NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
File Name: 05a0608n.06
Filed: July 19, 2005
No. 04-3119
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
JAMES HALL,
Plaintiff-Appellant,
v. On Appeal from the United
States District Court for the
CONSOLIDATED FREIGHTWAYS Northern District of Ohio
CORPORATION OF DELAWARE,
Defendant,
LUMBERMEN’S MUTUAL CASUALTY
COMPANY,
Defendant-Appellee.
/
BEFORE: BOGGS, Chief Judge; RYAN and ROGERS, Circuit Judges.
RYAN, Circuit Judge. The plaintiff, James Hall, appeals from a district court
order limiting the liability of Lumbermen’s Mutual Casualty Company, the surety of a
supersedeas bond, to the penal sum of the bond. The supersedeas bond was issued by
Lumbermen’s Mutual to the defendant, Consolidated Freightways Corporation, following
a jury verdict against Consolidated Freightways for discriminating against Hall, its former
employee, because of his race. After the jury rendered its decision, the district court
granted remittitur with respect to the punitive damages the jury awarded, but the judgment
was fully reinstated on appeal. Hall then moved against Lumbermen’s Mutual to satisfy the
judgment. Under the terms of the supersedeas bond, Lumbermen’s Mutual is bound by
(No. 04-3119) -2-
any modification of the judgment ordered by the appellate court, but its liability is expressly
limited to the penal sum of the bond. The district court ruled that Lumbermen’s Mutual was
liable for the penal sum only, that is, the original judgment, but not for the larger judgment
as modified on appeal. For the following reasons, we AFFIRM.
I.
The relevant facts of the case are reported in a previous decision of this court and
are only briefly recounted here. See Hall v. Consol. Freightways Corp., 337 F.3d 669 (6th
Cir. 2003). On November 6, 1998, Hall filed a complaint in the United States District Court
for the Northern District of Ohio, alleging that his former employer, Consolidated
Freightways, had discriminated against him in violation of Title VII of the Civil Rights Act
of 1964 and Title I of the Ohio Revised Code. Specifically, Hall alleged race discrimination,
racially hostile work environment, wrongful termination based on race, and retaliation. At
the end of a 10-day trial, the jury returned a verdict in Hall’s favor and awarded him
$50,000 in compensatory damages plus $750,000 in punitive damages, for a total award
of $800,000. Consolidated Freightways filed a motion for remittitur, which the district court
granted, reducing Hall’s punitive damages award from $750,000 to $252,400. The court
also awarded Hall $123,000 in attorney fees and $24,055 in costs. Both parties appealed.
While the appeals were pending, Consolidated Freightways filed a motion to stay
execution of the judgment and, shortly thereafter, submitted a supersedeas bond which it
had obtained from Lumbermen’s Mutual. Pursuant to Federal Rule of Civil Procedure
62(d), the district court approved the supersedeas bond and granted Consolidated
Freightways’s motion to stay execution of the judgment pending the appeals.
(No. 04-3119) -3-
The bond provided as follows:
KNOW ALL MEN BY THESE PRESENTS, that we, Consolidated
Freightways Corporation, as Principal, and Lumbermen’s Mutual Casualty
Company, as Surety, acknowledge by this instrument their obligation to pay
Plaintiff James Hall, or his successors, the sum of FOUR HUNDRED FIFTY
THOUSAND ONE HUNDRED THIRTY-FIVE AND NO/100 DOLLARS
($450,135.00) in Case No. 98-2554 above.
This bond is filed in accordance with the requirements of the U.S.
District Court for the Northern District of Ohio, as security for a stay of
execution of judgment pending appeal in the above named action, pursuant
to Rule 62(d), Federal Rules of Civil Procedure, and Rule 8, Federal Rules
of Appellate Procedure.
Both the Principal and the Surety are bound to satisfy in full the
judgment of the District Court in Case No. 98-2554, including costs and
interest, if the appeal should be dismissed or the judgment affirmed.
Principal and Surety are bound also to satisfy in full any modification of the
judgment ordered by the appellate Court. If the judgment should be reversed,
then this bond shall be discharged.
Should the Principal, Consolidated Freightways Corporation, satisfy
the judgment as described above, all obligations under this bond will be
discharged. Should the Principal, Consolidated Freightways Corporation, fail
to satisfy the judgment as described above, all obligations under this bond,
including the obligation of Lumbermen’s Mutual Casualty Company, the
Surety, to satisfy the judgment, shall remain in full force and effect.
PROVIDED, HOWEVER, that in no event shall the Surety’s liability exceed
the penal sum of this bond.
Thereafter, this court reversed the district court’s ruling reducing the punitive
damages award and directed the district court to reinstate the full jury award of $800,000.
Hall, 337 F.3d at 680. Hall then moved against the surety, Lumbermen’s Mutual, to
execute the judgment. The motion was granted by the court in a marginal entry order
dated October 28, 2003. Lumbermen’s Mutual then moved to vacate the marginal entry
order, arguing that its liability under the supersedeas bond did not exceed the penal sum
of $450,135 as stated in the bond. The district court granted the motion in part, directing
Lumbermen’s Mutual to pay Hall the amount of $450,135 forthwith, while establishing a
schedule for briefing the remaining amount in dispute. On December 23, 2003, the district
(No. 04-3119) -4-
court granted Lumbermen’s Mutual’s motion to vacate in full, concluding that Lumbermen’s
Mutual had satisfied its obligation under the bond when it paid the penal sum of $450,135
to Hall. The court reasoned that the bond’s modification provision seemed ambiguous, but
that the ambiguity was resolved by the bond’s final provision limiting the surety’s liability to
the penal sum. On January 6, 2004, Hall filed a motion for reconsideration of the district
court’s December 23, 2003, order, which was denied. This appeal followed.
II.
The supersedeas bond issued by Lumbermen’s Mutual was posted pursuant to
Federal Rule of Civil Procedure 62(d) and enforced pursuant to Federal Rule of Civil
Procedure 65.1. “Because Rule 65.1 simply allows for an enforcement mechanism for
bonds posted under Rule 62(d), only a federal question is involved. As such, federal law
. . . applies.” Bass v. First Pac. Networks, Inc., 219 F.3d 1052, 1055 (9th Cir. 2000).
For if it be true, and it undoubtedly is, that the giving of . . . a bond was an act
done pursuant to an authority exercised under the Constitution and laws of
the United States, it must follow that the bond so taken is to be interpreted
with reference to the authority under which it was given and the principles of
jurisprudence controlling such authority, and not by the local law.
Tullock v. Mulvane, 184 U.S. 497, 512-13 (1902).
There are no applicable federal standards governing the construction of
supersedeas bonds, however, so we must “look to state law bond provisions and
construction for guidance.” United States ex. rel. Miss. Road Supply Co. v. H.R. Morgan,
Inc., 542 F.2d 262, 267 (5th Cir. 1976). Under Ohio law, the rules of construction employed
to interpret a supersedeas bond, as a surety contract, are the same as those rules utilized
to interpret all written agreements. See State ex rel. Herbert v. Inland Bonding Co., 46
N.E.2d 623, 626 (Ohio Ct. App. 1942), overruled on other grounds, 51 N.E.2d 710 (Ohio
(No. 04-3119) -5-
1943). Generally, courts presume that the intent of the parties can be found in the written
terms of their contract. Shifrin v. Forest City Enters., Inc., 597 N.E.2d 499, 501 (Ohio
1992). If a contract is unambiguous, the language of the contract controls and “[i]ntentions
not expressed in the writing are deemed to have no existence and may not be shown by
parol evidence.” Aultman Hosp. Ass’n v. Cmty. Mut. Ins. Co., 544 N.E.2d 920, 923 (Ohio
1989). Ambiguity in a contract may arise when two contractual provisions are in conflict
with each other. See Fairmont Creamery Co. v. Ewing, 182 N.E. 883, 885 (Ohio Ct. App.
1932).
Hall argues that the plain meaning of the bond’s modification provision requires that
Lumbermen’s Mutual be held liable for the balance of the judgment as reinstated on appeal.
Lumbermen’s Mutual counters that the bond expressly limits its liability to the stated penal
sum. We acknowledge that the supersedeas bond arguably contains an ambiguity
inasmuch as two provisions of the bond appear to conflict with each other. On the one
hand, the bond provides that Lumbermen’s Mutual, as surety, is “bound . . . to satisfy in full
any modification of the judgment ordered by the appellate Court,” which would seem to
include the $800,000 judgment reinstated on appeal. On the other hand, the bond
expressly provides that under no circumstances will the liability of Lumbermen’s Mutual
exceed the penal sum, which in this case appears to be the original $450,135 judgment
acknowledged in the bond.
The modification provision appears to be a vestige of former Federal Rule of Civil
Procedure 73(d), which required that a supersedeas bond “be conditioned . . . to satisfy in
full such modification of the judgment and such costs, interest, and damages as the
appellate court may adjudge and award.” Fed. R. Civ. P. 73(d) (repealed 1968). Although
(No. 04-3119) -6-
this rule is no longer good law, Lumbermen’s Mutual is nevertheless contractually bound
by the “modification of the judgment” language set forth in the supersedeas bond.
In adherence to the principle that contracts should be interpreted so as to give effect
to every provision of the contract, Farmers’ National Bank v. Delaware Insurance Co., 94
N.E. 834, 839 (Ohio 1911), the district court reasoned that to hold Lumbermen’s Mutual
liable for the full judgment as reinstated on appeal would render the last provision of the
bond ineffectual: “To find in Plaintiff’s favor, the Court would have to completely ignore the
asserted penal sum and the last sentence . . . of the bond which expressly limits
Lumbermen’s liability to the penal sum.” To avoid this result and to resolve the apparent
ambiguity, the court interpreted the bond’s apparently conflicting language to mean that
Lumbermen’s Mutual was liable for any modification of the judgment on appeal, “but in the
event that the court of appeals modifies the judgment by increasing the amount above
$450,135, Lumbermen’s Mutual’s liability is limited to the penal sum, i.e., $450,135, and
Consolidated will be responsible for the balance.” We perceive no error in the court’s
reasoning.
Hall contends that the district court’s interpretation, while salvaging the provision of
the bond limiting the surety’s liability to the penal sum, simultaneously “‘eliminates [the
modification provision] from the contract and makes it purposeless and unnecessary.’”
(Quoting Farmers’ Nat’l Bank, 94 N.E. at 839.) Hall’s argument is without merit because
it presupposes that the only modification of the judgment contemplated by the parties was
a full reinstatement of the original judgment. During its appeal to this court, Consolidated
Freightways contended that the evidence in the case did not support an award of punitive
damages in any amount, whether under federal or state law. Hall, 337 F.3d at 671. Had
(No. 04-3119) -7-
Consolidated Freightways prevailed in only this aspect of its appeal, the judgment would
have been remitted to an amount less than the penal sum stated in the bond. The district
court’s order denying Consolidated Freightways’s Rule 50 motion relating to punitive
damages would have been reversed, leaving intact the remaining award of damages.
Although this would have resulted in a partial reversal of the judgment, Lumbermen’s
Mutual would still have been bound “to satisfy in full [the] modification of the judgment
ordered by the appellate Court.”
The district court’s interpretation of the bond’s terms is also supported by the general
rule that a surety’s liability is limited to the penal sum stated in the bond. Elliott v. Marc
Wilcher Realty, Inc., 171 N.E.2d 543, 547 (Ohio Ct. App. 1959). While nothing prevents
parties from contracting for a different result, including increasing a surety’s potential
liability to cover any increase in the judgment on appeal, the language of the bond does not
indicate that such an agreement was reached in this case. Rather, the surety’s liability is
expressly limited to the penal sum.
Hall argues that the term “penal sum” is itself ambiguous and should be interpreted
“to include not just the $450,135 obligation but also ‘any modification of judgment ordered
by the appellate court.’” We disagree. A natural reading of the language of the bond
indicates that the term “penal sum” refers back to the only monetary amount actually
specified in the bond, namely, “the sum of . . . []$450,135.00[.]” The term does not include,
in addition, any potential increase in the judgment ordered by the appellate court. Indeed,
given the purpose a supersedeas bond is intended to serve, the latter construction would
arguably provide a windfall to Hall.
(No. 04-3119) -8-
The purpose of a supersedeas bond is to preserve the status quo
while protecting the non-appealing party’s rights pending appeal. A judgment
debtor who wishes to appeal may use the bond to avoid the risk of satisfying
the judgment only to find that restitution is impossible after reversal on
appeal. At the same time, the bond secures the prevailing party against any
loss sustained as a result of being forced to forgo execution on a judgment
during the course of an ineffectual appeal.
Poplar Grove Planting & Ref. Co. v. Bache Halsey Stuart, Inc., 600 F.2d 1189, 1190-91
(5th Cir. 1979) (emphasis added).
Hall’s interpretation of “penal sum” would not preserve the status quo as it existed
when the district court entered its judgment. Rather, Hall’s interpretation, while protecting
his ability to execute the judgment he obtained in the district court, would also enable him
to collect a larger judgment from the surety in the event his appeal was successful. While
it would undoubtedly be more convenient for Hall to collect the entire judgment from
Lumbermen’s Mutual, especially considering that Consolidated Freightways has filed for
Chapter 11 bankruptcy protection, a reasonable construction of the bond’s language
indicates that Lumbermen’s Mutual’s liability is limited to the $450,135 obligation stated in
the bond.
III.
For the foregoing reasons, the district court’s order limiting the liability of
Lumbermen’s Mutual to the penal sum of the supersedeas bond is AFFIRMED.