). 

Plaintiff followed on June 28, 2005 with a motion for further

relief pursuant to 28 U.S.C. § 2202, asking the court to award

the amount in damages specified in its June 22 letter to

defendant, plus interest. (Pl.’s Mot. for Further Relief at 7). 

The parties agreed to a joint hearing for resolution of both

motions, which was scheduled for September 19, 2005. 

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1 Concurrent with these events, plaintiff filed a Motion for

Costs on June 24 and was awarded $4,4454.77 by the court. (Aug.

15, 2005 Order Re: Costs at 4).

2 Support for the district court’s power to award stays

without bonds comes from an interpretation of Federal Rule of

Appellate Procedure 8. Subsection (a) directs parties to

initiate a motion to stay in district court and subsection (b)

“implicitly recognizes the discretion of the appellate courts to

issue stays not conditioned on bond.” Fed. Prescription Serv.,

636 F.2d at 760. Taken together, these provisions give the

district court power to grant unsecured stays. Id. (“It would

make little sense to require an appellant who could qualify for

an unsecured stay from the appellate court to apply for it first

in the district court . . . if Rule 62(d) . . . denied the

district court the power to approve such a stay.”).

4

(Stipulation for Consolidation of Hearings at 2).1

II. Discussion

A. Defendant’s Motion to Stay

1. Legal Standard

With a few specified exceptions, Federal Rule of Civil

Procedure 62(a) provides an automatic stay of ten days following

judgment. Fed. R. Civ. P. 62(a). If a decision is appealed, the

party hoping to further stay execution of judgment may file a

supersedeas bond, Fed. R. Civ. P. 62(d), or move for a stay of

execution without a bond, Fed. R. App. P. 8(a)-(b).2 While

parties have a right to a stay obtained through a supersedeas

bond, an unsecured stay is reserved for “unusual circumstances”

and awarded at the district court’s discretion. Fed.

Prescription Serv., Inc. v. Am. Pharm. Ass'n, 636 F.2d 755,

760-61 (D.C. Cir. 1980); SIBIA Neurosciences, Inc., v. Cadus

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

Mar. 10, 1999). The parties do not appear to dispute these

settled principles.

As an initial matter, the parties also seem to agree,

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3 Defendant has declared its intent “to file a supersedeas

bond . . . pursuant to [Rule] 62(d)” if the court denies this

motion to stay. (Def.’s Opp’n to Pl.’s Mot. for Further Relief

at 3). Additionally, defendant has argued that the ten day

automatic stay granted under Rule 62(a), unavailable in

injunction cases, applies to this case. (Id. at 2). The court

takes these statements as evidence that defendant understands

this is not a case involving injunctive relief. Likewise,

because plaintiff has requested that the court order defendant to

pay, an assumption that he, too, sees this as a money judgment

case is not unwarranted. 

5

as does the court, that the declaratory judgment in this case,

which laid the foundation for plaintiff’s right to redeem his

stock, is more akin to a money judgement rather than injunctive

relief.3 See J. Perez & Cia., Inc. v. United States, 747 F.2d

813, 814 (1st Cir. 1984) (defining money judgments as judgments

where “the value . . . can be calculated and secured with

relative ease”); Hebert v. Exxon Corp., 953 F.2d 936, 937-38 (5th

Cir. 1992) (classifying a declaratory judgment against an insurer

as a de facto money judgment because it essentially bound insurer

to pay once it found coverage). This fact is worth mentioning

because whether the court granted injunctive or monetary relief

is significant in a motion to stay in light of an appeal. The

Federal Rules of Civil Procedure impose distinct standards for

stays of judgments involving injunctions, see Fed. R. Civ. P.

62(c), and stays of other judgments, see Fed. R. Civ. P. 62(d). 

See also Perez, 747 F.2d at 814 (identifying subsection (d) as

“likely aimed at money judgments” and subsection (c) as

applicable to “a case involving an order to do, or not to do,

something”). Given these distinctions, it should come as no

surprise that courts evaluate unsecured stays of these categories

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4 Moreover, common sense would suggest that while the

preliminary injunction test may aid a court in determining

whether to stay an injunction pending appeal, the test’s

applicability in a motion to stay a money judgment is

questionable, given the different nature of the relief being

postponed.

6

of judgments under different tests.4 Although the court could not

find a single case straightforwardly acknowledging the existence

of two separate tests, an examination of the case law clearly

reveals a different method of analysis applicable to motions for

unsecured stays when Rule 62(d), rather than Rule 62(c), applies.

Defendant argues that the Ninth Circuit analyzes a

motion for an unsecured stay of execution of judgment pending

appeal under the framework for evaluating a preliminary

injunction. (Def.’s Mot. for Stay at 2). At first glance, its

support for this argument certainly seems convincing. The Ninth

Circuit has stated that “[t]he standard for evaluating stays

pending appeal is similar to that employed by district courts in

deciding whether to grant a preliminary injunction.” Lopez v.

Heckler, 713 F.2d 1432, 1435 (9th Cir. 1983) (citation omitted). 

However, in formulating its argument, defendant took cases

supporting its preliminary injunction standard out of context and

in doing so distorted the applicable legal standard. As

plaintiff noted, “[a]ll of the cases cited by [defendant] in

support of using the preliminary injunction standard are

distinguishable from this case because they involve requests for

stays in the context of appeals involving injunctive relief.” 

(Pl.’s Opp’n to Def.’s Mot. to Stay at 7 n.4). The court agrees. 

Defendant may very well have identified the appropriate standard

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5 Because the court has determined that the preliminary

injunction test is inapplicable here, it has not investigated the

merits of whether, rather than applying the three (sometimes four

part Hilton test, the Ninth Circuit applies a “slightly

different” two-part test “for staying an injunction, pursuant to

Rule 62(c).” Pajaro Dunes Rental Agency, Inc. v. Pajaro Dunes

Ass'n, No. C-97-2516, 2002 WL 202412, at *6 (N.D. Cal. Feb. 5,

2002) (distinguishing Hilton v. Braunskill, 481 U.S. 770, 776

(1987)).

7

for evaluating a motion to stay injunctive relief pending appeal.5

However, this test is irrelevant in a case controlled by Rule

62(d).

Courts addressing a motion for an unsecured stay under

Rule 62(d) have expressed a willingness to grant such requests

when: (1) “defendant’s ability to pay is so plain that the cost

of the bond would be a waste of money” or (2) “the requirement

would put the defendant’s other creditors in undue jeopardy” (in

other words, the requirement is impracticable because it would,

for example, force appellant into bankruptcy or paralyze the

business). Olympia Equip. v. W. Union Tel. Co., 786 F.2d 794,

796 (7th Cir. 1986); Brooktree Corp. v. Advanced Micro Devices,

Inc., 757 F. Supp. 1101, 1104 (S.D. Cal. 1990); see also Miami

Int’l Realty Co. v. Paynter, 807 F.2d 871, 873 (10th Cir. 1986)

(looking instead at whether (1) “there is a showing that the

prevailing party’s judgment will not be jeopardized” or (2) “a

[full] bond is impracticable [and other] adequate security is

provided”). Under either approach, the burden is on the

appellant to demonstrate the reasons for “depart[ing] from the

usual requirement of a full security supersedeas bond.” Poplar

Grove Planting & Refining Co. v. Bache Halsey Stuart, Inc., 600

F.2d 1189, 1190 (5th Cir. 1979); United States v. Kurtz, 528 F.

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Supp. 1113, 1115 (E.D. Pa. 1981) (“It is the appellant's burden

to demonstrate objectively that posting a full bond is impossible

or impractical . . . .”). Additionally, even if an appellant

persuades the court that a full bond is unnecessary, the court

typically requires a substitute form of judgment guarantee. See

Olympia Equip., 786 F.2d at 796 (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, 1999 WL 33554683 at *4.

2. A Stay Without Bond Is Not Warranted

Given the evidence presented, the court fails to see

how defendant might qualify for a stay under either the clear

ability to pay or impracticability standards. Defendant argues

that it recently raised capital well in excess of the amount

needed to satisfy plaintiff’s claims, (Def.’s Reply in Supp. of

Mot. to Stay at 3), and in the same breath admits that these

funds are already slated for use in product development. (Id.,

see also Scibetta Decl. at 1 (“Merrimack utilizes almost all of

its resources and financing to develop and commercialize a

product . . . .”)). By its own admissions, defendant is not a

liquid company that can respond quickly to a judgment against it. 

Moreover, unlike the appellants in Federal Prescription Service,

who had a documented net worth of “about 47 times the amount of

the damage award,” defendant’s entire appeal is based on a claim

that its net worth has never surpassed the $5,000,000 redemptiontriggering mark. Finally, although “the inherently volatile

nature of . . . the industry” might not be determinative, see

Brooktree Corp., 757 F. Supp. at 1104, the court in this case

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cannot say with certainty that allowing an unsecured stay will

not jeopardize plaintiff’s recovery. The financial health of a

company developing a “potential breakthrough” drug that is still

in a “crucial” stage of development is anything but certain. 

(See Scibetta Decl. at 2).

Other than defendant’s conclusory statement that

requiring a bond at this time would cause defendant financial

hardship, it has failed to produce evidence of impracticability. 

Defendant does not claim that it will face bankruptcy,

jeopardizing its other creditors, if a bond is required. Quite

the contrary, it has expressed its intent to immediately file a

supersedeas bond if the court denies this motion for an unsecured

stay. (Def.’s Opp’n to Pl.’s Mot. for Further Relief at 3). 

Defendant’s desire to continue business as usual is

understandable, but it conflicts with plaintiff’s right to

promptly enjoy the benefits of his judgment. The court, in its

discretion, certainly could entertain a form of security other

than a supersedeas bond. See, e.g., Trans World Airlines v.

Hughes, 515 F.2d 173, 175-76 (2d Cir. 1975) (allowing defendant,

in a case awarding plaintiff over $145 million, to post a partial

bond of $75 million and provide regular evidence of net worth

greater than three times the balance owed–-an arrangement that

freed defendant to pursue other business opportunities pending

appeal). However, because defendant bears the burden of

formulating an alternative plan, the court will not imagine one

of its own.

Defendant is thus not entitled to a stay without

posting supersedeas bond. In the event that defendant does

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follow through with its pledge to file such a bond to stay

execution of judgment, the bond must be in the full amount of the

judgment, as described below, unless defendant proposes some

other form of surety acceptable to the court. 

B. Plaintiff’s Motion for Further Relief

1. The Court’s Authority to Hear Plaintiff’s Motion

Although an appeal typically divests the district court

of jurisdiction over a matter, a motion for further relief under

28 U.S.C. § 2202 is a logical exception to this rule. Horn &

Hadart Co. v. Nat’l Rail Passenger Corp., 843 F.2d 546, 548 (D.C.

Cir. 1988) (“When a party files a notice of appeal the district

court only surrenders ‘its control over those aspects of the case

involved in the appeal.’” (emphasis added)). The Declaratory

Judgment Act “clearly anticipate[s] ancillary or subsequent

coercion to make an original declaratory judgment effective.” 

Id. To bar district courts from considering further relief

pending appeal “would allow the party against whom a declaratory

judgment is rendered to nullify her adversary's right to § 2202

relief merely by lodging an appeal.” Id. Moreover, recognizing

the district court’s power to consider a motion for further

relief in this case will provide the appellate court with a more

complete case for review as it will further define the parties’

rights and liabilities. Judicial economy is actually better

served when the district court entertains such motions pending

appeal. The court will therefore fully consider plaintiff’s

motion for further relief.

///

///

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2. Timeliness of Plaintiff’s Motion

As an initial matter, defendant objects to plaintiff’s

motion for further relief under 28 U.S.C. § 2202 because,

according to defendant, it was filed within the ten day automatic

stay of execution of judgment provided by Rule 62(a). In the

part relevant to a stay of a money judgment, the rule states: “no

execution shall issue upon a judgment nor shall proceedings be

taken for its enforcement until the expiration of 10 days after

its entry.” Fed. R. Civ. P. 62(a). The court issued its

declaratory judgment on June 17, 2005 and plaintiff filed for

further relief on June 28, 2005. The motion thus facially

appears to have been timely. However when read in light of Rule

6(a), as defendant proposes, the motion was actually premature. 

Rule 6(a) states: “In computing any period of time prescribed or

allowed by these rules, . . . [w]hen the period of time

prescribed or allowed is less than 11 days, intermediate

Saturdays, Sundays, and legal holidays shall be excluded in the

computation.” Because plaintiff does not contest defendant’s

interpretation of the applicable time period, the court accepts

defendant’s argument that the stay was in effect in this case

until July 1, 2005. See also KRW Sales, Inc., v. Kristel Corp.,

154 F.R.D. 186, 188 (N.D. Ill. 1994) (holding, as a matter of

first impression, that the ten day automatic stay under Rule

62(a) excludes weekends and holidays).

In response, plaintiff argues that filing his motion

“does not constitute a ‘proceeding[] taken for [the judgment’s]

enforcement’” and therefore his motion was not at odds with Rule

62(a). (Reply Br. in Supp. of Pl.’s Mot. for Further Relief at

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6 Although defendant claims that the motion was three days

premature, the court thinks it only fair to not count holidays

and weekends in assessing the timeliness of an action when the

applicable period does not take into account holidays and

weekends.

12

3) (alterations in original)). The court disagrees, noting that

a “proceeding” includes “all motions made in the action.” 

Black’s Law Dictionary (8th ed. 2004). However, because the

court finds that defendant was not prejudiced by plaintiff’s

filing of its motion just one day early,6 the court will consider

further relief. Defendant did not pursue a stay as of right by

filing a supersedeas bond with the district court, and thus

plaintiff was free to file its motion on July 1 when the

automatic stay lifted. Defendant’s position was unaltered by

plaintiff’s motion. See In re Vanden Bossche, 125 B.R. 571,

(N.D. Cal. 1991) (permitting the recordation of a judgment lien

during the automatic stay period under Rule 62(a) because “a

judgment lien does not deprive the judgment debtor of his

property”). Furthermore, even if defendant had filed a bond, the

court would still have needed to determine the value of

plaintiff’s claim to evaluate the adequacy of the bond. 

Resolution of the value of plaintiff’s judgment appears to be an

inescapable duty of this court that will at least provide the

Ninth Circuit with a more complete case for review and facilitate

a more timely resolution of this case. 

3. Plaintiff’s Further Relief

The Declaratory Judgment Act, under which plaintiff

prays for further relief provides that “[f]urther necessary or

proper relief based on a declaratory judgment or decree may be

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granted, after reasonable notice and hearing, against any adverse

party whose rights have been determined by such judgment.” 28

U.S.C. § 2202. As previously noted, the district court has

jurisdiction to consider a motion for further relief, pursued to

establish the full benefit of a declaratory judgment, even though

defendant has appealed the underlying action. United Teacher

Assocs. Ins. Co. v. Union Labor Life Ins. Co., 414 F.3d 558, 572

(5th Cir. 2005); Horn & Hadart Co., 843 F.2d at 548. The court

is therefore capable of entertaining plaintiff’s request. 

Defendant does not appear to dispute the amount owed to

plaintiff in exchange for his stock, assuming the court’s

declaratory judgment withstands appeal. Having determined in its

summary judgment order that the triggering factor for plaintiff’s

right of redemption occurred during the relevant time period, the

court now holds that defendant was obligated to pay plaintiff

$524,880 in exchange for his Series A shares according to the

terms of these shares. 

The calculation of prejudgment interest is a more

complex matter. Defendant vociferously objects to plaintiff’s

arguments regarding the applicable rate for prejudgment interest.

In the underlying action for declaratory judgment, the court

applied Massachusetts contract law to determine defendant’s

obligations to plaintiff, as laid out in defendant’s own

“Description of Capital Stock”. (June 17, 2005 Summ. J. Order at

2, 6). Invoking the principle of dépeçage, however, defendant

claims that California law, the law of plaintiff’s domicile, and

not Massachusetts law, should apply to a calculation of

prejudgment interest. (Def.’s Opp’n to Pl.’s Mot. for Further

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Relief). California law would impose a lower interest rate.

Dépeçage is a curious invention of the courts that

“erects a framework under which issues in a single case, arising

out of a common nucleus of operative facts, may be decided

according to the substantive law of different states.” See

Putnam Res. v. Pateman, 958 F.2d 448, 465 (1st Cir. 1992) (citing

Hutner v. Greene, 734 F.2d 896, 901 (2d Cir. 1984) and Broome v.

Antlers’ Hunting Club, 595 F.2d 921, 923 n.5 (3d Cir. 1979)). It

arises in diversity cases when the court must engage in a choice

of law analysis. Under this principle, the law governing

liability does not necessarily apply to other issues in a case,

such as damages and attorneys’ fees. See, e.g., Arno v. Club Med

Boutique, Inc., 134 F.3d 1424 (9th Cir. 1998) (applying

California law to attorneys’ fees even though French law governed

the underlying tort dispute). The court instead conducts “a

separate choice-of-law inquiry . . . with respect to each issue

in a case.” S.A. Empresa De Viacao Aerea Rio Grandense v. Boeing

Co., 641 F.2d 746, 749 (9th Cir. 1981). 

The court questions whether the case at hand lends

itself to a suitable application of dépeçage. The Tenth Circuit

has cast doubt on whether prejudgment interest is a stand alone

issue capable of a choice of law analysis independent from the

damages award. Johnson v. Continental Airlines Corp., 964 F.2d

1059, 1064 (10th Cir. 1992) (affirming the concept of dépeçage

but finding its application inappropriate where a choice of law

determination was already made regarding compensatory damages;

the issues were not severable). Likewise, the use of one law to

calculate damages and another to calculate interest on those

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damages does not seem justified here. See also id. (holding that

dépeçage “is inappropriate when used to fragment issues related

to a common purpose”). However, the question turns out to be a

moot one here because, as discussed in the paragraphs below, the

court eventually concludes that Massachusetts law applies

regardless of whether dépeçage is applied or not. 

Although dépeçage is not a universally accepted

principle and has not been explicitly adopted by the California

Supreme Court, the concept behind it, that “a separate conflict

of laws inquiry must be made with respect to each issue in the

case,” is found in California law. Wash. Mutual Bank, FA v.

Superior Court, 15 P.3d 1071, 1081 (Cal. 2001); see also Reyno v.

Piper Aircraft Co., 630 F.2d 149, 167 (3d Cir. 1980) (applying

dépeçage in a case controlled by California law based on the

court’s belief that the California Supreme Court had implicitly

adopted this approach). This bears on the issue of what

prejudgment interest rate to apply because in a diversity case, a

federal court applies the choice of law principles of the state

in which it sits for substantive matters of law. Klaxon v.

Stentor Elec. Mfg. Co., 313 U.S. 487, 496 (1941). Prejudgment

interest is a component of substantive damages and, in a

diversity case, is calculated using the rate determined by state

law. Northrop Corp. v. Triad Int’l Mktg., S.A., 842 F.2d 1154

(9th Cir. 1988); Turner v. Japan Lines Ltd., 702 F.2d 752 (9th

Cir. 1983). Therefore, because this case was brought in the

Eastern District of California, California choice of law rules,

which appear to recognize the principle of dépeçage, govern

substantive matters, including awards of prejudgment interest. 

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7 Defendant argues for a rate of seven percent under

California law, based on a provision in the California

Constitution governing usury. Cal. Const. art. XV, § 1. The

court rejects defendant’s suggestion that prejudgment interest, a

part of plaintiff’s compensatory damages, can be classified as a

loan. The constitutional provision cited does not apply to this

case. 

16

Accordingly, the court undertakes a separate choice of law

analysis to determine which state law, California or

Massachusetts, to apply in calculating prejudgment interest.

California takes the “governmental interest analysis”

approach to choice of law questions. Reich v. Purcell, 432 P.2d

727 (Cal. 1967). At its core, the test involves “an analysis of

the respective interests of the states involved . . . the

objective of which is ‘to determine the law that most

appropriately applies to the issue involved.’” Hurtado v.

Superior Court, 522 P.2d 666, 669 (Cal. 1974) (quoting Reich, 432

P.2d at 730). The Ninth Circuit, however, has adopted a more

structured approach to California choice of law questions that:

(1) looks at “whether the foreign state law actually differs from

the law of California”, (2) “consider[s] each state’s interest in

having its own law applied to [the] case to determine whether

there is a ‘true conflict’”, and (3) “compare[s] the extent to

which each state’s interests will be impaired if the other

state’s law is applied. Darulis v. Garate, 401 F.3d 1060, 1062

(9th Cir. 2005).

In this case, Massachusetts and California law do

differ, with Massachusetts law calculating prejudgment interest

at twelve percent and California at ten percent.7 Mass. Gen. Laws

ch. 231, § 6C (entitled “Interest added to damages in contract

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8 Additionally, the court finds another glaring distinction

between the case at hand and In re Pago Pago in the subsequent

lines of the same paragraph that defendant has so selectively

cited: the court had already applied the general damage law of

the jurisdiction in which each victim is/was domiciled. In re

Pago Pago, 525 F. Supp. at 1010. In wrapping up its analysis, the

court noted that “[i]t is most consistent with that ruling

[regarding general damages] that [the] same law control the

determination of prejudgment interest . . . .” Id.

17

actions”); Cal. Civ. Code § 3289 (entitled “Rate of interest

chargeable after breach of contract”). Although a two percent

difference might be insubstantial in some instances, plaintiff’s

ultimate award for a judgment valued at $524,880 dating back to

June 28, 2002, will be significantly different depending on what

law is applied. Because the state laws are substantially

different, the interests of each state must be weighed by the

court.

Defendant cites In re Pago Pago Aircrash of Jan. 30,

1974, 525 F. Supp. 1007 (C.D. Cal. 1981), for the proposition

that “the jurisdiction with the greatest interest in defining

when an injured person has been fully compensated is the

jurisdiction in which the person is domiciled.” (Def.’s Opp’n to

Pl.’s Mot. for Further Relief at 4). However, In re Pago Pago

was a tort case and while the states where victims are domiciled

might have a weightier interest in ensuring that their citizens

are fully compensated for unforeseen physical injuries suffered

in a foreign state, the court finds the situation here readily

distinguishable.8

This case involves a corporation and its contractual

obligations to a shareholder, as laid out in corporate documents

defining the entity’s stock structure. Massachusetts has a

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substantial interest in ensuring that its corporations, creatures

of state creation, promptly fulfill their contractual obligations

to investors. Recognizing the uniqueness of this relationship

between a corporation and the state, the Supreme Court has

provided a rule that obviates the need to undertake choice of law

analysis when adjudicating the rights of parties under articles

of incorporation and by-laws. The law of the state of

incorporation controls. Order of United Commercial Travelers of

Am. v. Wolfe, 331 U.S. 586, 614 (1947) (relied on in the court’s

underlying declaratory judgment). Similarly, the court finds

that Massachusetts has an important interest in regulating the

conduct of state-created corporations, an interest that outweighs

any interest California may have in the compensation awarded in a

contracts dispute between its citizen and a foreign party. The

high Massachusetts prejudgment interest rate may encourage timely

resolutions of disputes and boost investor confidence in

Massachusetts corporations. Therefore, Massachusetts law applies

to the calculation of prejudgment interest. 

At oral argument, defendant raised for the first time

the possibility that prejudgment interest might accrue only from

the date of breach until the date of the declaratory judgment. 

Defendant cited Northrop Corp. v. Triad International Marketing

and argued that the Ninth Circuit has stated that prejudgment

interest runs only until the first judgment ascertaining damages. 

842 F.2d at 1156 (holding that postjudgment interest, calculated

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9 Section 1961(a) allows interest “on any money judgment in

a civil case recovered in a district court. . . . Such interest

shall be calculated from the date of the entry of the judgment,

at a rate equal to the weekly average 1-year constant maturity

Treasury yield, as published by the Board of Governors of the

Federal Reserve System, for the calendar week preceding.

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according to 28 U.S.C. § 19619 in diversity cases, runs from the

date of the underlying judgment, rather than the date of an order

enforcing an arbitration award). However, defendant failed to

mention that in American Telephone & Telegraph Co. v. United

Computer Sys., Inc., the court rejected the proposition that “§

1961 requires postjudgment interest to be calculated from the

first judgment in which the damages are sufficiently

ascertained.” 98 F.3d 1206, 1210 (9th Cir. 1996). The AT&T

court based its decision, which awarded prejudgment interest up

to the date of the second enforcement order, on two grounds: (1)

the delay between the first judgment and an enforceable judgment

was the fault of the party arguing for application of the

postjudgment interest rate and (2) the prejudgment interest rate

under state law more fully compensated the prevailing party for

its inability to enjoy its money judgment. Id. at 1211.

In this case, as in AT&T, “the postjudgment interest

rate is less than the prejudgment interest rate, and it is the

losing party who asks that postjudgment interest begin at the

time of the initial judgment . . . .” Id. at 1210. Compare 

Mass. Gen. Laws ch. 231, § 6C (setting the state law prejudgment

interest rate at twelve percent), with Federal Reserve,

http://www.federalreserve.gov/releases/H15/data/wf/tcm1y.txt

(documenting the applicable postjudgment interest rate at the

time of this court’s declaratory judgment order: 3.30%). 

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10 If defendant chooses to file a bond to obtain a stay as

of right pursuant to Rule 62(d), it should consider Local Rule

65.1-151(d) in determining the appropriate amount for the bond. 

See also SIBIA Neurosciences, 1999 WL 33554683 at *5 (“Although

Rule 62(d) does not specify how large the security must be,

courts have read Rule 62(d) to require that the security cover

costs and interest.” (citing Poplar Grove, 600 F.2d at 1191)). 

20

Likewise, defendant’s behavior is, at least in part, the cause of

the delay between the first judgment in this case and this order

specifying damages. At oral argument, counsel for plaintiff

confessed that his hope that a declaratory judgment would be

enough to secure payment from defendant motivated his decision to

separately petition the court for a declaration of his rights and

an order for payment. Defendant has not been as cooperative as

plaintiff had hoped. Therefore, the court finds that, under

these circumstances, prejudgment interest should run from June

28, 2002 until September 20, 2005.

III. Conclusion

Defendant failed to demonstrate, to the court’s

satisfaction, that a grant of an unsecured stay would not

jeopardize plaintiff’s chances of recovery. As a result, in the

absence of a stay, the court was free to rule on plaintiff’s

motion for further relief.10 For the reasons discussed above, the

court grants the relief sought. 

IT IS THEREFORE ORDERED that defendant's motion for

stay without bond be, and hereby is, DENIED.

IT IS FURTHER ORDERED that plaintiff's motion for

further relief be, and hereby is, GRANTED. The court determines

that plaintiff is entitled to $524,880 in exchange for his Series

A shares of defendant’s stock plus prejudgment interest in the

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amount of $203,279.55, which accumulated at a rate of twelve

percent under Massachusetts law from June 28, 2002 until

September 20, 2005.

DATED: September 20, 2005

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