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Note: Chase Barfield, Michael Biffle, Gina Biffle, and Dwight Robertson (Landowners) sued Sho-Me Power Electric Cooperative, Sho-Me Technologies, KAMO Electric Cooperative, and K-PowerNet (Electric Companies) for unauthorized use of an easement. After a trial, the jury found for Landowners and judgment was entered for USD 79,014,140.00.

When Electric Companies appealed, they moved for a stay of the execution of judgment. As part of the motion they sought to proceed without securing the judgement with a bond. The Judge stated that there is a presumption in favor of requiring a bond and Electric Companies had the burden of showing that they had the ability to pay the judgement “so plain that the cost of the bond would be a waste of money or that “due to unusual circumstances” Landowners’ interest would not be “unduly endangered.” The Judge ruled that Electric Companies did not meet the burden showing security to be unnecessary and that the “contingency is not appropriately placed on [Landowners] under the circumstances.”

Electric Companies argued that if they were required to post security, the bond should only be for USD 35,000,000, the difference between the judgement and the estimated post-judgement interest. The Judge ruled that Electric Companies must provide security in the amount of USD 41,500,000 and maintain combined net current assets in the amount of USD 45,500,000 and provide quarterly reports demonstrating the requirement had been met. The combination of the security and the maintenance of the net current assets was 110% of judgment, which the Judge decided was a fair number to account for post judgment interest and costs.

The Judge stated that she had the discretion to allow for another form of judgment guarantee besides a supersedeas bond if the “judgment debtor objectively demonstrates a present financial ability to facilely respond to a money judgment and presents a financially secure plan for maintaining that same degree solvency during the period of appeal.” The Judge also stated that a standby letter of credit was an acceptable alternative to a supersedeas bond.

Electric Companies and Landowners submitted a proposed joint motion for approval of a standby letter of credit issued by CoBank ACB and escrow agreement as security for stay of judgment. The Judge approved the form letter of credit which she concluded would act similarly to a supersedeas bond.

The Judge gave the following explanation of her approval of the use of a USD 41,500,000 standby letter of credit and the proffered form.

“The letter of credit from CoBank lists UMB Bank, NA as the beneficiary and as the escrow agent to disburse funds that may be drawn pursuant to the letter of credit. The letter of credit is irrevocable for one year, automatically extends for one or more additional periods of one year unless CoBank provides UMB Bank with forty-five days' notice, and permits, upon such notice, UMB Bank to immediately draw up to the full amount of security ($41.5 million) from CoBank. Further, [Electric Companies, Landowners], and UMB Bank have entered into an Escrow Trust Agreement which requires UMB Bank to draw under the letter of credit upon written notice by CoBank that CoBank has elected not to renew the letter of credit or upon notice by [Landowners] and [Electric Companies] of the Eighth Circuit's issuance of its mandate. The Escrow Trust Agreement provides a mechanism for determining what amount shall be drawn upon the issuance of such mandate… The Parties have also agreed to and request the Court's appointment of Garretson Resolution Group, Inc. as the claims administrator should the judgment in this case be affirmed in whole or in part. The Escrow Trust Agreement provides that UMB shall remit funds drawn under the letter of credit to Garretson on behalf of the Plaintiffs… The issuer of the letter of credit, CoBank, boasts one of the highest bank ratings in the United States and has a credit rating from S&P and Fitch of AA-. It has been named the safest bank in the United States by Global Finance magazine and has earned a place on its "World's 50 Safest Banks" list for the last four years. It is also a member of the Farm Credit System, a nationwide network of banks and retail lending associations with a combined net income of $4.724 billion.”

Comment: Use of “renew”. The opinion correctly refers to “automatic extension” of the standby but later the opinion indicates that the escrow bank is required to draw on receiving notice that issuer has “elected not to renew” the standby. A “renewal” of the standby differs from an “extension” in that the extension only relates to the time that the standby is in effect. “Renewal” can entail much more including amount available. Precision is preferable and in this situation, “extend” is the precise term. The opinion, however, illustrates how easy it is to slip between the words.

[ZTS]

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