Paula C. Bass, of the Estate of Arthur C. Bass v. First Pacific Networks, Inc., and T. Paul Fire & Marine Insurance Company

Citations: 219 F.3d 1052; 2000 Daily Journal DAR 7741; 46 Fed. R. Serv. 3d 1047; 2000 Cal. Daily Op. Serv. 5804; 2000 U.S. App. LEXIS 16127; 2000 WL 966855Docket: 97-15127

Court: Court of Appeals for the First Circuit; July 14, 2000; Federal Appellate Court

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In the case Paula C. Bass, Executor of the Estate of Arthur C. Bass v. First Pacific Networks, Inc., the Ninth Circuit addressed whether federal or state law governs the recoverability of attorney's fees in a motion to enforce a supersedeas bond under Federal Rule of Civil Procedure 65.1. The court held that federal law applies and that attorney's fees are not recoverable. Arthur Bass initially filed a lawsuit in state court against First Pacific Networks (FPN) for stock ownership, which FPN removed to federal court, leading to a dismissal of the federal RICO claim but retention of state claims. The district court ordered FPN to post a supersedeas bond while appealing its judgment that the stock was validly issued to Bass. After a settlement involving the stock sale, the Estate sought to enforce the bond for a specific amount. Although the district court granted the enforcement motion, it denied the Estate's request for attorney's fees, citing a conflict between state and federal rules. The federal analysis, referencing Hanna v. Plumer, determined that federal law governs attorney's fees in such cases, with precedent indicating that fees are not recoverable for enforcing a supersedeas bond under federal rules.

Rule 65.1 establishes summary proceedings for enforcing the liability of a surety, specifically concerning bonds required under the Federal Rules of Civil Procedure. It is intended to create a uniform approach for summary actions against sureties on bonds under Rules 65 and 73, but it permits enforcement through either Rule 65.1's summary procedure or an independent state or federal action. Importantly, neither Rule 65.1 nor Rule 62(d), which pertains to the bond in question, allows for the recovery of attorney's fees, costs, or damages. 

The Estate argues that California Civil Procedure Code § 996.480 should govern the liability for attorney's fees in a Rule 65.1 action involving a supersedeas bond posted under Rule 62(d), citing Erie R. Co. v. Tompkins to support a state interest in awarding such fees. However, the analysis under Erie is deemed inappropriate, as the choice of law issue does not arise in this context. The supersedeas bond is strictly procedural, aimed at preserving the status quo during an appeal and does not create any choice of law concerns. 

As Rule 65.1 merely enforces bonds under Rule 62(d), only federal law is applicable, which does not permit recovery of attorney's fees. Federal courts have consistently ruled that attorney's fees cannot be recovered in actions related to injunction bonds. Additionally, courts have often sidestepped choice of law considerations in similar situations involving preliminary injunction bonds, indicating no significant distinction between the applications of Rule 65.1 to supersedeas and preliminary injunction bonds.

In Fireman's Fund Insurance Co. v. S.E.K. Construction Co., the court addressed the issue of attorney's fees in a diversity case where defendants sought such fees related to a wrongful injunction and a bond posted under Rule 65(c). The court rejected the notion that state law should govern, instead applying a federal standard due to the federal nature of the injunction suit and bond under Rule 65(c). The court determined that the Erie doctrine, which typically requires federal courts to apply state law in diversity cases, did not apply since the case involved a federal question. Consequently, attorney's fees were found to be non-recoverable under federal case law. The district court's order denying recoverability of attorney's fees was affirmed. Additionally, the excerpt notes the implications of Federal Rule of Civil Procedure 65.1 regarding the liability of sureties on bonds and clarifies that while the district court's jurisdiction was based on federal questions, it retained supplemental jurisdiction over state law claims, applying the forum state's law as if under diversity jurisdiction. The court did not express an opinion on the availability of attorney's fees in cases solely seeking judgment on a surety under state law.