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premiums paid for [the] cost of supersedeas bonds or other bonds to preserve rights pending appeal ... shall be taxed by the clerk as costs of the appeal in favor of the party entitled to costs under this rule. [Emphasis added.]"
Reasoning: The court first decided that Federal Rule of Bankruptcy Procedure 8014 as opposed to Federal Rule of Appellate Procedure 39 or Federal Rule of Bankruptcy Procedure 7054(b) governed the issue before it. Rule 8014 specifically deals with appeals to district courts and deals with the apportionment of costs incurred by the parties in connection with those appeals. Notably, Rule 8014 specifically allows for the recovery of "premiums paid for the cost of supersedeas bond." On the other hand, Rule 8014's parallel rule Appellate Rule 39 deals with the costs incurred on appeals from district courts to appellate courts. And the court did not have any authority for the proposition that Rule 7054(b) applied to costs in incurred in appealing adversary proceedings. Thus, for these reasons, the court felt that Rule 8014 was the relevant provision for the determination of whether it should grant the Recovery Motion. As for the merits, the court felt that the plain language of Rule 8014 gives the court the discretion to award costs, regardless of whether there is a 'losing party' in the appeal to this court. The court "explicitly reject[ed] Bear Stearns's contention that it should be awarded the cost of the bond premium because the Trustee was the 'losing party' in the appeal to this Court." The court specifically distinguished this matter from the facts that were before the Second Circuit in Furman v. Cirrito, 782 F.2d 353 (2d. Cir. 1986). First, Furman dealt with Appellate Rule 39, which although similar in structure with Rule 8014, is still not applicable here. Second, in this case, there was no decision by any court "revising or redefining the result in the stage of the proceeding for which Bear Stearns seeks its costs." Third, the issues on appeal were complicated and "neither party sustained the totality of the legal positions they were advancing." Thus, there was no real 'losing party.' That Bear Stearns ultimately won on an affirmative defense before a jury does not obviate the legal rulings that the trustee was able to obtain. Ultimately, the court felt that there were two reasons to not grant the Recovery Motion: (i) the posture of the case at the time the bond was released, and (ii) the legal complexity of the litigation. As for the first reason, when the bond was released in December 2007, the outcome of the case was uncertain- it had yet to be tried before the jury. As for the second reason, novel complex issues were before the court in this case. The court drew some guidance from Appellate Rule 39 and state court case law which stated that a court has the discretion to deny costs when it deems it appropriate to do so. Certain factors have been provided that a court can use in exercising that discretion including the "'difficulty of the issues presented' on appeal." Here, as noted the issues were novel and difficult. For these reasons, the court felt it appropriate for the parties to bear their own costs on appeal and denied the Recovery Motion.
Facts: SONICBlue, Inc. filed for chapter 11 on March 21, 2003. The debtor retained Pillsbury, Winthrop, Shaw, Pittman, LLP ("Pillsbury") as its counsel. The Official Committee of Unsecured Creditors (the "Committee") hired Levene, Neale, Bender, Rankin & Brill LLP ("Levene") as its counsel. The Committee was comprised in part by three institutional bondholders (the "2002 Noteholders") who had hired Bruce Bennet of Hennigan, Bennett & Dorman as their separate counsel. Although the debtor sold substantially all of its assets soon after it filed chapter 11, one impediment to filing a plan of reorganization was the debtor's litigation with two companies: VIA Technologies, Inc. and S3 Graphics Co., Ltd. VIA and SONICblue had entered into a joint venture to form S3. SONICblue contributed intellectual property rights it licenses with Intel Corporation. After a books and records dispute arose between VIA and the debtor, Intel moved to lift the stay to terminate the license. As a result, VIA and S3 filed proofs of claim in the amount of $35 million against the debtor's estate for the books and records dispute and $70 million in liquidated damages. Pillsbury initially took over primary responsibility for the VIA litigation but, due to a conflict of interest, later arranged for Suzzanne Uhland of O'Melveny & Myers LLP to serve as the debtor's special litigation counsel on these issues. The court then provides an exhaustive factual background of the goings-on between Pillsbury, Uhland, Bennet, and Levene. Ultimately, the parties reached a settlement of the VIA/Intel litigation, which was approved by the court. The settlement included a provision
©2010 Leif M. Clark
