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Note: Intex Recreation Corp. (Judgment Debtor) was required to post an appeal bond in order to appeal a judgment of approximately US$12,900,000 in favor of Aero Products International, Inc. (Judgment Creditor). "The Local Rule for the Northern District of Illinois, LR 65.1 (b), ... provides [that] 'Every bond or similar undertaking must be secured.' LR 65.1(b). The Rule states, 'An unconditional letter of credit is an approved form of security.' LR65.1 (b)(4). The Rule is silent as to whether this letter of credit must be secured by a U.S. banking institution, and neither party has provided any case law interpreting this provision."

Judgment Debtor proposed obtaining a letter of credit from HSBC. The LC would be "available at the counters of Hong Kong and Shanghai Bank Corp., Mongkok, Kowloon, Hong Kong." Claiming that Judgment Debtors' LC is "fraught with risk and uncertainty," Judgment Creditor protested, concerned that a US court's "enforcement jurisdiction could be limited" because the bank is located overseas. The Judgment Debtor countered that "submitting an alternative letter of credit would be a significant hardship."

The court noted that the rules "are intended to maintain the status quo and protect the appellee...from loss while the appellant...appeals a judgment against the appellant." The U.S. District Court for the Northern District of Illinois, Eastern Division, Darrah, J., instructed Judgment Debtor to obtain a LC from a U.S. financial institution, stating "[T]he Court is charged with ensuring that the judgment can be satisfied, if necessary, upon the conclusion of the appeal. If this Court cannot assert personal jurisdiction over the financial institution issuing the letter of credit, this Court would be limited in its authority to protect the appellee."

[JEB/jw]

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