July 21, 2019

Tenth Circuit: Federal Appellate Rules Provide for Bond Only for Costs Allowable by Rule or Statute

The Tenth Circuit Court of Appeals issued its opinion in Tennille v. Western Union Co. on Monday, December 22, 2014.

Plaintiffs initiated a class action against Western Union based on Western Union’s retention of funds from failed wire transfers. After several years of litigation, plaintiffs and Western Union settled the case. The district court preliminarily certified a class of more than one million customers who experienced a failed wire transfer between January 1, 2001 and January 3, 2013, and ordered the class administrator to notify those class members of the class action, the proposed settlement, and the opportunity for them to opt out of the class or to object to the settlement. Several class members objected. The district court overruled all objections, certified the class, approved the settlement, and entered final judgment. Objectors Dorsey and Nelson appealed the district court’s denial of their objections. Plaintiffs asked the district court to require Dorsey and Nelson, as a condition of their appeal, to post a $1,007,294 appeal bond—$647,674 to notify class members of Objectors’ merits appeals challenging the settlement, $334,620 as administrative costs to maintain the settlement agreement pending Objectors’ appeal, and $25,000 as costs for printing and copying and preparing a supplemental record. The district court granted plaintiffs’ request, and Objectors appealed.

The Tenth Circuit first addressed plaintiffs’ contention that it lacked jurisdiction to hear the appeal, since the bond order was not a final, appealable order. The Tenth Circuit determined it had jurisdiction over the appeal on at least two bases. The district court’s bond order was entered “in aid of appellate court jurisdiction,” and since the Tenth Circuit has jurisdiction to review Objectors’ merits appeals, it also has jurisdiction over the bond appeal. Second, the district court’s bond order was a final order ending the post-judgment bond proceeding, and as such the Tenth Circuit has jurisdiction to hear the appeal.

Moving to the bond itself, the Tenth Circuit found unanimous circuit precedent allowing Rule 7 cost recovery only for costs expressly provided for by rule or statute. Because no rule or statute provides for costs for notifying class members or administrative costs, the district court erred in allowing those costs. The Tenth Circuit rejected plaintiffs’ argument that the district court has discretion to include in an appeal bond any cost a defendant may encounter in defending an appeal. The Tenth Circuit characterized plaintiffs’ argument as seeking damages for the delay caused by Objectors’ merits appeal, but noted the Federal Appellate Rules do not have separate provisions for class actions and the purpose of a Rule 7 bond is not to compensate for damages.

Next, Objector Dorsey challenged the district court’s imposition of a $25,000 bond to cover costs of preparation and transmission of the record. Plaintiffs failed to justify the need for $25,000. Because Objector Dorsey suggested he would be amenable to imposition of a $5,000 bond to cover such costs, the Tenth Circuit reduced the bond accordingly. Objector Nelson claimed she would experience hardship from the imposition of any bond, but the Tenth Circuit found that a $5,000 bond is not so burdensome as to deprive her of due process or equal protection of law, and found that she failed to establish that the smaller bond would deprive her of due process.

The district court’s bond imposition was affirmed, but the bond was reduced to $5,000. Objectors were ordered to post the bond within 14 days or their merits appeals would be dismissed.

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  1. […] class certification, approved the settlement, and entered judgment. Objectors posted bond after it was reduced by the Tenth Circuit and […]

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