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Note: In 2016, Marc Wichansky (Beneficiary) was awarded a judgment of USD 27,625,500 after a jury trial against Defendants David Zowine (Chief Defendant), Karina Zowine, Charles Johnson, Martha Leon, Pat Shanahan, Sarah Shanahan, Michael Ilardo, and Alisa Ilardo (Defendants) for compensatory damages and punitive damages for breach of fiduciary duty.

Following the trial court’s judgment, Defendants requested a stay of the “execution without security, or alternatively, to permit use of security other than a supersedeas bond.” The United States District Court for the District of Arizona, Campbell, J., denied Defendants’ request for an unsecured stay, and granted in part Defendant’s motion for alternative security. The Judge ordered Chief Defendant to provide USD 11,000,000 as security in the form of “a [USD] 5,000,000 supersedeas bond and a [USD] 6,000,000 irrevocable letter of credit,” to cover the “judgments against all Defendants during the pendency of post-trial motions.” The Judge also ordered Chief Defendant to provide the court and Beneficiary with the proposed issuers and terms of the bond and letter of credit. The Judge further enjoined all Defendants from transferring, selling, or encumbering their personal and professional assets, including but not limited to their ownership interests in the Defendents’ company, Zoe Holding Company, Inc., or any other business or entity before the resolution of the post-trial motions.

Claiming inability to post full security, Defendants proposed alternative security to cover less than 40% of the total judgment by proposing to post USD 11,000,000 of security in the form of “a [USD] 5,000,000 bond and an irrevocable [USD 6,000,000] letter of credit.” The Judge denied Defendants’ request for an unsecured stay for their failure to show either “unusual circumstances or that Beneficiary’s interest in ultimate recovery would not be unduly endangered.” Defendants also failed to explain how their proposal “would adequately protect” Beneficiary’s “interest in ultimate recovery,” and they did not provide information for evaluating the associated risk.

Defendants also contended that they should not be required to post security for the punitive damages. Beneficiary argued that Defendants should be required to provide security amounting to 125% of the judgment, and asked the Judge to appoint a receiver for Zoe Holding Company, Inc., the Defendents’ company.

Regarding punitive damages, Defendants requested for a waiver of security for punitive damages, claiming that “the security during an appeal need not include the amount of punitive damages.” Court rejected this claim because Defendants failed to show that this rule applies to stays during the pendency of post-trial motions.

[AYW]

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