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TNF Gear, Inc. v. VF Outdoor, LLC

United States District Court, N.D. California

December 19, 2019

TNF GEAR, INC., et al., Plaintiffs/Counter-defendants,
VF OUTDOOR, LLC, Defendant/Counter-plaintiff.



         Defendant/Counter-plaintiff VF Outdoor's motion for an order requiring Plaintiffs/Counter-defendants to post an appeal bond under Federal Rule of Appellate Procedure 7 is now pending before the Court. (Dkt. No. 116.) Having considered the parties' briefs and having had the benefit of oral argument on December 19, 2019, the Court DENIES VF Outdoor's request for a bond.


         William and Linda Vinci and TNF Gear, Inc., a Vermont corporation of which the Vincis are the sole shareholders, filed this civil action against VF Outdoor, LLC, which operates a division under the brand name “North Face.” VF Outdoor filed counterclaims against the Vincis and KL Sport Inc., TNF Gear's predecessor. The claims and counterclaims arose out of a business arrangement between the parties wherein TNF Gear acted as a reseller of The North Face merchandise. In July 2019, the Court granted VF Outdoor's motion for summary judgment and entered judgment in its favor on its breach of contract counterclaims and on Plaintiffs' claims against VF Outdoor. (Dkt. No. 98.)

         The Vincis and TNF Gear thereafter filed a notice of appeal to the Ninth Circuit. (Dkt. No. 103.) VF Outdoor thereafter filed a motion to certify the judgment for registration for enforcement in another district. (Dkt. No. 109.) After the motion was filed, the Vincis filed a suggestion of bankruptcy indicating that they had filed a voluntary petition for relief under Chapter 7. (Dkt. No. 111.) The Court issued an order staying proceedings as to the Vincis under 11 U.S.C. § 362(a)(1) and thereafter granted a motion to certify the judgment for registration against TNF Gear and KL Sport. (Dkt. Nos. 112, 115.) VF Outdoor then filed the now pending motion for an order requiring “the parties pursuing the appeal” to post an appeal bond under Federal Rule of Appellate Procedure 7. (Dkt. No. 116.)


         Federal Rule of Appellate Procedure 7 provides that a district court “may require an appellant to file a bond or provide other security in any form necessary to ensure payment of costs on appeal.” The Ninth Circuit has held that the term “costs” includes the costs specified in Federal Rule of Appellate Procedure 39, but does not include attorneys' fees unless “an applicable fee-shifting statute includes them in its definition of recoverable costs, and only if the appellee is eligible to recover such fees.” Azizian v. Federated Dep't Stores, Inc., 499 F.3d 950, 958 (9th Cir. 2007). Rule 39 lists the following costs on appeal as covered under the rule: “(1) the preparation and transmission of the record; (2) the reporter's transcript, if needed to determine the appeal; (3) premiums paid for a supersedeas bond or other bond to preserve rights pending appeal; and (4) the fee for filing the notice of appeal.” Fed. R. App. P. 39(e).

         An appeal bond functions to “protect an appellee against the risk of nonpayment by an unsuccessful appellant.” Embry v. ACER Am. Corp., No. C 09-01808 JW, 2012 WL 2055030, at *1 (N.D. Cal. June 5, 2012) (internal quotation marks and citation omitted). “[T]he need for a bond, as well as its amount, are left in the discretion of the trial court.” Fleury v. Richemont N. Am., Inc., No. C-05-4525 EMC, 2008 WL 4680033, at *6 (N.D. Cal. Oct. 21, 2008) (citing Fed. R. App. P. 7, 1979 advisory committee notes).


         District courts in this circuit apply the following factors in considering the necessity of an appeal bond: “(1) the appellant's financial ability to post a bond; (2) the risk that the appellant would not pay the appellee's costs if the [appellant] loses; and (3) the [appellant's likelihood of success on the] merits of the appeal.” Embry, 2012 WL 2055030, at *1; see also Fleury, 2008 WL 4680033, at *7 (applying the same factors); Figure Eight Holdings, LLC v. Dr. Jays, Inc., 534 Fed. App'x 670 (9th Cir. 2013) (affirming district court's imposition of an appeal bond under the same factors). VF Outdoor insists that these factors warrant an appeal bond in the amount of $52, 000.

         While VF Outdoor requests that the parties “pursuing the appeal” as an indivisible unit post a bond, the request must be addressed as to the Vincis on the one hand, and as to TNF Gear[1]on the other given their differing procedural status.

         A. The Bond Request as to the Vincis

         The Vincis' appeal of the grant of summary judgment as to VF Outdoor's counterclaims against them is automatically stayed under 11 U.S.C. § 362(a)(1). See Parker v. Bain, 68 F.3d 1131, 1137 (9th Cir. 1995). At oral argument VF Outdoor reported (although it is not in the record) that the parties had filed a stipulation for relief from the automatic stay, although it also conceded that the stipulation had not been signed. As a result, the appeal of summary judgment on the counterclaims is automatically stayed and the Court will not issue any bond in connection with the Vincis' appeal of that order.

         The appeal is not stayed as to the Vincis' appeal of the summary judgment order as to their claims against VF Outdoor. See Id. (“Within a single case, some actions may be stayed, others not. Multiple claim and multiple party litigation must be disaggregated so that particular claims, counterclaims, cross claims and third-party claims are treated independently when determining which of their respective proceedings are subject to the bankruptcy stay.”) Although the appeal is not stayed, under 11 U.S.C. § 362(a)(3) “any act to obtain possession of property of the estate or of property from the estate or to exercise control over property of the estate” is stayed. VF Outdoor was unable to point to any authority-and the Court is unaware of any-that would allow the Court to order the Vincis to post a bond notwithstanding that the stay applies to all property of the estate. VF Outdoor's reliance on cases holding that debtors remain liable for post-petition litigation related costs is unavailing as those cases have nothing to do with posting a bond under Rule 7 while a bankruptcy automatic stay is in place. See e.g., In re Ybarra, 424 F.3d 1018, 1026 (9th Cir. 2005) (finding ...

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