Kelley v. Westford Special Situations Master Fund, L.P.

Background

Douglas A. Kelley, acting as Trustee of the PCI Liquidating Trust, brought an adversary case in the Bankruptcy Court for the District of Minnesota to avoid and recover money transfers made to defendants by PL Ltd. and Petters Company, Inc., entities controlled by Thomas J. Petters. The case was transferred to the District Court on April 19, 2019.

After a bench trial concerning defendants’ good-faith defense, the court found that the Trustee had proved the elements of the fraudulent-transfer claims and that defendants had not proved that they received the transfers in good faith. The court found specified defendants liable for amounts ranging from $3,374,256 to $120,264,648. On May 5, 2025, the Clerk entered judgment after the court awarded prejudgment interest.

Defendants then moved for a new trial and moved to stay enforcement of the judgment while an appeal was pending. They also asked the court to waive the usual requirement that they post a supersedeas bond.

Legal standard

Federal Rule of Civil Procedure 62 provides for an automatic 30-day stay after entry of judgment. A judgment debtor may obtain a further stay as a matter of right by posting a bond or other security. Courts generally require security for the full amount of the judgment, plus interest, costs, and damages for delay.

A district court has discretion to waive the bond requirement and stay enforcement without a bond. The court described five relevant considerations: the complexity of collecting the judgment; the time needed to obtain a decision on appeal; the court’s confidence that funds will be available to pay the judgment; whether the defendant’s ability to pay is so clear that a bond would waste money; and whether requiring a bond would place the defendant’s other creditors in an insecure position. The party seeking the stay bears the burden of showing why the court should depart from the usual full-bond requirement.

Defendants’ arguments

Defendants argued that they lacked assets to post a sufficient bond or ultimately pay a significant part of the judgment. They asserted that the Master Funds had only modest ownership interests in two private companies that produced no revenue, that the Management Companies had no assets, and that Mr. Stevanovich’s only available asset was an art collection worth approximately $100,000. They also pointed to stipulated judgments against three of the four Master Funds in a separate adversary proceeding and the apparently bleak collection prospects in that matter.

Mr. Stevanovich additionally argued that he could file for personal bankruptcy, which would trigger an automatic bankruptcy stay and leave the Trustee as an unsecured creditor of a dischargeable judgment debt. The court noted that he had not filed for bankruptcy and had not stated that he intended to do so.

Court’s reasoning and ruling

The court held that defendants failed to meet their burden. Their showing that they could not pay did not establish that requiring a bond would jeopardize other creditors. The court explained that bond waivers are generally granted when a judgment debtor is financially secure and there is little risk that the judgment creditor will be unable to collect after the appeal. Defendants cited no authority showing that inability to pay, by itself, supports waiving the bond, and courts have reached the opposite conclusion.

The court also found that defendants did not show that the other relevant factors favored a waiver. They did not address the complexity of collection or explain how the time needed to resolve an appeal supported their request. The record did not give the court confidence that funds would be available to pay the judgment. Finally, the proposed alternative security—the Master Funds’ ownership interests in two private companies and Mr. Stevanovich’s art collection—was insufficient to protect the Trustee’s ability to collect if the judgment were affirmed.

The court therefore denied Defendants’ Motion for Stay of Enforcement of Judgment. The opinion does not state a separate disposition of the motion for a new trial.