Commercial Litigation and Arbitration

Class Actions — Increasing Objector’s Appellate Bond for Attorneys’ Fees on Appeal

Another Circuit split worthy of Supreme Court attention: Our post of October 6, 2007, reported on a recent Ninth Circuit case holding that a District Judge may not increase an appellate bond to cover potential appellate sanctions. That opinion is in accord with the general propositions that (1) it is for appellate courts, not district courts, to sanction improper appeals, and (2) district courts should not disincentivize appeals from their decisions. This position is not unanimous, however. District Judge T. John Ward came to the opposite conclusion in Vaughn v. Am. Honda Motor Co., 2007 U.S. Dist. LEXIS 76150 (E.D. Tex. Sept. 28, 2007), and increased the appellate bond required of an objector in a class action. He relied on an older First Circuit decision, Sckolnick v. Harlow, 820 F.2d 13, 15 (1st Cir. 1987), which appears to remain good First Circuit law (see Barnes v. FleetBoston Fin. Corp., 2006 U.S. Dist. LEXIS 71072, at *3 (D. Mass. Aug. 22, 2006)) but whose reasoning was recently rejected in In re AOL Time Warner, Inc., 2007 U.S. Dist. LEXIS 69510, at *14-*15 (S.D.N.Y. Sept. 19, 2007), which reasoned that Second Circuit authority ‛require[s] that the definition of costs for Appellate Rule 7 purposes should come from Rule 39, 28 U.S.C. § 1920, or the statute underlying the litigation.“

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