NO. 5-03-0320

IN THE

APPELLATE COURT OF ILLINOIS

FIFTH DISTRICT

JUSTICE MAAG delivered the opinion of the court:

This case involves the appeal of a money judgment entered by the circuit court ofMadison County on March 21, 2003. The judgment was entered in favor of the plaintiffs,Sharon Price, Michael Fruth, and a certified class of persons and against the defendant,Philip Morris, Inc. (Philip Morris), in the amount of $10.1 billion. The appeal of theunderlying judgment has not yet been briefed and argued. We presently have before us tworelated matters. The plaintiffs have filed a "Motion for Change of the Amount, Terms andSecurity of Appeal Bond." Philip Morris has filed a motion "For Interim Stay PendingFurther Review." Extensive legal memoranda have been filed by all the parties, in supportof and in opposition to these motions. We, sua sponte, set this case for oral argumentlimited to the issue of the interpretation of Supreme Court Rule 305 (155 Ill. 2d R. 305). The parties presented valuable arguments for us to consider.

We will discuss the detailed positions of the parties later in this opinion. Generally,however, the plaintiffs contend that Illinois Supreme Court Rule 305(a) (155 Ill. 2d R.305(a)) mandates that in cases where the judgment is for money only, the enforcement of thejudgment is stayed only if the bond is "in an amount sufficient to cover the amount of thejudgment, interest and costs." The plaintiffs claim that the bond approved by the circuitcourt in this case fails to comply with the mandates of that rule.

Philip Morris acknowledges that the bond approved by the circuit court does notsatisfy the requirements of Rule 305(a). Philip Morris contends, however, that Rule 305(b)(155 Ill. 2d R. 305(b)) and other provisions of Rule 305 vest the circuit court and this courtwith the discretion to stay the enforcement on other terms so long as such terms are "just." Philip Morris represented to the circuit court and to this court that it is unable to post a bondthat conforms to Rule 305(a) and that if required to comply it, will be forced intobankruptcy.

Philip Morris's motion "For Interim Stay Pending Further Review" only requiresconsideration if the issues concerning the bond are decided adversely to Philip Morris. Inthat event Philip Morris requests a stay of enforcement to allow it to seek review by theIllinois Supreme Court. The plaintiffs oppose such a stay.

In order to resolve the motions before us we need only discuss briefly the underlyingfacts in this case. The plaintiffs filed this case in the circuit court of Madison County,Illinois, against Philip Morris. It was alleged that Philip Morris violated the IllinoisConsumer Fraud and Deceptive Business Practices Act (815 ILCS 505/1 et seq. (West2000)) by engaging in certain marketing practices that the plaintiffs contended were falseand fraudulent. The plaintiffs further alleged that they had been damaged by these practices. Philip Morris denied these claims in the trial court and continues to deny them on appeal.

During the course of the litigation, class action status was granted and a state-wideclass was certified. Following a bench trial, the circuit court found in favor of the plaintiffsand awarded $10.1 billion. The award was allocated as follows:

Compensatory damages (including prejudgment interest) $7.1 billion

Punitive damages $3 billion

The punitive damages award was apportioned to the State of Illinois pursuant to section 2-1207 of the Code of Civil Procedure (735 ILCS 5/2-1207 (West 2000)).

As a part of the judgment, the circuit court set the amount of the Rule 305 appealbond at $12 billion. Subsequently, Philip Morris filed a motion to reduce the bond, citingan inability to post the bond that had been ordered. Philip Morris also claimed that if it werecompelled to post a $12 billion bond, it would be forced into bankruptcy and that othersettlement obligations it owed to many states under its 1998 "Master Settlement Agreement"would be jeopardized.

Following several hearings, the circuit court modified the bond requirements. Arecitation of the precise terms is unnecessary. For purposes of our decision it only mattersthat the "bond" approved by the circuit court is substantially less than the amount needed tocover the judgment, interest, and costs during appeal. Stated differently, if the judgment isaffirmed, the amount of security pledged would not be enough to satisfy what would beowed.

We will begin by setting forth the principles and rules that apply to the issues raised. It is necessary at the outset to define certain terms to avoid confusion.

A stay or supersedeas has been defined as follows:

"A stay ***, formally referred to as a supersedeas, suspends enforcement ofa judgment, and is intended to preserve the status quo pending the appeal and topreserve the fruits of a meritorious appeal where they might otherwise be lost." Stacke v. Bates, 138 Ill. 2d 295, 302, 562 N.E.2d 192, 195 (1990).

"The supersedeas operates against the enforcement of the judgment and notagainst the judgment itself." Gumberts v. East Oak Street Hotel Co., 404 Ill. 386,389, 88 N.E.2d 883, 885 (1949).

In contrast, a supersedeas bond/appeal bond has been defined as "[a]n appellant's bond tostay execution on a judgment during the pendency of the appeal." Black's Law Dictionary171 (7th ed. 1999).

Thus, requiring a bond to be posted as a precondition for granting a stay serves as ameans to give the judgment creditor security during the pendency of the appeal. It ensuresthat if the judgment is affirmed, the judgment creditor will be paid that which is owed. Ennor v. Galena Southern Wisconsin R.R. Co., 104 Ill. 103, 104 (1882). It also serves toprevent an unscrupulous debtor from hiding, diverting, wasting, or otherwise squanderinghis assets, resulting in the judgment becoming uncollectible.

Of critical importance to our analysis is the clear law of this state that the right toappeal, the right to file posttrial motions, and the right to obtain a stay by filing asupersedeas bond are separate, independent rights. The right to appeal is not dependant onposting a bond. Even if an appellant is unable to post a sufficient bond, that party may stillappeal but the enforcement of the judgment will not be stayed. Jack Spring, Inc. v. Little,50 Ill. 2d 351, 280 N.E.2d 208 (1972). The historical origins of the present law are usefulin understanding these rules.

"Prior to the enactment of the Civil Practice Act, every appeal operated in and ofitself as a supersedeas or stay of all proceedings to enforce the execution of the judgmentor decree pending the appeal. (People ex rel. Finn v. David, 328 Ill. 230 [(1927)]; Thompsonv. Davis, 297 Ill. 11 [(1921)]; Hopkins v. Patton, 257 Ill. 346 [(1913)].) The reasons for thiswere twofold: first, an appeal was a continuation of the proceedings below; and second, abond was an essential and integral part of every appeal. (Hopkins v. Patton, 257 Ill. 346.) *** The requirement that bond be given in all cases of appeal was eliminated[,] and section76 of the act provides that an appeal shall be deemed perfected when the notice of appealshall be filed in the lower court and that no step other than that by which the appeal isperfected shall be deemed jurisdictional. Under section 82, an appeal now does not, asformerly, operate as a supersedeas, but in order to have that effect, bond must be given andorder entered approving the same. (Ill. Rev. Stat. 1943, chap. 110, par. 206.)" FirstNational Bank of Jonesboro v. Road District No. 8, 389 Ill. 156, 159-60, 58 N.E.2d 884, 886(1945). Today the bonding requirements that must be satisfied to obtain a stay are containedin Supreme Court Rule 305.

If a right to appeal was conditioned on posting a supersedeas bond as was formerlythe case, then the requirement would be constitutionally infirm. "Section 7 of article VI ofthe constitution of Illinois (1870) and section 6, article VI[,] of the constitution of Illinois(1970) provide for an appeal, as a matter of right, from all final judgments of the circuitcourt. Having created the right of appeal, the statutes adopted and the rules promulgated inimplementation of that right may not serve to discriminate against appellants by reason ofthe inability to furnish an appeal bond. (Griffin v. Illinois (1956), 351 U.S. 12, 100 L. Ed.891, 76 S. Ct. 585; Boddie v. Connecticut (1971), 401 U.S. 371, 28 L. Ed.2d 113, 91 S. Ct.780; Mayer v. City of Chicago (1971), 404 U.S. 189, 30 L. Ed. 2d 372, 92 S. Ct. 410.)" Jack Spring, Inc., 50 Ill. 2d at 355, 280 N.E.2d at 211. Because the right to appeal and theright to obtain a stay by posting a bond are independent, there is no constitutional infirmity. Jack Spring, Inc., 50 Ill. 2d at 356, 280 N.E.2d at 211-12.

One of the inherent powers possessed by all courts, independent of Supreme CourtRule 305, is the power to grant a stay pending appeal. Whether to grant a stay is adiscretionary act. Stacke, 138 Ill. 2d at 302, 562 N.E.2d at 195. This power is not as broadas it may appear at first glance. It cannot be exercised in a fashion that would conflict withthe letter or spirit of Supreme Court Rule 305. Further, the duration of an unsecured orundersecured stay should be very limited. Allowing an extended unsecured or undersecuredstay would eviscerate the salutary purpose served by a supersedeas bond. A judgmentcreditor could have no confidence that the judgment would ever be collectible.

General administrative and supervisory authority is vested in the Illinois SupremeCourt by our state constitution. Moreover, the constitution expressly vests rule makingauthority concerning appeals in the Illinois Supreme Court. Ill. Const. 1970, art. VI,