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In re Certainteed Fiber Cement Siding Litigation

United States District Court, E.D. Pennsylvania

May 27, 2014

IN RE: CERTAINTEED FIBER CEMENT SIDING LITIGATION This document relates to: ALL CASES

MEMORANDUM

THOMAS N. O'NEILL, Jr., District Judge.

This multidistrict litigation arises out of plaintiffs' claims against defendant CertainTeed Corporation related to the alleged premature failure of certain of its siding products. On March 20, 2014, the Court granted final approval of a class action settlement in this matter. Dkt. No. 119. On April 9, the Jabrani objectors filed a notice of appeal challenging the Court's final approval of the settlement. See Dkt. No. 121.[1] Plaintiffs and the settlement class have now filed a motion asking that the Court require appellant-objectors Amirali Jabrani, Janet Jabrani and Real Homes, Inc., jointly and severally to post an appeal bond. Dkt. No. 128. Plaintiffs assert that the Jabrani objectors should be required "to post jointly and severally a bond in [an] amount deemed appropriate by the Court to ensure partial reimbursement of the costs being forced upon the Class members as a result of the Jabrani Objectors' meritless appeal." Dkt. No. 128-1 at ECF p. 3. The Jabrani objectors oppose plaintiffs' motion. Dkt. No. 131. For the reasons that follow, I will grant plaintiffs' request to require an appeal bond.

I. An Appeal Bond is Warranted

Rule 7 of the Federal Rules of Appellate Procedure provides that "in a civil case, the district court may require the appellant to file a bond or provide other security in any form and amount necessary to ensure payment of costs on appeal." Fed. R. App. P. 7. The purpose of an appeal bond is to "protect the rights of appellees... against the risk of non-payment by an unsuccessful appellant." Dewey v. Volkswagen of Am., Nos. 07-2249 and 07-2361, 2013 WL 3285105, at *2 (D.N.J. Mar. 18, 2013) (citations and internal quotations omitted). Factors to consider in determining whether to require a bond include: (1) whether a bond "is necessary to assure adequate security...; (2) the risks that the appellant will not pay the costs if it loses the appeal...; [and] (3) the appellant's financial ability to post the bond...."[2] Id . (citations and internal quotations omitted).

I find that it is appropriate to require the Jabrani objectors to post an appeal bond. First, a bond is necessary to assure adequate security to protect the interests of the settlement class. The Jabrani objectors' appeal delays CertainTeed's obligation to release the settlement fund to claimants, delaying payments to class members who have already submitted claims for damaged siding As plaintiffs point out, this delay has a potential impact on class members' "ability to protect what is likely their most valuable asset. Given that the average appeal in this Circuit is 10 months, each claimant's home will be subjected to another rainy season and winter before repair is an option for many claimants." Dkt. No. 128-1 at ECF p. 15; see In re Cardizem CD Antitrust Litig. , 391 F.3d 812, 818 (6th Cir. 2004) (relying in part on the "delay[ed] disbursement of settlement funds" in concluding that imposition of Rule 7 bond in class action appeal was proper); see also In re NASDAQ Market-Makers Antitrust Litig. , 184 F.R.D. 506, 514 (S.D.N.Y. 1999) (citation omitted) (finding that the actions of appellants in "jeopardizing a settlement agreement cause[] prejudice to the existing parties to a lawsuit").

Second, the Jabrani objectors have submitted no financial information to support their contention that they, as individuals, and/or Real Homes Inc., are incapable of posting an appeal bond. Instead, they have provided the Court only with an assertion that "[t]he Jabranis cannot afford a $1.4 million bond." Dkt. No. 131 at ECF p. 7. Their unsupported assertion regarding their claimed inability to pay is not sufficient to dissuade me from finding that an appeal bond is warranted under the circumstances now presented to the Court.

Third, allowing the Jabrani objectors to appeal without posting a bond will expose the settlement class to the risk that it will not be reimbursed for expenses imposed by the appeal. While there is no evidence that the Jabrani objectors would not pay any costs incurred by the settlement class if they were to lose their appeal, there is also no evidence that the Jabrani objectors would be able to pay fully the costs if they lose their appeal. Indeed, the Jabrani objectors contend that if the Court "imposes a seven-digit (or even a six-digit) bond, the Jabranis will: (1) move to stay the bond order pending review in the Third Circuit; and (2) move for in forma pauperis status under Fed. R. App. Proc. 24...." Dkt. No. 131 at ECF p. 7. Further, the Jabrani objectors' residence outside of the Third Circuit will arguably make it more difficult for the settling class to collect their costs should they prevail on the appeal. See Fleury v. Richemont N. Am., Inc., C-05-4525 EMC , 2008 WL 4680033, at *7 (N.D. Cal. Oct. 21, 2008).

For all of these reasons, I find that an appeal bond is warranted in this matter. Indeed, in their response to plaintiff's motion seeking the imposition of an appeal bond, the Jabrani objectors do not strongly contest plaintiffs' position that the imposition of a Rule 7 cost bond is warranted. Rather, they focus their efforts on challenging the amount that plaintiffs seek for the bond.

II. Calculating the Amount of the Bond

"The question of whether to impose an appeal bond is distinct from the issue of what costs the bond can and should cover." In re AOL Time Warner, Inc., Sec. & "ERISA" Litig. , 02-CV-5575, 2007 WL 2741033, at *3 (S.D.N.Y. Sept. 20, 2007). "A district court may not impose a bond in an amount beyond what is necessary to ensure adequate security if to do so would effectively preclude pursuit of an appeal." In re Diet Drugs (Phentermine, Fenfluramine, Dexfenfluramine Prods. Liab. Litig.), No. MDL-1203 , 2000 WL 1665134, at *5 (E.D. Pa. Nov. 6, 2000); see also Dewey, 2013 WL 3285105, at *2 (holding that a court's determination of the amount of an appeal bond should be guided by "whether the amount of the bond will effectively preclude pursuit of the appeal"). I will require the Jabrani objectors, jointly and severally, to post a bond for $5, 000, an amount which I find to be appropriate given the estimated costs to be incurred by the settlement class in defending the Jabrani objectors' appeal. See Dkt. No. 128-1 at ECF p. 14 ("Class Counsel estimates that they will incur an estimated... $5, 000 in costs related to the appeal.").

It is clear that "[c]osts' referred to in Rule 7 [include] those that may be taxed against an unsuccessful litigant under Federal Rule of Appellate Procedure 39." Hirschensohn v. Lawyers Title Ins. Corp., No. 96-7312 , 1997 WL 307777, at *1 (3d Cir. June 10, 1997) (citation omitted). Federal Rule of Appellate Procedure 39 provides:

[t]he following costs on appeal are taxable in the district court for the benefit of the party entitled to costs under this rule:
(1) the preparation and transmission of the record;
(2) the reporter's transcript, if needed to ...

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