Teleport Mobility, Inc. v. Sywula

Opinion

1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 TELEPORT MOBILITY, INC., et al., Case No. 21-cv-00874-SI

8 Plaintiffs, ORDER DENYING MOTION TO STAY 9 v. ENFORCEMENT WITHOUT BOND AND DENYING AS MOOT 10 KRZYSZTOF SYWULA, APPLICATION FOR SHORT-TERM STAY 11 Defendant. Re: Dkt. Nos. 102, 111 12 13 On March 18, 2025, this Court confirmed an arbitration award against defendant in the 14 amount of $1,500,000. Dkt. No. 95. A broader history of this case is set forth in that order. See id. 15 The Court entered judgment on the award two days later. Dkt. No. 96. Defendant timely appealed 16 the Court’s judgment to the Ninth Circuit, where the opening brief is due August 1, 2025. See Dkt. 17 Nos. 97, 98; Case No. 25-2182, Dkt. No. 5 (9th Cir.). Presumably, defendant may challenge whether 18 the Court had jurisdiction to confirm the award in light of the Supreme Court’s ruling in Badgerow 19 v. Walters, 596 U.S. 1 (2022), as that remains an open question in the Ninth Circuit. See Dkt. No. 20 95 at 8-9. 21 This Court did not confirm the $500,000 in attorney’s fees awarded by the arbitrator due to 22 a lack of complete jurisdiction, see Dkt. No. 95 at 13-14, but that portion of the award has since 23 been confirmed by the San Diego County Superior Court after a hearing on May 16, 2025, see Dkt. 24 No. 103-1 (“Decl. Ludwig”), Ex. 1. 25 Defendant now requests that the Court stay execution of its judgment pending appeal without 26 requiring a bond or, alternatively, allow defendant to set aside some of his non-public shares in 27 Teleport Mobility, Inc. as security. Dkt. No. 102 (“Mot.”) at 1. Pursuant to Civil Local Rule 7- 1 VACATED the June 24, 2025 hearing. For the reasons stated below, the Court DENIES defendant’s 2 motion. The Court ORDERS that, to stay enforcement of the judgment, defendant must post a bond 3 of $750,000. 4 5 BACKGROUND 6 Defendant’s papers suggest that he may be on the brink of bankruptcy. Defendant asserts 7 that he has debts that total “at least $316,857,” including credit card debts, money owed to the IRS, 8 debts to attorneys, a cash loan of $106,133.08, and other personal loans or lines of credit. Dkt. No. 9 102-1 (“Decl. Sywula”) ¶ 3. Defendant notes that in March 2024 he could not afford an arbitration 10 payment of $60,283.74 and that his “financial circumstances are unchanged” from that time. Id. ¶ 11 4. Defendant states that his family’s monthly income is $15,206.36 while their known expenses are 12 $14,700. Id. ¶ 5. The specific budgetary expense categories defendant lists (rent, insurance, cell 13 phones, expenses related to children, food, utilities, gas and car expenses, and clothes and hygiene 14 expense) add up to $6,019.55 in expenses. Id. Defendant further asserts the minimum monthly 15 payment on the family’s credit cards is $4,143.64 and that he owes ongoing legal expenses of an 16 unidentified amount. Id. As plaintiffs note in their opposition, these figures are identical to those 17 provided in a declaration by defendant in 2023. Dkt. No. 103 (“Opp’n”) at 2; Decl. Ludwig, Ex. 5. 18 Plaintiffs assert that defendant works for ByteDance, Inc. where, at least in defendant’s 2022 19 deposition, he testified to earning $400,000 in total compensation per year. Opp’n at 2; Decl. 20 Ludwig, Ex. 2. Plaintiffs also assert that defendant’s wife works as a contractor for Google, 21 according to her public LinkedIn account. Opp’n at 2; Decl. Ludwig, Ex. 3. Defendant’s filings do 22 not specify where he or any family members are currently employed. 23 Plaintiffs also submit a 2023 declaration from one of defendant’s estranged business partners 24 who reported that defendant had told him about multiple rental properties that defendant owned in 25 Poland.1 Decl. Ludwig, Ex. 3. In a declaration attached to his reply brief, defendant asserts that he 26

27 1 Without lodging a formal objection, defendant labels this assertion as “hearsay.” Dkt. No. 110 (“Reply”) at 6. The assertion is admissible as a statement of a party-opponent. Fed. R. Evid. 1 does not own rental properties in Poland or anywhere and does not own any real estate in general. 2 Dkt. No. 110-1 (“Decl. Sywula ISO Reply”) ¶ 2. Defendant further declares that he has “not tried 3 to hide any assets in Poland and [has] no plans to do so.” Id. ¶ 3. 4 Defendant claims his “sole asset of significant value” is 2.4 million shares of Teleport 5 Mobility, Inc. common stock, about 45% of the company’s stock. Decl. Sywula ¶ 6. Defendant 6 provides heavily redacted material that indicates that plaintiffs marketed to investors in 2020 that 7 the company could have an initial valuation of $60 million. Id. ¶ 8, Ex. B. Defendant further asserts 8 that the company has increased the value of its stock by 50% since then, to $90 million. Id. ¶ 10, 9 Ex. C. According to a declaration submitted by plaintiffs, the company has never made any revenue 10 and the stock is not publicly traded. Dkt. No. 103-2 (“Decl. Davis”) ¶¶ 6-7. The future value of the 11 shares depends on whether the company can monetize any valid patents “through litigation, 12 licensing, or product development and eventual sales.” Id. ¶ 8. As such, in plaintiffs’ eyes the value 13 of Teleport stock is “indeterminate.” Id. ¶ 9. 14 15 LEGAL STANDARD 16 Rule 62 of the Federal Rules of Civil Procedure provides for an automatic stay of execution 17 on a judgment for thirty days. Fed. R. Civ. P. 62(a). A party may also provide “a bond or other 18 security” to obtain a stay. Fed. R. Civ. P. 62(b). District courts have discretion to set a bond amount 19 or waive a bond requirement. Cotton ex rel. McClure v. City of Eureka, Cal., 860 F. Supp. 2d 999, 20 1027 (N.D. Cal. 2012) (citing Rachel v. Banana Republic, Inc., 831 F.2d 1503, 1505 n.1 (9th Cir. 21 1987) and International Telemeter, Corp. v. Hamlin International Corporation, 754 F.2d 1492, 22 1495 (9th Cir. 1985)); Neo4j, Inc. v. Purethink, LLC, No. 5:18-cv-07182-EJD, 2024 U.S. Dist. 23 LEXIS 223628, at *3 (N.D. Cal. Dec. 10, 2024). “The posting of a bond protects the prevailing 24 plaintiff from the risk of a later uncollectible judgment and compensates him for delay in the entry 25 of the final judgment.” NLRB v. Westphal, 859 F.2d 818, 819 (9th Cir. 1988). 26 The current rule does not specify or require a specific bond amount, but a prior version of 27 Rule 62 directed that a bond amount include “the whole amount of the judgment remaining 1 hearing and for good cause shown fixes a different amount or orders security other than the bond.” 2 Poplar Grove Planting & Ref. Co. v. Bache Halsey Stuart, Inc., 600 F.2d 1189, 1191 (5th Cir. 1979). 3 “Generally, ‘the amount of the bond should be sufficient to pay the judgment plus interest, costs and 4 any other relief (e.g. attorney fees) the appellate court may award.’” Cotton, 860 F. Supp. 2d at 5 1027-28 (quoting Christopher A. Goelz & Meredith J. Watts, California Practice Guide: Ninth 6 Circuit Civil Appellate Practice ¶ 1:168 (TRG 2011)). If a party seeks to deviate from this standard, 7 it should have the burden to “objectively demonstrate” why that would be appropriate. Cotton, 860 8 F. Supp. 2d at 1028 (quoting Poplar, 600 F.2d at 1191). 9 In evaluating a motion to stay enforcement without a bond, courts in the Ninth Circuit have 10 generally applied the factors elucidated in Dillon v. City of Chicago, 866 F.2d 902 (7th Cir. 1988). 11 Neo4j, Inc., No. 5:18-cv-07182-EJD, 2024 U.S. Dist. LEXIS 223628, at *3. These factors include: 12 (1) the complexity of the collection process; (2) the amount of time required to obtain a judgment after it is affirmed on appeal; (3) the 13 degree of confidence that the district court has in the availability of funds to pay the judgment (4) whether the defendant's ability to pay 14 the judgment is so plain that the cost of a bond would be a waste of money and (5) whether the defendant is in such a precarious financial 15 situation that the requirement to post a bond would place other creditors of the defendant in an insecure position. 16 Dillon, 866 F.2d at 904-05 (internal quotation marks and citations omitted). As the third and fourth 17 factors apply to opposite circumstances as the fifth factor, a party need not—and indeed cannot— 18 meet all the factors to merit a stay. See Clark v. Hidden Valley Lake Ass’n, No. 16-CV-02009-SI, 19 2018 WL 2412136, at *3 (N.D. Cal. May 29, 2018) (holding that defendant could not argue both 20 that a bond would create a financial hardship and that the court should be confident in its ability to 21 pay the judgment). 22

23 DISCUSSION 24 Defendant relies on the fifth Dillon factor to support his motion to stay without a bond, 25 arguing that he “will likely be forced into personal bankruptcy if required to post a full bond in order 26 to stay enforcement of this action.” Mot. at 6. In turn, the bankruptcy process “would place his 27 multiple creditors in an extremely insecure position.” Id. at 7. Defendant further argues waiver is 1 more appropriate where, as here, the Court acknowledged the open legal question upon which 2 defendant is presumably appealing. Id. Defendant contends that an unbonded stay would support 3 the status quo more than a bond requirement. Id. In the alternative, defendant requests that the 4 Court allow him to place some of his Teleport stock in escrow as security. Id. at 7-9. 5 In opposition, plaintiffs argue the first two factors weigh in favor of a bond because 6 defendant has “demonstrated a willingness to flee the jurisdiction of the U.S. court system to 7 Poland,” Opp’n at 6, and because defendant’s asserted lack of assets “suggest[s] the collection 8 process may be arduous.” Id. (quoting Angioscore, Inc. v. Trireme Med., Inc., No. 12-cv-03393- 9 YGR, 2015 U.S. Dist. LEXIS 144465, at *6 (N.D. Cal. Oct. 23, 2015)). Plaintiffs’ retained 10 collections counsel states that his research to date “has not shown other collectible assets.”2 Dkt. 11 No. 103-3 (“Decl. Selik”) ¶ 13.3 Since defendant reports substantial debts and no significant assets 12 beyond the Teleport stock, plaintiffs argue the third and fourth factors weigh in favor of a bond as 13 well. Id. at 7-9. Finally, plaintiffs briefly discuss the fifth factor, contending that defendant 14 “provides no explanation of how requiring a supersede[a]s bond would affect the unnamed creditors 15 identified in his declaration, if at all.” Opp’n at 9. 16 The third and fourth factors are not at issue here, since plaintiff could not seek waiver under 17 these factors while simultaneously seeking a waiver under the fifth factor. See Clark, No. 16-CV- 18 02009-SI, 2018 WL 2412136, at *3. Nor is there any suggestion that defendant’s financial position 19 is so solid that eventual payment of the award is not a concern. The Court therefore focuses its 20 analysis on the first, second, and fifth Dillon factors. 21 The evidence regarding the existence or location of any assets in defendant’s possession is 22 contested. Given the lengthy and very litigious history between the parties, the Court finds 23 plaintiffs’ concern about asset positioning outside of the United States to be reasonable and not 24 inadmissible speculation. Defendant now declares he has “no plans to ‘flee the jurisdiction’ and 25

26 2 The declaration does not make clear what “other” means in this context. 27 3 Defendant raises numerous evidentiary challenges to other paragraphs of Mr. Selik’s Declaration. Reply at 14-15. This order does not rely on those portions of the declaration and 1 [has] never done so.” Decl. Sywula ISO Reply ¶ 4. However, the Court notes that very early in this 2 litigation, when plaintiffs were trying to serve defendant at his United States address, defendant 3 submitted a sworn declaration from Poland. Dkt. No. 25-1 at 24. The Court then ordered 4 defendant’s counsel to provide an address for service if he could not accept service on his client’s 5 behalf, but service failed at the provided Polish location. See Dkt. No. 43-1 ¶¶ 10-13. 6 Regardless, taking defendant at his word regarding his precarious financial position, it seems 7 clear that any collections “may be arduous.” See Angioscore, No. 12-cv-03393-YGR, 2015 U.S. 8 Dist. LEXIS 144465, at *6. The question becomes whether the fifth Dillon factor merits a stay 9 under these circumstances anyway. In line with this factor, “[c]ourts have waived or allowed for 10 reduced supersedeas bonds where the defendant has shown that she cannot post the full bond, and 11 enforcement of the judgment would leave her insolvent.” Fed. Trade Comm’n v. Com. Planet, Inc., 12 No. 809CV01324CJCRNBX, 2012 WL 13015007, at *8 (C.D. Cal. Sept. 13, 2012) (collecting 13 cases). 14 The fifth Dillon factor was drawn from the Seventh Circuit’s prior decision in Olympia 15 Equipment Leasing Co. v. Western Union Telegraph Co., 786 F.2d 794, 799 (7th Cir. 1986), where 16 the court held alternative security sufficient in place of a bond. There, the plaintiff had secured an 17 antitrust judgment of $36 million, but the judge allowed alternative security “consisting of a pledge 18 of $10 million in cash, $10 million in accounts receivables, and a security interest, which [the 19 judgment debtor] represented to be worth about $70 million, in some of the company's physical 20 assets.” Olympia, 786 F.2d at 795-96. The appellate court concluded the district court acted 21 reasonably to help the judgment debtor avoid bankruptcy and the effect it would have on other 22 creditors. Id. at 799. 23 Other courts have foregone a bond for alternative measures of security. In Commerce 24 Planet, the judgment debtor provided a declaration, as defendant here did, stating execution of the 25 full judgment would force him into bankruptcy. No. 809CV01324CJCRNBX, 2012 WL 13015007, 26 at *9. The court was therefore willing to consider a reduced bond, but rejected the judgment debtor’s 27 initial offer and directed the judgment creditor to provide a proposal after it reviewed the judgment 1 Ltd., the Court approved a $15 million bond that amounted to 57% of the judgment due to concerns 2 about the judgment debtor’s financial viability. No. 8:21-cv-00717-SPG-KES, 2024 U.S. Dist. 3 LEXIS 240143, at *4-9 (C.D. Cal. Feb. 16, 2024). In other cases, courts have placed some other 4 limitation on the judgment debtor, like an order prohibiting the judgment debtor from disposing of 5 any assets. See, e.g., Miami Int’l Realty Co. v. Paynter, 807 F.2d 871, 874 (10th Cir. 1986). 6 In Neo4j, Inc., the court ruled against a judgment debtor’s claim for relief under fifth factor 7 because the debtor did not furnish “any specific information to support this argument.” No. 5:18- 8 cv-07182-EJD, 2024 U.S. Dist. LEXIS 223628, at *6. The debtor stated in a declaration that “it is 9 highly likely that I will be forced into bankruptcy if the garnishment proceeds” but did not identify 10 creditors or describe his current assets. Id. Defendant here makes a similar statement in his 11 declaration, but does provide some of the detail lacking in Neo4j, Inc. Specifically, defendant has 12 listed his debts (although, other than the IRS, not his specific creditors), monthly household income, 13 and monthly household expenses. 14 Nonetheless, under the circumstances of this case, the Court holds that a bond is necessary 15 to secure plaintiffs’ interest in the judgment. Defendant has not “objectively demonstrate[d]” why 16 such a sharp deviation from the standard bond would be appropriate here. See Cotton, 860 F. Supp. 17 2d at 1028 (quoting Poplar, 600 F.2d at 1191). Defendant’s only evidence is his own declaration, 18 which—as plaintiffs point out—uses recycled figures and is drawn into question by his own 2022 19 deposition testimony. Defendant does not provide any financial statements to support his assertions 20 or identify any specific third-party creditors beyond the IRS. Nor does he state his current 21 employment status. Moreover, the history of litigation between these parties suggests that collection 22 may be difficult should defendant’s appeal take time to be resolved. 23 Defendant’s suggestion that the open legal question underlying appeal merits a stay of 24 enforcement carries some weight, but not enough to reverse the Court’s conclusion that a bond is 25 necessary. Even if this Court were to be found lacking in jurisdiction, defendant cannot show that 26 he is likely to fare better in state court. Indeed, a state court has added to the judgment by confirming 27 the arbitrator’s award of $500,000 in attorney’s fees that this Court declined to award due to 1 Lastly, the Court rejects defendant’s alternative request to post a certain amount of his 2 || Teleport shares as security. Teleport is a start-up company and, despite the company’s marketing 3 || materials for investors, plaintiffs are correct to label the stock value as “indeterminate.” Opp’n at 4 || 4. This is not a case like United States v. Birdsong, where the judgment debtor owned real property 5 with obvious value as an alternative security. No. CV 17-72-M-DWM, 2019 U.S. Dist. LEXIS 6 || 34082, at *4, 123 A.F.T.R.2d (RIA) 2019-971 (D. Mont. Mar. 4, 2019). Defendant’s stock will only 7 attain true value should the plaintiffs succeed in their entrepreneurial endeavors, a goal made more 8 || challenging by defendant’s actions and litigation. As such, the Court will not accept Teleport shares 9 as alternative security. 10 While the Court requires defendant to post a bond to stay enforcement, the Court will not 11 require a bond that covers the full amount of the judgment. In line with other cases that have allowed 12 || lesser but still significant bonds in circumstances of financial instability and third-party creditors, 5 13 || the Court will accept a bond of $750,000 to stay enforcement of its judgment pending appeal.* 14 CONCLUSION a 16 For the foregoing reasons and for good cause shown, the Court hereby DENIES defendant’s 3 17 motion and orders defendant to post a bond of $750,000 should he wish to stay enforcement of the 18 || Court’s $1,500,000 judgment. Defendant’s separate application for a stay of judgment pending this 19 || ruling is DENIED as moot. 20 21 IT IS SO ORDERED. 22 Dated: June 24, 2025 Site WU tee 23 SUSAN ILLSTON United States District Judge 25 26 ||}. ——_ * The Court recognizes, of course, that Rule 62 does not limit the Court of Appeals from 28 || issuing a stay in the absence of a district court stay. See Fed. R. Civ. P. 62(g).