Article

Note: Wade Tucker (Plaintiff), a stockholder of HealthSouth Corporation, sued Richard Scrushy (Defendant), HealthSouth's former chief executive officer for "insider open-market trading, fraud, breach of fiduciary duty by corporate directors, professional negligence by auditors, aiding and abetting or civil conspiracy by an investment banking firm, and breach of contract. Plaintiff's complaint also alleges that Defendant was unjustly enriched when he accepted bonuses as a result of overvalued financial statements that misstated HealthSouth's net income." Partial summary judgment in the amount of US$47,828,106 plus prejudgment interest was granted against Defendant. The judgment was finalized and Defendant appealed.

In connection with his appeal, Defendant filed an emergency motion to stay execution of the judgment. Under applicable state rules, no stay could be granted "unless the appellant executes bond with good and sufficient sureties, approved by the clerk of the trial court, payable to the appellee (or to the clerk or register if the trial court so directs), with condition, failing the appeal, to satisfy such judgment as the appellate court may render, when the judgment is...for the payment of money only, in an amount equal to ... 125% [of the amount of the judgment] if the judgment exceeds $10,000.00...." The required amount of the bond was US$59,300,000.

Seeking an exemption to this requirement, Defendant alleged that he was unable to obtain a bond in this amount. In support of this contention, he submitted an affidavit by William Dodson, president of Robinson-Adams Insurance, Inc., who stated he had contacted eight surety companies. "Each of these surety companies said that they would not consider issuing the required supersedeas bond unless [Defendant] would fully collateralize the surety's bond obligation by posting an irrevocable evergreen letter of credit in the amount of the bond penalty issued by a bank that was acceptable to the surety company. To date, I have not been informed that [Defendant] can or will obtain an acceptable letter of credit in the required amount to fully collateralize an appeal bond, so no surety has, at this point, been willing to entertain further the issuance of the bond."

The Supreme Court of Alabama, Lyons, J., denied defendant's motion. It stated that Defendant had failed to show that he was unable to post a supersedeas, but rather had merely shown he would first have to obtain an LC. "Notably, [Defendant] presented no evidence indicating that he could not obtain an LC.

[JEB/mm]

COPYRIGHT OF THE INSTITUTE OF INTERNATIONAL BANKING LAW & PRACTICE

The views expressed in this Case Summary are those of the Institute of International Banking Law and Practice and not necessarily those of ICC or the other partners in DC-PRO.