Article

Note: Satyam Computer Services, Ltd. (Judgment Creditor) brought an action to enforce an arbitration award against Venture Global Engineering, LLC (Judgment Debtor) for an order requiring Judgment Debtor to deliver share certificates to Judgment Creditor worth US$622,656, pay £48,777.48 in arbitration costs and US$1,488,454.11 in additional costs plus 5% interest compounded annually until these costs are paid. Judgment Debtor moved to stay execution of the award pending appeal. The U.S. District Court for the District of Michigan, Robert H. Cleland, Senior Judge, granted the motion for stay pending appeal provided that Judgment Creditor's concerns regarding security were fully addressed.

In requesting the stay, Judgment Debtor offered to post an irrevocable LC in the amount of US$1,194,460.11 pursuant to U.S. Fed. R. Civ. P. 62(d) which "entitles a party who files a satisfactory supersedeas bond to a stay of money judgment as a matter of right." Judgment Debtor claimed that since it was willing to post "a bond or its equivalent in the amount of US$1,194,460.11," it was "entitled to a stay of the Final Judgment as a matter of right to pursue its appeal."

Judgment Creditor objected, contending that Judgment Debtor's "proposed LC is deficient under applicable Michigan law in both form and amount." Judgment Creditor had three primary concerns.

First, Judgment Creditor contended that the LC "is not redeemable...at conclusion of the appeal for which it was posted." According to its terms, the LC was not redeemable after Judgment Debtor's initial appeal is dismissed or denied if Judgment Debtor appeals. In addition, the LC provided a waiting period of fourteen days after the appeal is dismissed or denied before there can be a draw. Judgment Creditor preferred a one-day waiting period.

Second, Judgment Creditor contended that the LC is deficient because "the identity of the financial institution issuing the LC is not disclosed." Under Michigan law, "a supersedeas bond must be backed by a surety that has affirmed its own net assets with a market value that is twice as great as the bond."

Third, Judgment Creditor contended that "the amount of the proposed LC bond does not meet the requirements for an acceptable stay bond." Judgment Creditor argued that it was inappropriate to offset costs of the share certificates with other costs since "they are separate obligations and [Judgment Creditor] is required to pay [Judgment Debtor] the book value of the stock when [Judgment Debtor] transfers the stock to [Judgment Creditor]."

In granting the stay, the court conditioned its decision on the provision that Judgment Debtor "provides an irrevocable LC or supersedeas bond payable to [Judgment Creditor] one day after the [appellate court] denies or dismisses its appeal, backed by an appropriate financial institution, for US$1,976,417.19."

[JEB/tjd]

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