RLI Ins. Co. v. Nexus Servs. Inc.

RLI INSURANCE COMPANY, Plaintiff, v. NEXUS SERVICES INC, et al., Defendants

Civil Action No. 5:18-cv-66

UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF VIRGINIA HARRISONBURG DIVISION

December 17, 2020

By: Michael F. Urbanski Chief United States District Judge

MEMORANDUM OPINION

This matter is before the court on defendants Nexus Services, Inc.; Libre by Nexus, Inc.; and Homes by Nexus, Inc.'s (collectively "Nexus") motion to stay the court's October 23, 2020, order (hereinafter "October order") regarding damages and collateral security pending appeal without requiring Nexus to post a supersedeas bond. ECF No. 602. Plaintiff RLI Insurance Company ("RLI") opposes the motion, arguing that Nexus has not met its burden to justify a stay of damages without posting a bond nor has it met its burden to justify the stay of the court's injunction regarding collateral security. ECF No. 606. Nexus replied to RLI's opposition, claiming a stay on damages is necessary to avoid irreparable harm to Nexus and the public interest and that the court's order of collateral is not injunctive in nature. ECF No. 608.¹

The matter has been fully briefed and is ripe for resolution. The court dispenses with oral argument because the facts and legal contentions are adequately presented in the materials before this court and argument would not aid the decisional process. For the reasons stated herein, the court DENIES Nexus's motion to stay the court's October order.

I. Applicable Law

Rule 62 of the Federal Rules of Civil Procedure provides that "[w]hile an appeal is pending from an interlocutory order or final judgment that grants, dissolves, or denies an injunction, the court may suspend, modify, restore, or grant an injunction on terms for bond or other terms that secure the opposing party's rights." Fed. R. Civ. P. 62(d). Nexus appeals several of this court's orders and requests the court grant its motion to stay the October order, including the court's order on damages and collateral security, without a supersedeas bond.

Generally, "[a] party can obtain a stay as a matter of right under Rule 62(d) by posting a supersedeas bond in the full amount of the judgment, but district courts have the discretion to grant a stay without a bond or with a reduced bond." E.I. DuPont de Nemours and Co. v. Kolon Industries, Inc., No. 3:09-cv-58, 2012 WL 1202485, at *2 (E.D. Va. April 10, 2012) (citing Alexander v. Chesapeake, Potomac & Tidewater Books, Inc., 190 F.R.D. 190, 192 (E.D. Va. 1999)). However, "[d]efendants are not entitled to a stay [when they]have not posted a supersedeas bond in the full amount of the judgment." Schmidt v. FCI Enterprises LLC, No. 118-CV-1472, 2020 WL 2748499, at *4 (E.D. Va. Feb. 3, 2020).

"A stay is considered 'extraordinary relief' for which the moving party bears a 'heavy burden.'" Northrop Grumman Technical Services, Inc. v. DynCorp International, LLC, No. 1:16-cv-534, 2016 WL 3346349, *2 (E.D. Va. 2016) (quoting Larios v. Cox, 305 F. Supp. 2d1335, 1336 (N.D. Ga. 2004)). "In determining whether to issue a stay pending appeal on the basis of less than a full bond, a district court should act to 'preserve the status quo while protecting the non-appealing party's rights pending appeal.'" Alexander, 190 F.R.D. at 193 (quoting Poplar Grove Planting and Refining Co., Inc. v. Bache Halsey Stuart, Inc., 600 F.2d 1189, 1190-91 (5th Cir. 1979)). In considering a motion to stay pending appeal, the court must evaluate the following factors:

(1) whether the stay applicant has made a strong showing that he is likely to succeed on the merits;

(2) whether the applicant will be irreparably injured absent a stay;

(3) whether issuance of the stay will substantially injure the other parties interested in the proceeding; and

(4) where the public interest lies.

Northrop, 2016 WL 3346349 at *2 (quoting Nken v. Holder, 556 U.S. 418, 434 (2009)).

"Since the traditional stay factors contemplated individualized judgments in each case, the formula cannot be reduced to a set of rigid rules." Hilton v. Braunskill, 481 U.S. 770, 777 (1987). Accordingly, "[t]he court need not give these factors equal weight, but should consider all of the factors in light of the circumstances surrounding the injunction." MicroStrategy, Inc. v. Bus. Objects, S.A., 661 F. Supp. 2d 548, 558 (E.D. Va. 2009). Although the Fourth Circuit has not addressed the issue directly, many sister circuits treat the first two factors as a sliding scale, requiring a less rigorous showing of likelihood of success on appeal in the face of a compelling showing of irreparable harm. Id. (collecting cases). Absent a showing of likelihood of success on appeal, a movant must, at the very least, "demonstrate a substantial case on the merits," irrespective of the degree of irreparable harm. ePlus Inc. v. Lawson Software, Inc., 946 F. Supp. 2d 503, 507 (E.D. Va. 2013) (quoting Hilton, 481 U.S. at 778) (internal quotationsand citations omitted). But see Combs v. FV-1, Inc., No. MJG-13-3734, 2013 WL 6662729, at *2 (D. Md. Dec. 16, 2013) ("[Movant] must satisfy each element for relief.").

In the Fourth Circuit, "the posting of a supersedeas bond may only stay a monetary judgment pending an appeal, Fed. R. Civ. P. 62(d), and does not permit a party to stay injunctive relief." Solis v. Malkani, 638 F.3d 269, 275 (4th Cir. 2011). See also ActiveVideo Networks, Inc. v. Verizon Commc'ns, Inc., No. 2011-1538, 2012 WL 10716768, at *1 (Fed. Cir. Apr. 2, 2012) (applying Fourth Circuit law); 11 Charles Alan Wright et al., Federal Practice and Procedure § 2905 (2d ed.1995).

II. Motion to Stay

Nexus requests the court grant a motion to stay its payment of damages and collateral security pending appeal. Nexus claims a stay without a bond is justified given the overwhelming irreparable harm at issue. RLI disagrees, arguing that Nexus has not presented any actual evidence of irreparable harm beyond speculative allegations and that Nexus is unable to show a likelihood of success on appeal. Further, RLI contends that the order to pay a specific amount of collateral security is an affirmative injunction and therefore not subject to a stay of the judgment. Conversely, Nexus characterizes the court's order of collateral security as "nothing more than a straight-forward order to pay a specific lump sum of money" and "purely monetary," and therefore subject to the stay it requests.

First, Nexus must show that it is likely to succeed in appealing the court's grant of summary judgment based on its interpretation of the Indemnity Agreement. In assessing the likelihood of success on appeal, the "standard does not require the trial court to change its mind or conclude that its determination on the merits was erroneous. Rather, the court mustdetermine whether there is a strong likelihood that the issues presented on appeal could be rationally resolved in favor of the party seeking the stay." United States v. Fourteen Various Firearms, 897 F. Supp. 271, 273 (E.D. Va. 1995) (internal citations omitted) (emphasis added). The Fourth Circuit reviews a court's award of summary judgment de novo and views the facts and inferences drawn therefrom in the light most favorable to the non-moving party. Spriggs v. Diamond Auto Glass, 242 F.3d 179, 183 (4th Cir. 2001). The Fourth Circuit also reviews a district court's interpretation of a contract de novo. Choice Hotels Int'l, Inc. v. BSR Tropicana Resort, Inc., 252 F.3d 707, 710 (4th Cir. 2001). Although Nexus offers no new evidence or argument to support its interpretation of the Indemnity Agreement, the court agrees the Fourth Circuit may diverge in its interpretation of the contract upon a de novo review. U.S. Home Corp. v. Settlers Crossing, LLC, No. 8-cv-1863, 2015 WL 3973071, at *5 (D. Md. June 29, 2015) ("Although the court stands by its prior rulings and final Judgment, a number of the issues Purchaser plans to raise on appeal are objections to this court's interpretations of the parties' Agreement, which will be reviewed de novo by the Fourth Circuit."). Nexus "has not necessarily shown a 'strong likelihood of success' on appeal, but has identified specific legal findings that raise 'serious questions of law.'" Id.

Second, Nexus must provide evidence that it would be irreparably injured without a stay. Nexus claims that it currently indemnifies approximately 20,000 immigration bonds with non-party sureties, who would view Nexus's requirement to pay the monetary judgment as a "material change in Nexus's condition and seek to unwind the immigration bonds." ECF No. 602 at 5. Nexus claims:

Those sureties would be correct in assuming that paying damages to RLI necessarily drains resources otherwise available to keep[Nexus] current on their payment and collateral demands, even if such funds are ultimately returned to Nexus following a successful appeal effort.

Id. Nexus also argues that without the stay, "thousands of asylum seekers will be irreparably harmed even if Nexus prevails on its appeal." Id. at 5-6. It suggests that the sureties are bound to "unwind" their immigration bonds, which would force the previously bonded immigrants to return to detention facilities during the pandemic. Id. Conversely, RLI argues that Nexus has not met its burden of producing evidence of irreparable harm and, even if it had evidence, a claim of financial injury is insufficient to justify irreparable harm. ECF No. 606 at 8.

The court finds Nexus did not carry its burden of showing irreparable harm. When, as here, the petitioners do not establish a strong likelihood of success on the merits, the impetus is on them to make an especially "strong showing of probably irreparable injury." James A. Merritt & Sons v. Marsh, 791 F.2d 328, 331 (4th Cir. 1986) (citing N.C. State Ports Auth. v. Dart Containerline Co., 592 F.2d 749, 750 (4th Cir. 1979)). "Mere injuries, however substantial, in terms of money, time and energy necessarily expended in the absence of a stay are not enough. The possibility that...