
USCA1 Opinion

	




          April 1, 1993                            UNITED STATES COURT OF APPEALS                                FOR THE FIRST CIRCUIT                                 ____________________        No. 92-1844                       DANA MURPHY, in his Individual Capacity                             and d/b/a as BENEVEST, INC.,                                Plaintiff, Appellant,                                          v.                              ANGEL F. GINORIO, ET AL.,                                Defendants, Appellees.                                 ____________________                     APPEAL FROM THE UNITED STATES DISTRICT COURT                           FOR THE DISTRICT OF PUERTO RICO                     [Hon. Carmen C. Cerezo, U.S. District Judge]                                             ___________________                                 ____________________                                        Before                         Torruella and Stahl, Circuit Judges,                                              ______________                         and Skinner,* Senior District Judge.                                       _____________________                                 ____________________            Maria Soledad  Ramirez Becerra  with whom  Mercado &  Soto was  on            ______________________________             _______________        brief for appellant.            Maria Luisa  Martinez with whom Lasa,  Escalera &  Reichard was on            _____________________           ___________________________        brief for appellees.                                 ____________________                                    March 30, 1993                                 ____________________        _____________________        *Of the District of Massachusetts, sitting by designation.             SKINNER, Senior District Judge.                      ______________________               This  appeal arises  from an  order  of the  United States             District Court  for the  District of Puerto  Rico, Honorable             Carmen  Consuelo Cerezo,  dismissing plaintiff's  action for             his failure  to post a  $75,000 non-resident surety  bond as             ordered by  the court pursuant  to District  of Puerto  Rico             Local Rule 304.               BACKGROUND             BACKGROUND             __________               The  plaintiff   Dana  Murphy,   d/b/a  Benevest,   Inc.,1             brought suit against defendant AFG  Broadcasting Corporation             and fifteen of its officers, directors, and agents, alleging             that they conspired to defraud Murphy in connection with  an             investment in AFG Broadcasting.  Murphy contends that he was             duped into  investing more than  $200,000 in  AFG under  the             false  belief that AFG was  licensed to operate a television             station  in Arecibo,  Puerto  Rico.   Plaintiff's  complaint             asserted  claims  for  compensatory and  treble  damages  in                                              ____________________             1  The legal  relationship  between Murphy  and Benevest  is             unclear.    Benevest is  identified  in the  complaint  as a             corporation  incorporated under  the  laws of  Massachusetts             and, yet, the briefs filed with this  court strongly suggest             that Benevest is  not an  entity separate from  Murphy.   On             appeal Murphy  and Benevest have been treated as one entity;             this  conclusion, however,  does not  affect the  outcome of             this appeal.                                           -2-                                          2             excess  of  $5,000,000 under  the  Racketeer Influenced  and             Corrupt Organizations Act, 18 U.S.C.   1961 et. seq. and the             Civil  Code  of Puerto  Rico.    The complaint  also  sought             $300,000 for costs, expenses, and attorneys' fees.                 On November  21, 1991, defendants sought  an order of  the             court pursuant  to Rule 304  requiring plaintiff  to post  a             non-resident bond in  the amount of  $500,000 to secure  any             award to defendants of costs, expenses, and attorneys' fees.             Defendants also informed the court that they planned to move             to dismiss the action as res judicata.  The motion, however,                                      ____________             was  never filed or decided.   Rule 304  states, in relevant             part:               When the plaintiff is  domiciled outside of Puerto Rico               or is a foreign  corporation, a bond shall be  required               to secure the costs,  expenses and attorneys' fees that               may be awarded.   All proceedings in the action  may be               stayed until  bond is posted,  which shall not  be less               than $250.00.  The Court may require an additional bond               upon a showing that the original bond is not sufficient               security,  and may  stay the  proceeding in  the action               until such additional bond is given.               After  the lapse of sixty (60) days from the service of               the  order requiring  bond or additional  bond, without               bond  having been  posted,  the Court  may dismiss  the               action.               This rule  shall be  liberally interpreted in  favor of               _______________________________________________________               the  plaintiff so as not  to preclude his  right to sue               _______________________________________________________               through  excessive bond  requirement.   Consistent with               _____________________________________               this,  the Court,  for good  cause shown,  may dispense               with this requirement.                                         -3-                                          3             D.P.R.L.R. 304 (emphasis added).  Murphy opposed the motion,             arguing  that  the  bond  request was  excessive  and  would             preclude  him from  pursuing this  action given  his limited             financial resources.                 On December 20, 1991, the district court issued a  summary             order  requiring  Murphy to  post a  bond  in the  amount of             $75,000 within  90 days;  failure to  comply with the  order             would  result in the  action being dismissed.   Murphy filed             two motions for reconsideration  in which he complained that             he had been unable  to obtain the requisite bond  because he             had neither  sufficient income  nor valuable  property; that             the  $75,000 security  bond  was excessive;  that the  court             failed to evaluate his ability to post the bond; and that as             a result of the court's  order he was "economically helpless             to  pursue  a bonafide  [sic]  claim  before this  Honorable             Court."    The  district   court  denied  both  motions  for             reconsideration   and   ultimately  dismissed   the  action,             reasoning:               We  note,  at the  onset that  plaintiff is  suing over               sixteen  defendants, raising  complex claims  under the               RICO  statute,  breach  of  contract  and tort  claims.               Inasmuch as  plaintiff is asking $300,000  to cover his               own costs, expenses, and attorney's fees, it should not               be  out of line  to consider  that defendants  would be               expected to incur in [sic] similar expenses.  Plaintiff               does not deny that he was a party to the Superior court               cases  upon which  defendants  will  move  for  summary               judgment; rather,  he asks that we  order defendants to                                         -4-                                          4               provide  him  with   certified  transcripts  of   those               proceedings, as if they were never there.             Murphy timely filed a notice of appeal from the dismissal.             ANALYSIS             ANALYSIS             ________               The  purpose of Rule  304 is  to ensure  that a prevailing             party will be  able to  collect a judicial  award of  costs,             expenses, and attorneys' fees  from a non-resident litigant,             who probably  has no  assets in and  few ties to  the forum.             Santa Molina v.  Urban Renewal and Hous.  Corp., 14 Official             _______________________________________________             Translations  of the Supreme Court of  Puerto Rico 382, 385,             114 P.R.  Dec. 382, 385 (P.R.  1983) (finding constitutional             the  parallel rule of  the state court).   While recognizing             the  legitimate interest  served  by the  rule, courts  have             emphasized  that  it  must  be carefully  applied  to  avoid             depriving a plaintiff, who  may have few financial resources             but a legitimate claim,  of the opportunity to have  a court             decide his claim on the merits.   See Aggarwal v. Ponce Sch.                                               ____________ _____________             of Medicine, 745 F.2d 723, 728 (1st Cir. 1984) ("The rule is             ___________             a scalpel, to be used with  surgical precision as an aid  to             the even-handed administration of justice, not a bludgeon to             be employed as an instrument of oppression."); Santa Molina,                                                            ____________             114  P.R.R. at  385 (inferring  the lawmaker's  intention to             open the doors of  courthouses to poor litigants).   A trial                                         -5-                                          5             court  enjoys  wide discretion  in  administering procedural             matters, including the question of security costs.  Thus, we             review the court's decision only for an abuse of discretion.             Aggarwal, 745 F.2d at 726-27.             ________               This  appeal  falls comfortably  within Aggarwal  v. Ponce                                                       __________________             School of Medicine where  we vacated an order of  a district             __________________             court that  dismissed an  action for plaintiff's  failure to             post  a $5,000 non-resident bond.  Id. at 729.  In Aggarwal,                                                ___             ________             as  in this  case,  the district  court  failed to  consider             plaintiff's ability to post bond.  Id. at 727-28.   Rule 304                                                ___             demands  that a court consider at least three factors before             imposing  a  non-resident   bond:     (1)  the   plaintiff's             probability of success on the merits, and the background and             purpose  of  the suit;  (2)  the  reasonable extent  of  the             security  to be posted, if any,  viewed from the defendant's             perspective; and  (3) the reasonable extent  of the security             to  be  posted,  if  any,  viewed  from  the  nondomiciliary             plaintiff's perspective.   Id.  Moreover, whenever a bond is                                        ___             set in excess of the statutory $250 minimum, the trial court             should evidence  on the record its  careful consideration of             each of these factors.  See id. at 727 n.1, 728-29.                                     _______               In  this case, it  appears that  the district court failed             to consider  Murphy's economic circumstances, his ability to                                         -6-                                          6             post the $75,000 bond, and the potentially preclusive effect             of the bond requirement on his ability to pursue litigation.             Certainly,  no such  findings  were made  in  either of  the             judge's   opinions  that  addressed  the  bond  requirement.             Though the court  below expressly considered several  highly             relevant  factors,  including  the  large  number  of  named             defendants,  the complex  nature of  the suit,  and  its low             probability  for  success on  the  merits,  the court  never             addressed plaintiff's  oft repeated  contention that he  was             incapable  of posting  a $75,000  bond.   Appellees' contend             that though the trial court did not specifically address the             reasonableness of the bond requirement  from the plaintiff's             perspective, it did consider some of the factors relevant to                                          _____             Rule 304.  This  argument, however, is plainly at  odds with             our holding in Aggarwal.  Id. at 727 (absent a trial court's                            ________   ___             consideration of the plaintiff's ability to post a bond, the             court's  findings  "comprise,  at best,  two-thirds  of  the             equation").               Appellees  also  complain  that  Murphy  has  relied  upon             conclusory    and   sometimes    contradictory   allegations             concerning  his financial  condition,  and that  he has  not             proven  his  inability  to  post  the  bond.    Murphy   has             ______             identified himself  at various  times as self-employed,  the                                         -7-                                          7             president and  sole shareholder of Benevest,  and an officer             of Scanner International.  Moreover, there is no information             before the court concerning the financial resources, if any,             of Benevest.  Indeed,  as previously noted, it is  not clear             whether  Benevest is a separate  entity.  In  spite of these             shortcomings, plaintiff, however, has done what he must.  He             raised  the  issue  before  the trial  court  and  submitted             affidavits  identifying his  annual salary, stating  that he             has no substantial assets,  and describing his  unsuccessful             attempts  to secure  a  bond.   The error  lies not  in what             plaintiff has  offered as  evidence, but in  that the  court             failed  even  to  consider   the  evidence  offered  by  the                               ________             plaintiff.   Nevertheless, the  district court will  need to             resolve  these  issues  on  remand  before  it  can  set  an             appropriate bond requirement, if one is imposed at all.                We vacate  the district court's  order not simply  because             the court below failed to follow a formalistic three-pronged             evaluation, but  rather because  the trial  court's approach             comes  dangerously  close   to  making  judicial  access   a             privilege for only  the most financially secure.   "While it             is neither  unjust nor unreasonable  to expect a  suitor `to             put                                          -8-                                          8             his money where his mouth is,'  toll-booths cannot be placed             across the courthouse doors in a haphazard fashion."  Id. at                                                                   ___             728 (citation omitted).               The judgment  of the  district  court is  vacated and  the               __________________________________________________________             case  is   remanded  to  the  district   court  for  further             ____________________________________________________________             consideration of the criteria  for imposing a bond described             ____________________________________________________________             above.             ______                                         -9-                                          9
