The founder of Exxon-acquired company InterOil has asked the Fifth Circuit to approve a $25 million supersedeas bond as opposed to an amount exceeding $210 million due to a final judgment against him and his family.
A Houston jury last year found that Philippe Mulacek, currently chairman of Empire Petroleum Corp., breached agreements spanning more than a decade he had with Swiss investor Carlo Civelli, resulting in a $210 million final judgment against him and his family. Mulacek lost a bid last month to reduce the appeal bond to about one-eighth of its original size, citing the absence of a federal rule governing the size of such a bond and then pointing to a 2003 Texas state law that caps them at $25 million.
The capped bond denial from U.S. District Judge Randy Crane was followed weeks later by Mulacek's motion Monday asking an appellate panel to approve a capped bond.
"The Texas Legislature's cap was a direct response to the grave problem of exorbitant judgments robbing judgment debtors of their right to meaningful appellate review," Mulacek's motion said. "This case is a poster child for that reform."
Mulacek's motion, penned by legal teams at Gibson Dunn & Crutcher LLP and Yetter Coleman LLP, said nuclear verdicts like the one at hand are what the state Legislature's 2003 appellate bond cap law intended to alleviate for potential appellants.
Otherwise, Mulacek said, a debtor may resort to bankruptcy, as Texaco did after a $10.5 billion judgment in the 1980s. Other times it may lead to a settlement under pressure or a judgment creditor picking up the debtor's assets before an appeal is decided, the motion said.
And because the federal rules of civil procedure don't address the size of a bond, state law should apply, according to Mulacek. The oil executive cited the 1938 opinion in Erie R.R. Co. v. Tompkins , which he said requires federal courts to apply state substantive law in diversity cases where federal law is silent on the issue.
Not applying the cap would incentivize litigators to forum shop between federal and state court, Mulacek said, adding that appeal bonds would become pressure points that can be leveraged during a settlement.
Civelli's counsel said it agreed with Judge Crane's decision to decline a capped bond.
Civelli's legal team, consisting of teams from Munsch Hardt Kopf & Harr PC, Martin Walton Law Firm and Andrews Myers PC, argued in a March filing that the Fifth Circuit has ruled that state law applies only if the judgment is a lien on property. They pointed out in a footnote that it was Mulacek's counsel who successfully made that argument in MM Steel LP v. JSW Steel , where the court declined to apply Texas' $25 million bond cap.
Civelli's counsel said that if the state capped bond law did apply, each defendant should post a separate $25 million bond and prevent the Mulaceks from transferring any assets.
Mulacek has asked the Fifth Circuit to provide a ruling by May 18, while Civelli has agreed to hold off on enforcing the judgment until then. A settlement mediation has also been scheduled for April 27.
An alternate path previously in consideration by Mulacek was asking Judge Crane to consider lowering the bond at his discretion and showing evidence to justify the reduction. An evidentiary hearing was scheduled and Civelli began requesting asset and liability information from Mulacek. Mulacek ultimately told the trial court last week it wouldn't seek its discretion in lowering the bond amount.
The dispute traces back to a 2017 suit in which Civelli said Mulacek breached informal agreements related to InterOil shares, profit-sharing from asset sales and cost-sharing on joint projects. Mulacek countered that Civelli was handling assets belonging to Mulacek's family and was not entitled to a loan repayment or a share of the profits, but a jury found in favor of Civelli.
"The right to appeal shouldn't turn on whether a case is brought in state or federal court," Allyson Ho of Gibson Dunn & Crutcher LLP told Law360 in a statement. "Federal courts hearing questions of Texas law should respect that policy choice and apply the Legislature's $25 million cap."
Dick Schwartz of Munsch Hardt, counsel for Civelli, told Law360 that he believes Judge Crane's ruling was correct in that Texas law does not cap the amount of the bond.
Civelli is represented by Richard A. Schwartz and Michael A. Harvey of Munsch Hardt Kopf & Harr PC, Michael B. Martin of Martin Walton Law Firm and Andrew B. Bender and Sharon McCally of Andrews Myers PC.
Mulacek is represented by Allyson N. Ho, Elizabeth A. Kiernan, Arjun Ogale, Robert Frey and Jessica J. Kinnamon of Gibson Dunn & Crutcher LLP, R. Paul Yetter, Reagan W. Simpson, Justin S. Rowinsky and David J. Gutierrez of Yetter Coleman LLP, Katherine Zhang, David A. Barrett, Eric Yang, Jeffrey P. Waldron Jr., Jenny H. Kim, John Zach, Lauren M. Goldman, Lindsey Ruff, Michael M. Fay, Valencia J. Battle and Virginia Su of Boies Schiller Flexner LLP and Warren Harris of Bracewell LLP.
The cases are Carlo Giuseppe Civelli et al. v Philippe Emanuel Mulacek et al., case number 4:17-cv-03739, in the U.S. District Court for the Southern District of Texas, and Civelli et al. v. Mulacek et al., case number 26-20183, in the U.S. Court of Appeals for the Fifth Circuit.
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