Federal Trade Commission v. Vyera Pharmaceuticals, LLC

Background

After a bench trial, the court entered a February 4, 2022 judgment against Martin Shkreli for $64.6 million in equitable monetary relief, subject to a setoff of up to $40 million, in favor of the seven state plaintiffs. Enforcement was automatically stayed for 30 days under Rule 62(a) of the Federal Rules of Civil Procedure.

On March 7, the thirtieth day after judgment, Shkreli moved to extend the stay while any appeal was pending. He asked to provide “other security” instead of a supersedeas bond. His proposed security consisted only of a possible remainder interest in shares of Phoenixus AG.

Rule and analysis

Rule 62(b) permits a party to obtain a stay after judgment by providing a bond or other security. The court explained that the purpose of security is to ensure that the prevailing party can recover the judgment if it is affirmed, while protecting the defendant’s ability to recover the payment if the judgment is reversed. A court may waive a bond if the defendant provides an acceptable alternative means of securing the judgment.

The court considered factors identified by the Court of Appeals for the Second Circuit, including the complexity and timing of collection, the court’s confidence that funds will be available, whether the defendant’s ability to pay makes a bond unnecessary, and whether requiring a bond would harm other creditors.

The court found that Shkreli’s proposed security was insufficient. Phoenixus AG was a private company, and it was unclear both what its shares were worth and when their value would be determined. The shares were already held by a receiver for use toward satisfying a judgment in an unrelated civil case, and it was uncertain whether any shares would remain afterward or whether their sale would satisfy that other judgment. Any future interest Shkreli might have in remaining shares was therefore speculative and did not assure collection of the judgment in this case.

The court also found that Shkreli’s assertion that he had no other significant assets weighed against his request. In the court’s view, that assertion effectively conceded several factors that favored requiring security, and financial difficulties generally weighed against granting a stay without a bond.

Disposition

Judge Denise Cote denied Shkreli’s March 7, 2022 motion to stay execution of the monetary judgment pending appeal. The opinion did not state that the denial was with or without prejudice.