Capitol Hill Group

1 Shaw Pittman is now known more fully as Pillsbury
Winthrop Shaw Pittman LLP.
UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF COLUMBIA
In re
CAPITOL HILL GROUP,
Debtor.
)
)
)
)
)
Case No. 02-00359
(Chapter 11)
OPINION RE APPLICATION TO RELEASE CASH BOND TO SATISFY
AUGUST 1, 2005, JUDGMENT AND CROSS-MOTIONS RE STAY PENDING APPEAL
By a judgment signed on August 1, 2005, and entered on
August 2, 2005, Shaw Pittman1 obtained an award for the recovery
from Capitol Hill Group (“CHG”) of $209,952.86 in attorneys' fees
and expenses incurred during the period of September 2004 through
May 2005 in enforcing Shaw Pittman's rights under a contract
breached by CHG. Shaw Pittman seeks to satisfy the August 1,
2005, judgment from a cash bond previously posted by CHG when it
pursued its last round of appeals. That round of appeals related
to a fee award judgment of December 1, 2004, and this court's
order of December 17, 2004, denying CHG's motion under F.R. Civ.
P. 60(b) for relief from that judgment (and other related
The opinion below is hereby signed. Dated: August
31, 2005.
_____________________________
S. Martin Teel, Jr.
United States Bankruptcy Judge
Case 02-00359 Doc 926 Filed 09/01/05 Entered 09/01/05 11:30:09 Desc Main
Document Page 1 of 10

2
judgments). The judgment and the order appealed were affirmed by
the District Court's Orders and its Memorandum Opinions filed on
June 22, 2005, in, respectively, Civil Actions Nos. 05-97 and 05-
98. CHG opposes Shaw Pittman's Application and has filed motions
seeking a stay of the August 1, 2005, judgment.
I
CHG contends that the cash bond posted when it pursued the
earlier round of appeals was not intended as a bond for the
August 1, 2005 judgment. However, the bond was fixed at an
amount in excess of the monetary awards under the December 1,
2004, judgment and provided that upon a non-stayed affirmance by
the district court:
Shaw Pittman shall be entitled, to the extent
consistent with the affirmance, to immediately withdraw
from the Registry (a) all unpaid sums due under the
Judgment, and (b) all other sums approved pursuant to a
non-stayed court order.
Order of January 1, 2005, ¶ 4. At ¶ 6, this bond order further
specified that the deposited funds served as a bond for the stay
and gave Shaw Pittman a first priority perfected security
interest in the funds.
A.
The bond protected Shaw Pittman with respect to collecting
the judgment but served the additional purpose an appeal bond
serves of protecting the appellee (here, Shaw Pittman) with
respect to interest, costs, and allowable attorney's fees
Case 02-00359 Doc 926 Filed 09/01/05 Entered 09/01/05 11:30:09 Desc Main
Document Page 2 of 10

3
incurred in defending against the appeal. This is evident based
on this court's having estimated the likely fees Shaw Pittman
would incur as a result of the appeal in fixing the amount of the
bond. Appeal bonds traditionally compensate for all damages
incurred by reason of the appeal, including attorney's fees and
costs awardable by reason of pursuit of the appeal.
B.
Shaw Pittman contends that the bond went further and extends
to all amounts recoverable based on CHG's breach of contract,
including amounts incurred prior to CHG's filing a motion for a
stay pending appeal. The August 1, 2005, judgment awarded
attorneys fees incurred from September 2004 through May 2005, and
thus part of the award is for fees incurred from September 1,
2004, through November 30, 2004, even before the court issued the
judgment of December 1, 2004. The fallacy in Shaw Pittman's
argument is demonstrated by paragraph 5 of the January 19, 2005,
order which provided that in the event the district court
reversed the December 1, 2004, judgment, CHG would be entitled to
withdraw the bond funds to the extent consistent with the
reversal. If the bond had been intended to cover contract
damages recoverable by Shaw Pittman other than those incurred by
reason of the appeal, the order would not have provided for such
a right in CHG to withdraw the bond funds.
Case 02-00359 Doc 926 Filed 09/01/05 Entered 09/01/05 11:30:09 Desc Main
Document Page 3 of 10

2 If it becomes necessary, the parties may file
supplemental papers to address whether the court should use a
date earlier than January 7, 2005, but if the judgment of
December 1, 2004, is collected from the $332,000 cash bond, less
than $89,756.78 will remain on deposit in the court's registry,
and the issue of an earlier date will be academic. The
$89,756.78 does not include any expenses incurred in January 2005
because the expenses for that month are not broken down by
whether they were incurred after January 7, 2005.
3 The court signed an order on August 30, 2005, authorizing
the $332,000 cash bond to be applied to the judgment of December
1, 2004, which is no longer subject to any stays.
4
C.
A portion of the August 1, 2005, judgment relates to
attorney's fees and expenses incurred by reason of the appeal.
The judgment granted all of Shaw Pittman's requested fees and
expenses for the months of September 2004 through May 2005. The
amounts awarded that arose in the period of January 8, 2005,
through May 2005 (after the court announced its decision
regarding the bond order on January 7, 2005) are at least
$89,756.78 (or 32.45% of the outstanding principal balance of
$276,572.27 owed on the December 1, 2004, judgment).2 When that
$89,756.78 is combined with the December 1, 2004 judgment's
balance owed of $276,572.27 plus interest, the amounts
recoverable from the bond far exceed the bond fund of $332,000
(plus any interest accumulated on it).3
D.
Although, in light of the foregoing, it may become an
academic point, the court notes that the August 1, 2005,
Case 02-00359 Doc 926 Filed 09/01/05 Entered 09/01/05 11:30:09 Desc Main
Document Page 4 of 10

5
judgment, if not stayed, is enforceable by Shaw Pittman for all
amounts, not just amounts incurred by reason of the appeal.
Unless stayed, Shaw Pittman is entitled to execute the August 1,
2005, judgment against the bond funds. If authorization is
necessary, Shaw Pittman is hereby authorized, once the August 1,
2005, judgment is no longer stayed, to serve a writ of execution
on the clerk. Because the funds are in the custody of the court,
a necessary element of execution is to obtain a court order
authorizing payment of the funds (to the extent that CHG has any
right to them) to Shaw Pittman pursuant to such execution.
However, the execution writ would not seize anything that is
presently owed to CHG. CHG's right to recover the funds would
require a ruling by the court of appeals directing the district
court to enter an order reversing the bankruptcy court's December
1, 2004 judgment (and the district court's entry of such an order
in compliance with the mandate of the court of appeals). Until
that occurs there is no amount owed to CHG (except contingently)
and thus execution will not seize anything currently owed to CHG.
There is no occasion at this juncture to order a release of funds
pursuant to execution (as opposed to a release of funds pursuant
to enforcement of the appeal bond).
II
CHG's stay motion proposes to post a cash bond equal to the
August 1, 2005, judgment amount. However, as discussed above, a
Case 02-00359 Doc 926 Filed 09/01/05 Entered 09/01/05 11:30:09 Desc Main
Document Page 5 of 10

4 As to the $194,072.27 balance of the judgment, the court
thought that CHG had no chance whatsoever on appeal, but the
court granted a temporary stay pending CHG's seeking a stay from
the district court. The court conditioned that temporary stay of
that $194,072.27 portion of the judgment on CHG's posting a cash
bond of $199,500 (which the court thought was sufficient to
protect Shaw Pittman during the short duration of the temporary
stay).
6
bond ought to cover any costs or allowable attorney's fees
incurred as part of the appeal.
The inadequacy of the cash bond posted to stay the December
1, 2004, judgment is instructive. The court's order of January
19, 2005, fixed a cash bond of $132,500 as the price for a stay
pending appeal of the $82,500 portion of the December 1, 2004,
judgment that the court thought was potentially open to reversal.
That represented a cash bond of roughly 160.6% of the $82,500
part of the judgment being stayed. The court granted only a
temporary stay of the remainder of the judgment, requiring a bond
only slightly in excess of that part of the judgment, leaving the
issue of any further stay and the appropriate additional cash
bond for such further stay to the district court. The district
court (perhaps thinking that this court had fully addressed the
appropriate amount of a cash bond) called for no additional cash
bond in granting the further stay.4 The result was a cash bond
of $332,000 for a principal judgment balance of $276,572.27,
representing a cash bond of only 120% of the principal judgment
balance.
Case 02-00359 Doc 926 Filed 09/01/05 Entered 09/01/05 11:30:09 Desc Main
Document Page 6 of 10

5 The delay in enforcing the judgment prior to that date
was based on this court's erroneous belief that the judgment was
unenforceable until a mandate issued.
7
That cash bond has proven woefully inadequate. As noted
above, the recoverable attorney's fees and expenses chargeable to
the cash bond so far exceed 32% of the principal balance of
$276,572.27 owed on the December 1, 2004, judgment. Moreover,
Shaw Pittman is seeking sanctions in the district court for a
frivolous appeal which, if awarded, could be asserted against the
present cash bond, and its ongoing efforts to collect fees
incurred in the appeal ought to be a damage flowing from the
appeal that would also be compensable from the $332,000 cash
bond. In hindsight, the bond ought to have been fixed at 150% of
the principal amount to guard against the uncertainty of
precisely how much Shaw Pittman would incur in attorney's fees
and expenses.
Turning to the August 1, 2005 judgment sought to be stayed
now, CHG has had the benefit of a stay (via the court's inaction
in enforcing the judgment) from the date of CHG's filing its
motion to stay the judgment. Any bond pending appeal ought to
cover the attorney's fees and expenses incurred since CHG filed
its motion on August 11, 2005.5 The judgment is for $209,952.86,
and although less than the $276,572.27 at stake in the last
appeal, that difference does not necessarily mean that the fees
generated in the current appeal will be less than in the previous
Case 02-00359 Doc 926 Filed 09/01/05 Entered 09/01/05 11:30:09 Desc Main
Document Page 7 of 10

8
appeal. Everything suggests that as the procedural background of
the case becomes lengthier, the fees in each succeeding appeal
could be even higher than in the previous appeals. However, the
last round involved both an appeal of the denial of the motion
for reconsideration of the court's prior ruling that Shaw Pittman
was entitled to recover fees incurred in enforcing the oral
contract, and an appeal of the order fixing reasonable attorney's
fees incurred prior to September 2004. In contrast, the issues
in the current appeal appear to be two straightforward issues
that should not entail as much in attorney's fees as the last
round. Although the court has determined that a portion of the
August 1, 2005, judgment is already covered by the balance of the
bond posted staying the December 1, 2004, judgment that will
remain after satisfaction of that judgment, that bond potentially
covers as well other attorneys' fees not yet reduced to judgment.
Moreover, CHG maintains that the bond does not apply to any part
of the August 1, 2005, judgment. Shaw Pittman is entitled to a
bond devoted solely to the August 1, 2005, judgment and damages
occasioned by the appeal thereof. The court will accordingly
require a cash bond of $295,000.
The court notes that CHG has little chance of success on
appeal (which weighs in favor of a cash bond well designed to
protect Shaw Pittman against the worst foreseeable damage):
Case 02-00359 Doc 926 Filed 09/01/05 Entered 09/01/05 11:30:09 Desc Main
Document Page 8 of 10

9
• CHG once again let Patrick Potter (one of Shaw
Pittman's attorneys) be the sole witness in the
evidentiary hearing, and provided no evidentiary basis
for this court to conclude that Shaw Pittman's fees
were excessive under the required lodestar analysis.
• As to CHG's Rule 54 argument, CHG appeared at a
scheduling conference at which it raised no objection
to the lack of a written Rule 54(d) motion, and a trial
date was set. It thereby waived that objection to the
court's hearing Shaw Pittman's fee request without a
Rule 54(d) motion having been filed. Shaw Pittman in
effect made an oral motion at the scheduling conference
to impose attorney's fees, and this court had the
discretion to set the matter for hearing without a
written motion. F.R. Bankr. P. 9013. Moreover, the
attorney's fees and expenses were incurred after this
court's original ruling that CHG was in breach of its
contract, and thus the request for those fees could not
have been sought within 14 days after the entry of that
ruling as contemplated by Rule 54(d). Finally, all of
the proceedings in this court have been handled as
contested matters, not adversary proceedings, and Rule
54(d) has not been made applicable to contested
Case 02-00359 Doc 926 Filed 09/01/05 Entered 09/01/05 11:30:09 Desc Main
Document Page 9 of 10

10	O:\JUDGEFIL\APPEALS\Stay Pending Appeal - In re CHG (Shaw Pittman jdgt of August 1, 2004) v2.wpd
matters. See LBR 7054-1.
Shaw Pittman contends (based on the frivolousness of the appeal
and other stay factors) that no stay whatsoever should be
granted, but the court believes it is appropriate to grant a stay
conditioned on the posting of a substantial cash bond so that CHG
will have review on at least one appellate level. Where such a
bond is posted to stay a monetary judgment, in an amount designed
to fully protect the appellee, the trial judge whose ruling is at
stake should be chary of depriving the appellant of appellate
review to assess whether the trial judge erred. This is
particularly so because such a stay would be a matter of right
were this an adversary proceeding, and the judgment here, for all
practical purposes, is no different than a monetary judgment in
an adversary proceeding.
An order follows.
[Signed and dated above.]
Copies to:
Donald Hartman [counsel for CHG]
John Burns [counsel for CHG]
Patrick Potter [counsel for Shaw Pittman]
Office of the United States Trustee
Case 02-00359 Doc 926 Filed 09/01/05 Entered 09/01/05 11:30:09 Desc Main
Document Page 10 of 10