KANSAS CITY — A federal judge in Missouri has denied two requests by Berkley Equity Limited to pause proceedings in a post-judgment dispute with DRE Health Corporation, ruling that the defendants did not justify either a stay of judgment enforcement without a supersedeas bond or a stay of a receivership order.
In an Oct. 22 order, U.S. District Judge Roseann A. Ketchmark said the defendants had not reliably shown they could pay the judgment if it were upheld on appeal, nor proposed adequate substitute security.
The court concluded that some security was required to protect DRE Health’s ability to collect.
The defendants sought a stay of post-judgment enforcement while they appealed and asked the court to waive the bond requirement.
Federal Rule of Civil Procedure 62(b) allows a party to obtain a stay by providing a bond or other security, the order said. A bond typically protects the judgment creditor by ensuring payment if the judgment is affirmed.
Ketchmark acknowledged that courts may, in appropriate cases, permit an unsecured stay or reduce the required bond.
But the order said the defendants’ arguments did not establish that this case warranted such relief.
The defendants had acknowledged that their ability to pay was questionable, according to the order, and had not reliably demonstrated they could satisfy the judgment if their appeal failed.
The court also rejected the defendants’ reliance on the complexity of collecting from Berkley Equity, which they described as a shell company, and from Anthony Lyons, a non-U.S. citizen residing in the Bahamas with principally illiquid assets outside the United States.
The order said those circumstances weighed against waiving security, particularly given the uncertainty about what assets Lyons held and whether assets were outside the scope of his U.K. bankruptcy proceedings.
The court said Lyons did not identify assets that could be used to secure a bond or explain how doing so might affect other creditors.
The judge further cited the collection efforts to date and the defendants’ record in post-judgment discovery, finding that the process was complex in part because Lyons had not participated in all discovery in good faith and with candor, as described in prior orders and the record.
The defendants also asked in the alternative for a substantially reduced bond, but the court said they offered no meaningful analysis or specific proposed amount.
The second request sought to pause an Oct. 7 order granting DRE Health’s renewed motion for a receiver, pending appeal.
The defendants also asked the court to reconsider or modify restrictions on their assets to permit Lyons to pay living expenses and attorney fees without court approval.
The Oct. 7 order barred transactions involving the defendants’ property and assets without court approval.
A supplemental order later authorized Lyons, until a receiver was selected and appointed, to use covered funds for reasonable living expenses not exceeding $5,000 and for reasonable attorney fees and required him to keep a log of those transactions.
The court said the defendants agreed in their reply that this addressed the main concern raised in their emergency motion.
Ketchmark found that the defendants had not shown grounds for a stay of the receivership order.
The court said they had not adequately shown that a stay would avoid substantial injury to DRE Health’s interest in the receivership.
It also rejected arguments about DRE Health’s financial interest in the judgment and the possibility that money distributed to third parties could be difficult to recover if the judgment were reversed, finding the defendants had not sufficiently applied those arguments to the circumstances of the case.
The court likewise was not persuaded by the defendants’ public-interest argument that freezing assets could affect U.S. diplomatic relations, noting the argument had not been raised earlier in opposition to the receivership and lacked supporting legal authority in the stay briefing beyond a law review note.
The judge said the public interest in this case favored enforcement of, and good-faith compliance with, court judgments and orders.
Both motions to stay were denied. The court also denied DRE Health’s motion to strike a supplemental filing by the defendants, while cautioning the parties to follow proper litigation procedures.
The authorization for Lyons to pay reasonable living expenses of up to $5,000 and reasonable attorney fees from covered funds, while keeping a transaction log, will remain in effect after a receiver is appointed.
The court said it may modify that authorization upon a party’s motion or at the receiver’s request, with notice to the parties.
U.S. District Court for the Western District of Missouri, Western Division case number: 4:22-cv-00031
