EMERGENCY MOTION TO STAY EXECUTION OF JUDGMENT. Comes Now, Carmella Macon and William Casey and moves the court to stay execution FACTS AND BACKGROUND
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1 ELECTRONICALLY FILED 9/21/ :27 AM CV CIRCUIT COURT OF JEFFERSON COUNTY, ALABAMA ANNE-MARIE ADAMS, CLERK IN THE CIRCUIT COURT OF JEFFERSON COUNTY, ALABAMA BIRMINGHAM DIVISION JESSICA EDWARDS, JANET T. JUDGE, and ALARM ONE, INC., individually and on behalf of all of others similarly situated, Plaintiffs, CASE NO. CV v. JEFFERSON COUNTY COMMISSION, et al Defendants EMERGENCY MOTION TO STAY EXECUTION OF JUDGMENT Comes Now, Carmella Macon and William Casey and moves the court to stay execution of judgment and as grounds states as follows: FACTS AND BACKGROUND 1. On July 11, 2011 this court denied Carmella Macon s motion to intervene as a named class representative. 2. On August 3, 2011 Ms. Macon filed a notice of appeal to the Alabama Supreme Court challenging the court s order of July 11, This appeal has been docketed as Appeal Number On July 25, 2011 Carmella Macon and William Casey filed objections to the settlement agreement and a notice of intent to appear at the fairness hearing. 4. On August 8, 2011 counsel for Carmella Macon and William Casey appeared at the fairness hearing and argued that the notice to the class was insufficient to satisfy the minimum 1
2 requirements of Due Process, and that the settlement agreement was unfair, unenforceable, and unconstitutional. 5. On August 9, 2011 this court entered a final judgment approving the settlement, and involuntarily excluding Carmella Macon and William Casey from the settlement subclass. 6. On August 16, 2011 Carmella Macon and William Casey filed a notice of appeal to the Alabama Supreme Court challenging their involuntary exclusion from the class, challenging the notice process, and challenging the fairness of the settlement. This appeal has been docketed as Appeal Number Pursuant to the settlement agreement that this court has approved, and which is incorporated into the final judgment, the class representatives have agreed to give $6.5 million in taxpayer funds held in escrow to the County. In exchange, the County has agreed to be enjoined by the Court from enacting or levying retroactive taxation on the settlement subclass for the escrow period. 8. The settlement agreement defines the effective date of the settlement as follows: Effective Date means one (1) business day after the date on which the Final Order and Judgment approving this Settlement becomes final. For purposes of this definition, the Final Order and Judgment shall become final: (i) if no appeal is taken from the Final Order and Judgment, on the date on which the time to appeal therefrom has expired; or (ii) if any appeal is taken from the Final Order and Judgment, on the date on which all appeals therefrom, including petitions for rehearing or reargument, petitions for rehearing en banc and petitions for certiorari or any other form of review, have been finally disposed of in a manner resulting in approval of the Settlement and affirmance of all of the material provisions of the Final Order and Judgment. 9. The settlement also provides that the injunction against the Commission not to impose retroactive taxation for the escrow period, which constitutes the sole consideration offered by the Commission, does not become effective until the Effective Date. 2
3 10. However, the settlement contemplates that the County will receive the $6.5 million settlement fund after opt-outs are compensated and after $70,000 is transferred to an administrative fund. Thus, the County will receive taxpayer funds prior to the effective date of the settlement and before any injunction is imposed upon the County Commission. 11. On September 14, 2011 this Court issued an order which, among other things, directed the Special Master to transfer the settlement fund to the County as soon as practicable. ARGUMENT This Court should stay execution of judgment and order that the Special Master continue to hold the $6.5 million in taxpayer funds in an interest bearing account. Such an order would be in the interest of justice, would not endanger the County s ultimate recovery should they prevail on appeal, and would ensure that the status quo is maintained while the Supreme Court considers the merits of Ms. Macon and Mr. Casey s appeals. The test for a stay pending appeal is governed by the Alabama Rules of Civil Procedure. Rule 62 (d) provides: When an appeal is taken the appellant by giving a supersedeas bond may obtain a stay subject to the exceptions contained in subdivision (a) of this rule. The bond may be given at or after the time of filing the notice of appeal or of procuring the order allowing the appeal, as the case may be. The stay is effective when the supersedeas bond is approved by the court. The purpose of a supersedeas bond is to maintain the status quo of the parties and ensure that the party that has obtained a judgment will not be prejudiced by a stay of execution of judgment. Ethridge v. Wheat, 838 So.2d 396 (Ala. Civ. App. 2002). However, in this case a supersedeas bond is unnecessary, and the imposition of a bond requirement would be unjust to the class. The funds in escrow provide an adequate judgment guarantee to the County, and a stay should be granted because the appellants are likely to prevail on the merits of their appeals, the taxpayer class will be irreparably harmed if a stay is not granted, no third parties will suffer injury, the 3
4 County s recovery would merely be delayed as a result of a stay, and finally, a stay would serve the public interest. A. This Court should stay execution of judgment because the escrow fund provides an adequate judgment guarantee to the County. The federal courts have recognized that under certain circumstances a supersedeas bond requirement is unnecessary and irrational. [A]n inflexible requirement for impressments of a lien and denial of a stay of execution unless a supersedeas bond in the full amount of the judgment is posted can in some circumstances be irrational, unnecessary, and self defeating, amounting to a confiscation of the judgment debtor s property without due process. Texaco Inc. v. Penzoil Co., 784 F.2d 1133, 1554 (2d Cir. 1986) rev d on other grounds, 481 U.S. 1 (1987). Thus, a court may grant a stay without requiring a supersedeas bond if the court is sufficiently satisfied that the judgment is reasonably secured by other means. Id. at Also see Morgan Guaranty Trust Company of New York v. Republic of Palau, 702 F. Supp 60 (S.D. New York 1988) (Republic of Palau only required to post a partial supersedeas bond to stay execution of judgment); International Telemeter Corp. v. Hamlin Int l Corp., 745 F.2d 1492, 1495 (9 th Cir. 1985) (recognizing that while the Rules of Civil Procedure provides that a supersedeas bond may be used to stay execution of a judgment pending appeal, the court has discretion to allow other forms of judgment guarantee ); also see Poplar Grove Planting and Refining Co. v. Bache Halsey Stuart, Inc., 600 F.2d 1189, 1191 (5 th Cir. 1979). The federal courts have recognized that an escrow account may provide adequate protection to a judgment creditor pending appeal and may act as a substitute for a supersedeas bond. See e.g. Foster v. Hallco Manuafacturing Co. Inc., 835 F. Supp (D. Or. 1993). Alabama s Rule 62 (d) is identical to its federal counterpart, and this court should stay execution of judgment under the authority of the federal precedents cited above. See e.g. Cutler 4
5 v. Orkin Exterminating Co., 770 So.2d 67, 70 n. 2 (Ala. 2000) ( Because the Alabama Rules of Civil Procedure were patterned after the Federal Rules of Civil Procedure, cases construing the federal rules are considered authority in construing the Alabama rules ). The escrow account in the case before the Court, which has been administered by the Special Master, fully protects and guarantees the County s judgment. Thus, if this court grants a stay, even if the County prevails in defending the two appeals, the County will receive the entire $6.5 million plus any accrued interest. Additionally, no further guarantee is necessary because, if they prevail, the County will not be entitled to any further damages or penalty under a supersedeas bond. See Jones v. Regions Bank, 25 So.3d 427 (2009) (overruling previous case law, and finding that damages, including attorneys fees are not recoverable under a supersedeas bond pursuant to Rule 8 of the Alabama Rules of Appellate Procedure). It is true that a number of statutory provisions provide for penalties that may be recovered on a supersedeas bond. See e.g. Ala. Code (1975) (providing that interest accrues at a rate of twelve percent per annum on judgments for money); Ala. Code (1975) (providing for a 10 percent penalty when an appeal is taken by the claimant on a trial of the right of property and the judgment is stayed by execution of a supersedeas bond ); Ala. Code (1975) (providing for rental damages that accrue after judgment made on a claim in the nature of ejectment, but before delivery of possession). However, none of these penalty provisions have any application in this case. No money judgment has been entered; this action was not on a trial of the right of property (see Hall v. Mazzone, 486 So.2d 408 (Ala. 1986)); and this case is not an action in nature of ejectment as defined by Ala. Code (1975). Because there is no applicable penalty statute, and in light of the holding in Jones, the court need only be satisfied that that the escrow account is 5
6 protected to ensure that the judgment is guaranteed, and that there is sufficient security for court costs. The appellants have satisfied their burden in these respects, and in order to maintain the status quo, a stay should be granted. B. This Court should stay execution of judgment because the appellants are likely to prevail on the merits, the appellants and the taxpayer class will be irreparably harmed if a stay is not granted, neither the County nor any other third parties will suffer significant injury as a result of a stay, and a stay would serve the public interest. Additionally, the equities of this case support a stay of execution without the posting of a supersedeas bond. In determining whether to stay a judgment, the federal courts apply a four factor test. [A] court must consider (1) whether the petitioner is likely to prevail on the merits of his appeal, (2) whether, without a stay, the petitioner will be irreparably injured, (3) whether issuance of a stay will substantially harm other parties interested in the proceedings, and (4) wherein lies the public interest. Morgan Guaranty Trust Company of New York v. Republic of Palau, 702 F. Supp 60, 65 (S.D. New York 1988) (quoting McSurely v. McClellan, 697 F.2d 309, 317 (D.C. Cir. 1982), cert. denied, 474 U.S (1985) (citing Virginia Petroleum Jobbers Ass n v. FPC, 259 F.2d 921, 925 (D.C. Cir. 1958))). This test should be applied flexibly, and the petitioner need only demonstrate a substantial case on the merits, even if ultimate success is not a mathematical probability. Id. (citing Washington Metropolitan Transit Comm n v. Holiday Tours, Inc., 559 F.2d 841, 843 (D.C. Cir. 1977)). First, the appellants are entitled to a stay because, respectfully, Ms. Macon and Mr. Casey presented a substantial case on the merits. Although the County has characterized appellants arguments as meritless, Ms. Macon and Mr. Casey presented substantial case law from Alabama, sister states, and the federal courts in support of their arguments that their exclusion from the class was improper, that the notice process failed to satisfy the minimum requirements of due process, and that the settlement was unfair, unconstitutional, and unsupported by consideration. 6
7 The County, on the other hand, primarily argued that the appellants case law was inapplicable, but failed to fully address or dispute the merits of appellants arguments in a way that would demonstrate appellants case on the merits is not substantial. While this court is undoubtedly confident in its rulings, tribunals may properly stay their own orders when they have ruled on an admittedly difficult legal question and when the equities of the case suggest that the status quo be maintained. Morgan Guaranty Trust Company of New York v. Republic of Palau, 702 F. Supp 60, 66 (S.D. New York 1988) (quoting Washington Metropolitan Transit Comm n v. Holiday Tours, Inc., 559 F.2d 841, (D.C. Cir. 1977)). Second, immediate transfer of $6.5 million to the County would very likely cause irreparable harm to the taxpayer class. The court should take judicial notice that County has been, and remains in financial crisis, and that the County has repeatedly threatened its creditors with bankruptcy as a negotiating ploy in order to secure agreements to reduce its indebtedness. Unless and until the Alabama legislature takes action to authorize a new revenue source, the County may be unable to pay the full $6.5 million back over to the taxpayers should the appellants prevail. As such, the status quo should be maintained and the settlement fund should remain in escrow. Third, the appellants are aware of no other third parties interested in the proceedings that stand to be harmed by a stay of judgment. While the County may suffer some delay if a stay is granted, this slight harm should not be controlling. As noted above, the escrow funds are protected by the Special Master, are accruing interest, and fully guarantee the County s judgment. Finally, it is in the public interest to stay judgment. The taxpayers have an interest in receiving a full and complete refund. If the appellate court ultimately agrees with Ms. Macon 7
8 and Mr. Casey, a stay will ensure that their rights are adequately protected. Additionally, this court should note that the County has already been allowed to retain the illegal taxes it collected from April, 2000 up until January 12, The taxpayer class has already born the weight of the County s financial mismanagement, and will likely never recover the hundreds of millions in taxes illegally collected. A stay will merely ensure, should the appellants prevail, that the judgment in Jefferson County Comm n v. Edwards ( Edwards II ), 49 So.3d 685 (Ala. 2010) is fully implemented and that the taxpayer class receives the full 37.8 million in refunds (which is just a fraction of taxes illegally collected) that the Supreme Court has already ruled they are entitled to. CONCLUSION Ms. Macon and Mr. Casey respectfully request that this Court stay execution of judgment without a bond requirement until all appeals are exhausted because the County s judgment is adequately guaranteed by the escrow account, and because the four factor test supports issuance of a stay. If the Special Master has already transferred funds to the County, the appellants respectfully request that the Court order the funds returned. Dated this 21st day of September, /s/ Edward Jason Dennis Lynn Tillotson Pinker & Cox, LLP 2100 Ross Ave. Ste Dallas, TX /s/ Samuel Butler Hardy, IV Lynn Tillotson Pinker & Cox, LLP 2100 Ross Ave. Ste Dallas, TX
9 /s/ Matthew Weathers, ASB-9090-T78W Weathers Law Firm, LLC P.O. Box 1826 Birmingham, AL 3520 CERTIFICATE OF SERVICE I hereby certify that all counsel of record have been served with the foregoing by Alafile electronic notice. September 21, 2011 /s/ Matthew Weathers, ASB-9090-T78W 9
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