605 Fifth Property Owner, LLC v. Abasic, S.A.

Background

605 Fifth Property Owner, LLC (“Owner”) signed a commercial lease with NTS W. USA (“NTS”), which the opinion identifies as a subsidiary of Abasic, S.A. At the same time, Owner and Abasic signed a guarantee under which Abasic unconditionally guaranteed NTS’s obligations under the lease. NTS later declared bankruptcy and stopped making rental payments.

NTS rejected the lease in the bankruptcy proceedings and brought a related proceeding seeking to avoid its lease obligations. The Bankruptcy Court ruled against NTS, and the District Court affirmed that ruling. That decision was on appeal to the Second Circuit when Judge Cote considered this motion.

Owner sued Abasic to enforce the guarantee. The court previously granted Owner summary judgment, meaning it decided that Owner was entitled to judgment without a trial because there was no genuine dispute requiring one. Judgment was entered for $2,213,009.82 in damages, and Owner later received an additional $183,296.27 in attorneys’ fees. Abasic appealed and moved under Federal Rule of Civil Procedure 62(b) to stay both judgments while the appeal proceeded.

Bond Requirement

Rule 62(b) generally allows a party to obtain a stay after judgment by providing a bond or other security. A court may waive the bond requirement if the appealing party provides an acceptable alternative way to secure the judgment.

The court found that several considerations weighed against waiving the bond requirement. Collection would likely be difficult because Abasic was located outside the United States and had resisted enforcement of the guarantee throughout the litigation. Abasic proposed no alternative security. The court therefore denied Abasic’s request to waive the supersedeas bond requirement.

Stay Pending Appeal

The court also applied the four-factor test for a stay pending appeal: whether the applicant is likely to succeed, whether it would suffer irreparable harm without a stay, whether a stay would substantially harm other interested parties, and where the public interest lies.

The court found that Abasic had not shown a likelihood of success. Abasic argued that the lease’s purpose had been frustrated and that approval of NTS’s bankruptcy plan released Abasic from its guarantee obligations. The court had already rejected those arguments on summary judgment, and Abasic offered no additional argument showing that the Court of Appeals would reach a different conclusion.

Abasic also argued that NTS might prevail in its related appeal and that such a result would release Abasic from the guarantee. The court found that Abasic had not explained why NTS was likely to succeed. It further held that, even if NTS were released from its lease obligations, an unconditional guarantor could not assert defenses personal to the principal under the guarantee. The court therefore concluded that Abasic would remain obligated under the guarantee.

The court also found no irreparable harm. Paying a judgment that might later be reversed was an injury that could be remedied with money. Abasic’s concern that Owner might spend the money and be unable to return it if the judgment were reversed was too remote and speculative.

The court rejected Abasic’s argument that a stay would not substantially harm Owner because Owner could lease the premises to other tenants. Income from other leases had already been considered in calculating the damages award. Finally, although the dispute was between private parties, the court found that the public interest favored certain and efficient enforcement of unconditional guarantee agreements.

Disposition

Judge Denise Cote denied Abasic’s May 2, 2022 motion to stay the judgment pending appeal and waive the requirement to post a supersedeas bond.