Howard Town Center Developer, LLC v. Howard University
Civil Action No. 2013-1075
| D.D.C. | Dec 8, 2017Background
- Developer (Howard Town Center Developer, LLC) sought a stay of execution pending appeal by posting an irrevocable letter of credit instead of a full supersedeas bond.
- The district court previously entered summary judgment for Howard University and Developer appealed to the D.C. Circuit.
- Developer earlier deposited $1,475,000 in escrow with Closeline Settlements, then directed Closeline to return the funds; those funds were routed through Eagle Bank and Industrial Bank and transferred to an affiliate (PMAS).
- University attempted to attach the escrow funds but could not because Developer had the funds returned/transferred; depositors later testified the funds belonged to PMAS, not Developer.
- Trial testimony indicated the Developer had little or no cash, was inadequately capitalized, and was essentially judgment‑proof absent substitute security.
- Developer argued a letter of credit would avoid the expense of a bond; University opposed substitution given Developer’s conduct and lack of demonstrated financial ability.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a letter of credit may substitute for a full supersedeas bond under Rule 62(d) | Letter of credit should be accepted as alternate security to avoid needless expense of a bond | Developer has not met burden to justify departing from full bond; past conduct and insolvency risk show need for full bond | Denied — court refused to substitute letter of credit for full supersedeas bond |
| Whether Developer demonstrated present financial ability and a secure plan to satisfy judgment if appeal fails | Developer cited cost savings of a letter of credit and asserted ability to provide that instrument | University showed Developer returned escrow funds, transferred assets to affiliate, and is undercapitalized and likely unable/unwilling to satisfy judgment | Denied — Developer failed to show present ability or financially secure plan; prior conduct suggested risk of evasion |
Key Cases Cited
- Fed. Prescription Serv., Inc. v. Am. Pharm. Ass'n, 636 F.2d 755 (D.C. Cir. 1980) (purpose of supersedeas bond is to protect appellee from loss during stay)
- So v. Suchanek, 670 F.3d 1304 (D.C. Cir. 2012) (district court has broad discretion to determine appropriate stay security)
- Poplar Grove Planting & Refining Co. v. Bache Halsey Stuart, Inc., 600 F.2d 1189 (5th Cir. 1979) (party seeking departure from full bond must objectively demonstrate reasons)
- Athridge v. Iglesias, 464 F. Supp. 2d 19 (D.D.C. 2006) (court may substitute alternate guaranty only if debtor demonstrates present ability and a secure plan to remain solvent)
- Grand Union Co. v. Food Emp'rs Labor Relations Ass'n, 637 F. Supp. 356 (D.D.C. 1986) (burden on moving party to justify waiving bond requirement)