UNITED STATES DISTRICT COURT

 EASTERN DISTRICT OF MICHIGAN

SOUTHERN DIVISION

TRANSPORTATION INSURANCE COMPANY

and NATIONAL FIRE INSURANCE COMPANY

OF HARTFORD,

Plaintiffs,

v.

CITIZENS INSURANCE COMPANY OF

AMERICA,

Defendant.

Case No. 08-15018

Honorable Julian Abele Cook, Jr.

ORDER

This civil action represents the continued litigation between the Plaintiffs, Transportation

Insurance Company ("Transportation") and National Fire Insurance Company of Hartford ("National

Fire"), and the Defendant, Citizens Insurance Company of America ("Citizens") pursuant to a

settlement agreement that was reached in Perez v. Dailey Co. (Macomb Circuit Court, Case No. 07-

35330NO). In Perez, David Perez Jr. filed a lawsuit against the Dailey Company ("Dailey"), an

insured of the Plaintiffs, and Giannola Masonry ("Giannola"), an insured of the Defendant, after

suffering permanent injuries while employed by Giannola. The Plaintiffs now seek reimbursement

from the Defendant for damages that they paid as a result of the Perez litigation.

Currently before the Court are (1) the Plaintiffs' request for prejudgment interest on the

judgment for $5 million entered by this Court on March 7, 2013; (2) the Defendant's emergency

motion to stay execution of the judgment; (3) the Defendant's motion for stay pending appeal upon

the posting of an insurance policy in lieu of appeal bond; and (4) the Plaintiffs’ motion to dissolve

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the temporary stay of execution entered by the Court on June 5, 2013.

I.

On June 26, 2007, David Perez, Jr. was seriously injured while working on a construction

project in Macomb County for which Dailey was the general contractor. At the time, Perez was

employed by Giannola, the masonry contractor on the project. After his injury, Perez filed a lawsuit

against several companies, including Dailey. Dailey, in turn, requested indemnification from

Giannola and Citizens. 

Perez’s lawsuit was ultimately resolved for a sum of $12 million. Pursuant to the agreement,

the Plaintiffs reserved the right to pursue (1) reimbursement of $6 million paid on behalf of the

Dailey Company and (2) 50% of the costs of the defense. The parties eventually agreed to a

settlement for 50% of the costs of the defense and $1 million out of the $6 million paid by Dailey.

A bench trial was held to determine whether the Plaintiffs were entitled to reimbursement

for the remaining $5 million. On March 7, 2013, this Court entered a judgment for the Plaintiffs in

the amount of $5 million. The issue of interest was deferred until after the parties submitted

supplemental briefing on the issue. Supplemental briefing was concluded by the end of March 2013.

After an exchange of emails on March 15, 2013, the Defendant believed that an enforceable

agreement had been reached by the parties which would postpone any execution of the judgment

until after the issue of pre-judgement interest was decided. Several weeks later, on April 5, the

Defendant filed a notice of appeal. On June 5, 2013, the Plaintiffs informed the Defendant that

unless an appeal bond was filed by June 6, the Plaintiffs would seek to execute the judgment. The

Defendant filed an emergency motion to stay and a motion to stay pending appeal upon the posting

of insurance policy in lieu of appeal bond. The emergency motion to stay was granted pending

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briefing by all parties. On June 21, 2013 the Plaintiffs filed a motion to dissolve the emergency stay.

II.

The Court will first consider the Plaintiffs’ contention that they are entitled to pre- and postjudgment interest. The Defendant does not dispute that the Plaintiffs are entitled to postjudgment

interest at the rate of 0.17% on the $5 million judgment, or $23.28 per day. However, it maintains

that the Plaintiffs are not entitled to prejudgment interest.

The settlement agreement contains a blanket clause in which the Plaintiffs agree to release

"any and all claims" against the Defendant arising out of the Perez litigation, including "all claims,

demands, damages and causes of action of whatsoever kind or nature, either in law or equity, on

account of any . . . loss, expense or damages of any kind." ¶ 3(a). A separate limiting provision of

the agreement, on the other hand, reserves the right of the Plaintiffs to "continued litigation against

[the Defendant] for payment of the $6,000,000 paid by [the Plaintiffs] . . . plus 50% of the costs of

the defense of the Perez litigation." ¶ 4. This limiting provision appears to have been satisfied.

Presently, the parties have reached an agreement regarding $1 million and 50% of the costs of the

Perez defense, and the Court awarded the Plaintiffs a judgment of the remaining $5 million. The

disputed issue is whether the limiting provision caps any award to the Plaintiffs at a total of $6

million, or whether they are entitled to the $6 million plus prejudgment interest.

The Plaintiffs maintain that this agreement limits the theories of recovery available to them,

but it places no other limitations on the litigation. They contend that the settlement agreement

contemplated "continued litigation" between the parties, including the corresponding rights

conferred upon the litigants by statute. Thus, the Plaintiffs maintain that they, as the prevailing

parties, are entitled to prejudgment interest pursuant to MCL 600.6013.

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The Defendant counters that, in addition to limiting the available theories of recovery, the

settlement agreement also limits the amount of recovery to a total sum of $6 million. Therefore, the

Plaintiffs are not entitled to any additional payments, including an award of prejudgment interest.

In a prior order, this Court determined that "the presence of unambiguous language

forecloses any attempt by the Plaintiffs to recover anything other than the $6 million . . . and one

half of the defense costs in the Perez litigation." (Order at 22, Aug. 17, 2010, ECF 22). Although

the issue presented in that order was whether the Plaintiffs were entitled to attorney fees and costs

resulting from this litigation, the agreement language compels the same result with respect to the

pending request for prejudgment interest. The settlement agreement expressly limits the recovery

to the total sum of $6 million. The Plaintiffs’ request for prejudgment interest will be denied. 

III.

The Court will next address the Defendant's motion for stay pending appeal upon the posting

of an insurance policy in lieu of a supersedeas bond. The Federal Rules of Civil Procedure provide

that when appealing a judgment, an appellant may stay its enforcement by posting a supersedeas 

bond. Fed.R.Civ.P.62 (d) This bond requirement has been interpreted by the Sixth Circuit as being

necessary only to obtain a stay as a matter of right. Arban v. West Publ’g Corp., 345 F.3d 390, 409

(6th Cir. 2003) (citing Federal Prescription Serv., Inc. v. Am. Pharm Ass’n, 636 F.2d 755, 759 (D.C.

Cir. 1980)). The Rule “does not limit the district court’s power to issue unsecured stays through an

exercise of its sound discretion.” Federal Prescription Serv., Inc., 636 F.2d at 760.

While the Sixth Circuit has not outlined a specific test to guide the decision of a district court

when considering whether to grant a request for an unsecured stay, courts have tended to examine

the purpose of Rule 62(d). The bond requirement of this Rule serves to protect both parties. See

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Hamlin v. Charter Tp. of Flint, 181 F.R.D. 348, 351 (E.D. Mich. 1998). It protects the appellant

from “the risk of satisfying the judgment only to find that restitution is impossible after reversal on

appeal” while protecting the appellee “from the risk of a later uncollectible judgment and also

provid[ing] compensation for those injuries which can be said to be the natural and proximate result

of the stay.” Id. (internal quotation marks omitted). Thus, “Rule 62(d) establishes not only the

appellant’s right to a stay but also the appellee’s right to have a bond posted. Because of Rule

62(d)’s dual protective role, a full supersedeas bond should almost always be required.” Id.; see also

Pucci v. Somers, 834 F. Supp. 2d 690, 706 (E.D. Mich. 2011) (quoting Hamlin, 181 F.R.D. at 351). 

Despite this presumption as it relates to a supersedeas bond, two circumstances exist in

which courts are urged to consider foregoing the requirement: namely, where (1) “the [appellant’s]

ability to pay the judgment is so plain that the cost of the bond would be a waste of money” and (2)

“the requirement would put the [appellant’s] other creditors in undue jeopardy.” Pucci, 834 F. Supp.

2d at 707 (quoting Olympia Equip. Leasing Co. v. Wester Union Tel. Co., 786 F.2d 794, 796 (7th Cir.

1986)); see also Arban, 345 F.3d at 409 (affirming decision to grant stay without bond “[i]n light

of the vast disparity between the amount of the judgment in this case and the annual revenue of the

[defendant]”); cf. Dubuc v. Green Oak Twp., No. 08-13727, 2010 WL 3908616, at *2 (E.D. Mich.

Oct. 1, 2010) (preferring an analysis that “looks to whether there are ‘extraordinary circumstances’

that justify deviating from the bond requirement”). “When an appellant claims its ability to pay the

judgment is so obvious that posting a bond would simply be a waste of money, courts have generally

required the appellant to present ‘a financially secure plan for maintaining that same degree of

solvency during the period of an appeal.’” Hamlin, 181 F.R.D. at 353 (quoting Poplar Grove

Planting & Refining, Co. v. Bache Halsey Stuart, Inc., 600 F.2d 1189, 1191 (5th Cir. 1979).

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The Defendant submits that a viable alternative to a supersedeas bond is the security of a

certified copy of the insurance policy covering this judgment along with a surety affidavit of

recognizance obligating it to pay the judgment if it is affirmed on appeal. The Plaintiffs, on the other

hand, contend that an insurance policy for which the Defendant is liable does not offer any

additional protection should the Defendant be unable to pay the judgment. They request that a stay

of execution be granted only in the event that the Defendant files a supersedeas bond or other

equivalent security.

According to the Defendant, an insurance policy is regularly used by Michigan state courts

as security pursuant to Mich. Comp. Laws § 500.3036, which provides as follows:

When an appeal is taken from a judgment in a case where it appears to the court that

all or a part of the particular liability of the appellant is insured against by a surety

company or insurance carrier authorized to do business in this state . . . the court

shall not require the appellant to provide an appeal bond or bond to stay execution

pending appeal up to the amount of the coverage of the policy or suretyship. 

Mich. Comp. Laws § 500.3036. The facts of the case at hand, however, do not meet the requirements

of the Michigan statute. The policy which Citizens would like to submit is Citizen's own insurance

policy covering its insured, Giannola Masonry Company. Giannola Masonry is not a party to this

action and is not liable for any portion of the $5 million. The judgment of $5 million was entered

against Citizens. As a result of the judgment, Citizens is legally obligated to pay $5 million. A letter

of recognizance issued by Citizens, acknowledging that it is legally obligated to pay $5 million,

provides no greater security to the Plaintiffs than the judgment itself.

The Michigan Court of Appeals has confirmed that § 500.3036 does not cover an insurance

company appellant. In McMillan v. Detroit Auto. Inter Ins. Exch., 292 N.W.2d 165, 167 (Mich. Ct.

App. 1980) it held that when a defendant "is primarily liable on the insurance policies . . . its liability

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is not 'insured against'" within the meaning of the statute. A defendant also fails to meet the

requirements of the statute if it "did not purchase or maintain the policies that it attempted to utilize

in lieu of bond." Id.

Here, the Defendant is primarily liable on the insurance policy, so its liability is not insured.

In order for the Defendant to meet the requirements of the statute, it would be required to obtain an

insurance policy for the $5 million judgment from a different qualified insurance carrier. As the

insurance policy for which the Defendant is liable provides no additional protection to the Plaintiffs

than the judgment itself, the Defendant is in essence requesting a stay of execution without security,

or, in other words, a waiver of the appeal bond requirement.

Intended to preserve the status quo, the appeal bond requirement is waived typically only

under "exceptional circumstances." Those circumstances tend to be when the appellant demonstrates

a disproportionately high income in relation to the judgment or when the appellant has posted cash,

accounts receivables, or other assets as security. See, e.g., Arban, 345 F.3d at 409; Olympia Equip.

Leasing Co., 786 F.2d 794 at 796.

In support of its request, the Defendant notes that it has an "A" rating from A.M. Best

Company, a global credit rating service and is approved by the United States Department of

Treasury to issue appeal bonds, with a bonding authority of up to $70,169,000. It asserts that "[t]here

can be no legitimate concern about [its] solvency." Notwithstanding these assertions, the Defendant

has not provided any information regarding its income, nor has it posted any assets as security. As

a result, the Court does not believe that the Defendant has proved that this case constitutes

“exceptional circumstances” that would justify denying the Plaintiffs the security of a supersedeas

bond. The stay of execution will be extended for a period of fourteen (14) days from the date of

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entry of this order so that the Defendant may obtain a supersedeas bond. 

IV.

For the reasons that have been set forth above, the Court will (1) deny the Plaintiffs' request

for pre-judgment interest; (2) deny for reasons of mootness the Defendant's motion for an emergency

stay (ECF No. 101); (3) deny the Defendant's motion for a stay pending appeal upon the posting of

the insurance policy in lieu of an appeal bond (ECF No. 103); and (4) deny for reasons of mootness

the Plaintiffs’ motion to dissolve the temporary stay of execution (ECF No. 108). The temporary

stay of execution entered by this Court on June 5 (ECF No. 102) is continued for a period of

fourteen (14) days from the date of entry of this order in order to permit the Defendant to submit a

supersedeas bond.

IT IS SO ORDERED.

Date: August 29, 2013 s/Julian Abele Cook, Jr. 

JULIAN ABELE COOK, JR.

U.S. District Judge

CERTIFICATE OF SERVICE

The undersigned certifies that the foregoing Order was served upon counsel of record via the Court's ECF System to their respective

email addresses or First Class U.S. mail to the non-ECF participants on August 29, 2013.

s/ Kay Doaks 

Case Manager

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