Petersen-Dean, Inc. v. Nat'l Union Fire Ins. Co. of Pittsburgh, PA

PETERSEN-DEAN, INC., Petitioner, v. NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA., Respondent.

19 Civ. 11299 (AKH)

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK

April 24, 2020

ORDER GRANTING MOTION TO REGISTER JUDGMENT IN OTHER DISTRICTS & DENYING CROSS-MOTION TO STAY ENFORCEMENT

ALVIN K. HELLERSTEIN, U.S.D.J.:

On February 11, 2020, I issued an order denying Petersen-Dean, Inc.'s ("Petersen") petition to vacate an arbitration award against it and granting National Union Fire Insurance Company of Pittsburgh, PA.'s ("National Union") cross-petition for enforcement of the arbitral award. See Order (Feb. 11, 2020) ("February Order"), ECF No. 21. I held that "there can be no doubt that the arbitral prehearing security award ... was proper," as it was "well within the panel's discretion to guard against a National Union Pyrrhic victory" by "ordering an award small enough to minimize the risk of Petersen's collapse" from its precarious financial perch, but also "large enough to avoid the distasteful result of National Union succeeding in an arbitration only to suffer a net loss due to costs." February Order at 7, 9-10. Judgment was entered soon thereafter. See Judgments, ECF Nos. 22 and 26.

Petersen has thus far failed to comply with the Judgment, despite the clear order of this Court. National Union now moves for an order authorizing registration of the Judgment against Petersen pursuant to 28 U.S.C. § 1963, on the grounds that Petersen refuses to comply with the arbitral award and enforcing judgment. See Mtn. to Register Judgment, ECF No. 29. In response, Petersen brings a motion of its own, to stay enforcement of the Judgment pending its appeal. See Mtn. to Stay Enforcement, ECF No. 35. Petersen's argument, thrice¹ rejected by the arbitral panel and once so by this Court, is that its financial fragility renders it unable to pay any interim security. For the reasons that follow, including the fact that granting Petersen's request would fundamentally undermine the rationale behind the arbitral award, National Union's motion is granted and Petersen's cross-motion is denied.²

Discussion

A. Registration of Judgments

Section 1963 of Title 18 provides in relevant part:

A judgment in an action for the recovery of money or property entered in any court of appeals, district court, bankruptcy court, or in the Court of International Trade may be registered by filing a certified copy of the judgment in any other district or, with respect to the Court of International Trade, in any judicial district, when the judgment has become final by appeal or expiration of the time for appeal or when ordered by the court that entered the judgment for good cause shown. .... A judgment so registered shall have the same effect as a judgment of the district court of the district where registered and may be enforced in like manner.

28 U.S.C. § 1963 (emphases added). Good cause can be shown by "evidence that [the respondent] lacks sufficient property in the judgment forum to satisfy the judgment and has substantial property in another district." Treasure Chest Themed Value Mail, Inc. v. David Morris Int'l, Inc., No. 17 Civ. 1, 2019 WL 2006179, at *2 (S.D.N.Y. May 6, 2019); see also, e.g., Lifetree Trading Pte. Ltd. v. Washakie Renewable Energy, LLC, No. 14 Civ. 9075, 2018 WL 4278280, at *1 (S.D.N.Y. Feb. 1, 2018) (noting that "'[g]ood cause" requires a "'mere showing that the party against whom judgment has been entered has substantial property in the other foreign district and insufficient property in the rendering district to satisfy the judgment'")(quoting HSH Nordbank AG N.Y. Branch v. Swerdlow, No. 8 Civ. 6131, 2018 WL 1957265, at *1 (S.D.N.Y. May 14, 2010)).

In determining whether good cause has been shown, "[a] court may rely on affidavits and other documentary evidence," and, as such, a "judgment creditor need not provide exact evidence of the debtor's assets." Lifetree Trading, 2018 WL 4278280, at *1 (quotation marks omitted); see also, e.g., Donel Corp. v. Kosher Overseers Ass'n of Am., Inc., No. 92 Civ. 8377, 2001 WL 1512589, at *2 (S.D.N.Y. Nov. 28, 2001) ("In the absence of contrary evidence, the affidavit in support of the judgment creditors' motion should be presumed true."); Treasure Chest Themed Value Mail, 2019 WL 2006179, at *3; Jamil v. SPI Energy Co., No. 16 Civ. 1972, 2017 WL 4326065, at *2 (S.D.N.Y. Sept. 8, 2017).

National Union has shown good cause. Petersen is a California corporation with its principal place of business in California, see Pet., ECF No. 1, at ¶ 5, and National Union adduces a sworn statement from counsel indicating that an asset search and investigation has turned up no assets in New York, see Crowell Decl., ECF No. 31, at ¶¶ 2-6. Petersen does not dispute these assertions. See Petersen Mtn. to Register Opp. Mem., ECF No. 48, at 2. Instead, it argues: "The purpose of [28 U.S.C. § 1963] is to allow for the efficient registration of final money judgments," and here there has only been an award of interim security rather than "any award on the merits in the [underlying] arbitration." Id. at 3-4. Therefore, Petersen urges, a judgment on an interim security award, even if it is for money, is "not a money judgment," and "cannot be enforced and collected" under Section 1963.

Petersen does not provide any persuasive authority to support this argument.³ National Union's Judgment is clearly a Judgment for money. It is based on an arbitration awardordering Petersen to pay money, albeit on an interim basis. The arbitral award granted "[National Union']s Motion for Security in the amount of $2 million to be provided by [Petersen]," Interim Arbitration Award, ECF No. 7-1, at 1. Section 1963, according to its terms, applies to any judgment "in an action for the recovery of money" (emphasis added), which this action surely is. It is therefore no surprise that courts in this district have, accordingly, not hesitated to apply Section 1963 to motions to register arbitral awards of the kind at issue here. See, e.g., Ill. Nat'l Ins. Co. et al. v. TSC Staffing Solutions, Inc., No. 12 Civ. 6146, ECF Nos. 22, 24 (S.D.N.Y. 2014) (granting a motion pursuant to Section 1963 with respect to a pre-hearing security award); Pacific Reinsurance Management Corp. v. Fabe, 929 F.2d 1215, 1217-18 (7th Cir. 1991) (rejecting the argument that Section 1963 would not apply if the money was paid, for example, into escrow rather than directly to the claimant).

National Union's motion to register the Judgment, see Judgment, ECF Nos. 22 and 26, in California or any other appropriate district, is granted.

B. Staying the Enforcement of Judgments

Federal Rule of Civil Procedure 62 provides in relevant part as follows:

At any time after judgment is entered, a party may obtain a stay by providing a bond or other security. The stay takes effect when the court approves the bond or other security and remains in effect for the time specified in the bond or other security.

Fed. R. Civ. P. 62(b) (emphases added).⁴ In In re Nassau Cty. Strip Search Cases ("Nassau"), the Second Circuit explained that "[t]he purpose of the rule is to ensure that the prevailing party will recover in full, if the decision should be affirmed, while protecting the other side against the risk that payment cannot be recouped if the decision should be reversed," and, as such, a district court "may, in its discretion, waive the bond requirement if the appellant provides an acceptable alternative means of securing the judgment." 783 F.3d 414, 417 (2d Cir. 2015) (quotation marks omitted). The Nassau Court identified the following "non-exclusive" factors a district court may consider when deciding whether the waive the supersedeas bond requirement:

(1) the complexity of the collection process; (2) the amount of time required to obtain a judgment after it is affirmed on appeal; (3) the degree of confidence that the district court has in the availability of funds to pay the judgment; (4) whether the defendant's ability to pay the judgment is so plain that the cost of a bond would be a waste of money; and (5) whether the defendant is in such a precarious financial situation that the requirement to post bond would place other creditors of the defendant in an insecure position.

Id. at 417-18. Case law makes clear that the Nassau factors are a tool geared toward ensuring a meaningful outcome for the prevailing party, and not a device for easing the judgment burden on the losing party. See, e.g., Butler v. Ross, No. 16 Civ. 1282, 2017 WL 6210843, at *3 (S.D.N.Y. Dec. 7, 2017) (the Nassau factors "contemplate waiving the requirement of a supersedeas bond because a court is satisfied that the debtor would be able to pay the judgment with ease," and, noting the debtor "plead[ed] a case of impecuniosity," reasoning that Nassau "does not envisage waiving the bond requirement because a debtor simply cannot pay"); John Wiley & Sons, Inc. v. Book Dog Books, LLC, 327 F.Supp.3d 606, 649 (S.D.N.Y. 2018) ("Defendants ground their stay request on their inability to pay the judgment. They provide documentation showing that the award dwarfs their assets. But the bond requirement will not be waived solely on the basis that it will pose a severe financial hardship on the appellant."); Moore v. Navillus Tile, Inc., No. 14 Civ. 8326, 2017 WL 4325537, at *1 (S.D.N.Y. Sept. 28, 2017) ("The bond requirement is not designed to protect the judgment debtor's ability to continue in business.").

In essence conceding (as it must) that all but the fifth of the Nassau factors clearly favor National Union, Petersen asks the Court to waive the bond requirement on the sole basis that meeting a bond requirement would "imperil other creditors." Petersen Stay Mem. at 16-17. Petersen argues that it has an agreement with a major lender that would allow the lender to accelerate the repayment date if Petersen had to post $2 million for bond, which in turn would cause Petersen to become insolvent and force it to...