745 F.

2d 723
40 Fed.R.Serv.2d 262

Deep AGGARWAL, Plaintiff, Appellant,

v.
PONCE SCHOOL OF MEDICINE, Defendant, Appellee.
No. 84-1163.

United States Court of Appeals,

First Circuit.
Argued Sept. 5, 1984.
Decided Oct. 4, 1984.
1

Luis A. Gonzalez Perez, Santruce, P.R., with whom Woods, Woods & Mayo,
Santruce, P.R., was on brief, for plaintiff, appellant.

Charles R. Cuprill, Ponce, P.R., with whom Hector R. Cuprill, Ponce, P.R.,
Jose E. Otero, Oscar Davila Suliveres, Victor M. Caparros Cabrera, Hato Rey,
P.R., and Luis G. Estades, hijo, San Juan, P.R., were on brief, for defendant,
appellee.

Before CAMPBELL, Chief Judge, BREYER, Circuit Judge, and SELYA,*

District Judge.

SELYA, District Judge.

The appellant, Deep Aggarwal, formerly toiled in the academic vineyards of the
appellee, Ponce School of Medicine (PSM), as an associate professor of
physiology. Somewhere along the way, the seeds of discontent were sown; and,
in early May of 1981, PSM notified Dr. Aggarwal that his services would no
longer be required after July 31, 1981. That separation from service took place
as scheduled.

Dr. Aggarwal fled to Wisconsin, mulled over his plight at some length, and
eventually decided that he would not permit PSM to plow him under without a
struggle. This decision fructified in August of 1983, when Dr. Aggarwal filed
suit in the United States District Court for the District of Puerto Rico. His
complaint invoked that court's diversity jurisdiction, 28 U.S.C. Sec. 1332, and

sought money damages aggregating $500,000 for breach of contract.

Simultaneous with the filing of its answer, PSM moved pursuant to Rule 5 of
the Local Rules of the District of Puerto Rico to require the appellant to post
bond. Since this rule is central to the matters here at issue, its full text follows:
7

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 which may be awarded. All proceedings in the action shall be
stayed until bond is given, which shall not be less than five hundred dollars
(500.00). The Court may require an additional bond upon a showing that the
original bond is not sufficient security, and stay the proceeding in the action
until such additional bond is given.

After the lapse of ninety (90) days from the service of the order requiring bond
or additional bond, without the bond having been given, 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.

10

It is beyond cavil that the appellant, who claimed in his complaint to be

"domiciled and residing in the state of Wisconsin," was--and remains--within
the reach of D.P.R.L.R. 5.

11

On October 5, 1983, before Dr. Aggarwal had responded to the Rule 5 motion
and prior to the expiration of the time for so doing, see D.P.R.L.R. 8(F), the
court granted PSM's request. While the motion was silent as to any proposed
principal amount for the bond, the district judge took note of the ad damnum
contained in the complaint, and wrote in pertinent part:

12Using the amount claimed and the nature of the claim as a yardstick, the court
...
must determine the bond to be posted in order to reasonably protect the interest of
defendants [sic]. The bond is placed at $5,000.00 which is to be posted within 30
days from date hereof, or otherwise the complaint is to be dismissed.
13

Dismayed by the bitter fruit of this unwanted harvest, the appellant seasonably
pressed for relief from the order. Dr. Aggarwal contended that the practical
effect of the bond requirement was to deprive him of any judicial remedy, and
implored the court to exempt him from posting the mandated security by reason
of his impecunity. Dr. Aggarwal attached to his motion an affidavit which

recited in substance that he had been out of work since July of 1981; that his
only income was a monthly gratuity ($200) from his relatives in India; that his
valiant (albeit unspecified) efforts to find gainful employment had been
uniformly unavailing; and that his present checking account balance was
roughly $350. The record before us reflects no stated opposition to this motion.
Yet, the parties agree that it was orally denied at a Fed.R.Civ.P. 16
status/scheduling conference held before the district court on November 22.
14

In early December, Dr. Aggarwal again moved for relief vis-a-vis the bond. He
reiterated his plea of poverty; expressed his "particular[ ] interest" in continuing
the prosecution of the case; and averred that he had "made every effort possible
to obtain the sum required as bond, but due to his extremely limited financial
resources" had come up empty. PSM filed a formal opposition to this motion, in
which it stalwartly defended the propriety of the bond. But, PSM did not in any
way controvert or cast doubt upon the appellant's description of his straitened
circumstances. The district court responded in January of 1984 by a written
order in which it both denied Dr. Aggarwal's latest imprecation and dismissed
the action for noncompliance with the October 5 surety decree. In so doing, the
district judge concluded:

15 Court finds that plaintiff has no attachable property in Puerto Rico and his
[T]he
likelihood of success on the merits is tenuous. The bond was set at 1% of the
amount claimed in the complaint and, considering the length, complexity, and cost
of this suit, plaintiff's failure in posting a non-resident bond renders this case as
DISMISSED.
16

No finding was made upon, nor any comment addressed to, Dr. Aggarwal's
allegations of impoverishment.

17

Judgment was entered in favor of PSM on January 31, 1984. The appellant
promptly moved pursuant to Fed.R.Civ.P. 60(b)(6) for relief from the
judgment. Dr. Aggarwal challenged the district court's assessment of his
chances of success on the merits, and again displayed the tatterdemalion banner
of impecunity. He characterized the bond amount as "excessive" in relation to
his meagre resources and questioned the constitutionality of so draconian an
application of D.P.R.L.R. 5. PSM's objection, filed on February 17, 1984, did
not contest (or even touch upon) Dr. Aggarwal's financial condition. The record
before us is devoid of any indication of judicial action below on this motion,
presumably because an appeal was taken from the judgment of dismissal, also
on February 17, 1984.

18

This court has, in the not too distant past, had occasion to consider the

constitutionality of D.P.R.L.R. 5 on its face, and has held it harmless against

such a challenge. Hawes v. Club Escuestre El Comandante, 535 F.2d 140, 14445 (1st Cir.1976). And, we have likewise determined that the promulgation and
perpetuation of Local Rule 5 was a proper exercise of the power ceded to the
district courts by Congress, see Fed.R.Civ.P. 83, to design and implement
idiocratic procedural rules. Hawes, 535 F.2d at 143-44. There is nothing in the
case before us which in any way signals the need for a retreat from the twin
holdings of Hawes. Indeed, as we observed at that time:
19

Even in the absence of a standing local rule, a federal district court has the
inherent power to require security for costs when warranted by the
circumstances of the case.

20

Id. at 143. See also McClure v. Borne Chemical Co., 292 F.2d 824, 835 (3d
Cir.1961).

21

But, Hawes was careful to note that the nondomiciliary plaintiffs in that case
did not attack D.P.R.L.R. 5 as applied. Hawes, 535 F.2d at 145. Hawes,
therefore, left open the possibility of ferment arising out of particular
applications of the rule, warning that

22 district court is under an obligation to evaluate each case individually, and to

[T]he
exercise its inherent discretion to apply the requirements of Rule 5 so as to facilitate
a just and speedy disposition on the merits, as required by Fed.R.Civ.P. 1.
23

Id.

24

The instant case takes up, in a very real sense, where Hawes left off. The
appellant's sortie is two-pronged: he claims that the imposition of substantial
surety for costs upon one in his beggarly circumstances is an unconstitutional
denial of equal protection and of access to the courts; and that, given the
appellant's indigency, the judge abused the "inherent discretion" which Hawes,
id., directed the district court to exercise.

25

It has long been a basic tenet of the federal courts to eschew the decision of
cases on constitutional grounds unless and until all other available avenues of
resolution were exhausted. Mills v. Rogers, 457 U.S. 291, 305, 102 S.Ct. 2442,
2451, 73 L.Ed.2d 16 (1982); Hagans v. Lavine, 415 U.S. 528, 546-47, 94 S.Ct.
1372, 1383-84, 39 L.Ed.2d 577 (1974); Ashwander v. Tennessee Valley
Authority, 297 U.S. 288, 341, 347-48, 56 S.Ct. 466, 480, 483, 80 L.Ed. 688
(1936) (Brandeis, J., concurring). We have routinely followed such an

approach. E.g., In re Justices of the Supreme Court of Puerto Rico, 695 F.2d 17,
22 (1st Cir.1982). Indeed, to look the other way would be "gratuitously to hold
a farthing candle to the sun." Lopez v. Bulova Watch Co., 582 F.Supp. 755,
762 (D.R.I.1984). Mindful, then, of this prudential precept, we turn first to a
consideration of the argument that the district judge, by imposing a $5,000
bond requirement in this case, overstepped the encincture of his discretion.
26

We are aware that the question of security for costs is procedural in nature,
Hawes, 535 F.2d at 143 & n. 3, and that a trial court's discretion in
administering procedural matters--even those which may arguably affect
substantive rights--is wide. Id. at 143-44. See Smith v. Ford Motor Co., 626
F.2d 784, 796 (10th Cir.1980), cert. denied, 450 U.S. 918, 101 S.Ct. 1363, 67
L.Ed.2d 344 (1981); United States v. Simmons, 476 F.2d 33, 35 (9th Cir.1973);
Lance, Inc. v. Dewco Services, 422 F.2d 778, 783-84 (9th Cir.1970). But
discretion, as the term implies, necessarily speaks to degrees, not to absolutes.
And, it has regularly been recognized that limits upon the exercise of such
judicial discretion do obtain. E.g., Wirtz v. Hooper-Holmes Bureau, Inc., 327
F.2d 939, 943 (5th Cir.1964) ("It is also true that a district court may abuse its
authority and discretion in the application and enforcement of local rules, which
are otherwise valid."). See also Farmer v. Arabian American Oil Co., 285 F.2d
720 (2d Cir.1960). As Chief Judge Magruder remarked some three decades
ago:

27
"Abuse
of discretion" is a phrase which sounds worse than it really is. All it need
mean is that, when judicial action is taken in a discretionary matter, such action
cannot be set aside by a reviewing court unless it has a definite and firm conviction
that the court below committed a clear error of judgment in the conclusion it reached
upon a weighing of the relevant factors. One is reminded of the "clearly erroneous"
standard in Rule 52(a) of the Federal Rules of Civil Procedure, 28 U.S.C.
28

In re Josephson, 218 F.2d 174, 182 (1st Cir.1954).

29

The cask which encases a judge's discretion, though commodious, can be

shattered when a reviewing tribunal is persuaded that the trial court
misconceived or misapplied the law, or misconstrued its own rules. Smith, 626
F.2d at 796; Farmer, 285 F.2d at 722-23. It is this strain which nourishes the
appellant's argument. He contends, at bottom, that the district court, in ignoring
the uncontradicted evidence as to Dr. Aggarwal's broken fortunes,
misconceived the applicable legal standard in setting the surety sum.

30

In the matter at bar, the district court's determinations (i) that the claim asserted
was of dubious worth, and (ii) that, because of Aggarwal's itinerant status and

dearth of assets in Puerto Rico, PSM had a cogent need for meaningful
security,1 cannot readily be contested. This is peculiarly so in this case, given
the lower court's broad discretion and the skimpiness of the record before us.
Yet, these findings comprise, at best, two-thirds of the equation. They omit
entirely any reference to the appellant's means.
31

In finding D.P.R.L.R. 5 valid per se, we noted that Rule 5 must be read as being
subject to the strictures of 28 U.S.C. Sec. 1915(a), the text of which is
excerpted in the margin.2 Hawes, 535 F.2d at 143. Later in that opinion, in
virtually the same breath in which we emphasized the district court's obligation
"to evaluate each case individually," id. at 145, we reaffirmed the notion that
"to require all foreign plaintiffs, as such, to post substantial security as a
condition to access to the courts may well be an unconstitutional denial of equal
protection." Id., quoting Coady v. Aguadilla Terminal Inc., 456 F.2d 677, 679
(1st Cir.1972). And, there is in this instance no necessity to engraft
consideration of the nondomiciliary's financial status upon the rule by appellate
fiat, as D.P.R.L.R. 5 itself directs the court to take this into account in the
plainest of terms ("This rule shall be liberally interpreted in favor of the
plaintiff so as not to preclude his right to sue through excessive bond
requirement.").

32

In fine, D.P.R.L.R. 5 demands that the court construct an equation composed of

at least three integers: (i) the degree of probability/improbability of success on
the merits, and the background and purpose of the suit; (ii) the reasonable
extent of the security to be posted, if any, viewed from the defendant's
perspective; and (iii) the reasonable extent of the security to be posted, if any,
viewed from the nondomiciliary plaintiff's perspective. And just as factors such
as the absence of attachable property within the district or the conduct of the
parties may bear on a defendant's legitimate need for the prophylaxsis of a
bond, so too, a plaintiff's ability to post surety for costs must weigh in the
balance when the third figure of the equation is tabulated. 3 While it is neither
unjust nor unreasonable to expect a suitor "to put his money where his mouth
is," cf. In re Stump, 449 F.2d 1297, 1298 (1st Cir.1971) (per curiam), tollbooths cannot be placed across the courthouse doors in a haphazard fashion.
The district court, in the exercise of its sound discretion, must settle upon an
assurance which is fair in the light not only of the case itself and of the
exigencies faced by the defendant, but also fair when illuminated by the actual
financial situation of the plaintiff. 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.

33

This formulation, we believe, captures the spirit of Farmer v. Arabian

American Oil Co., supra, where the Second Circuit, on admittedly different
facts and in an era when the value of the dollar had been subjected to
considerably less erosion, set aside an order of the district court fixing a $6,000
nondomiciliary bond under a local varietal of D.P.R.L.R. 5. Noting, as do we,
that competing concerns are at play, the Second Circuit reversed for abuse of
discretion. Judge Clark, for a unanimous panel, wrote in part:
34is clear that possible loss of reimbursement for costs, should defendant eventually
It
become so entitled, may annoy it, but cannot really prejudice it in its defense. On the
other hand, plaintiff showed conclusively that he could not put up the 100%
collateral required by surety companies before furnishing the bond. Truly were this
order to stand it would go far in making the federal court a court only for rich
litigants....
35

Farmer, 285 F.2d at 722.

36

In the case at hand, there is no history of the persistent pursuit of fruitless

litigation by the appellant, nor any demonstrated track record of harassment or
the like. Dr. Aggarwal repeatedly alleged that he was desirous of pressing what
he visualized as a bona fide claim, but that he was financially helpless in the
face of the sizable bonding requirement imposed by the district court. While the
facts which he served up to support his conclusion of fiscal impuissance were
somewhat sketchy, the point was plainly made. And, having been raised in a
timely fashion, Dr. Aggarwal's protestations of impecunity (never denied by
PSM) were not addressed by the district court.4 This, we believe, was an abuse
of discretion. The lower court should either have held an evidentiary hearing or
demanded that more concrete proof of the appellant's economic health--say, a
detailed financial statement or copies of his federal income tax returns--be
produced. Given the tenor of D.P.R.L.R. 5, express findings should have been
set forth to reflect that the court had weighed the plaintiff's finances and had
interpreted the rule with the required liberality "so as not to preclude
[plaintiff's] right to sue through excessive bond requirement." Id.

37

We are troubled, too, by the district court's reliance on an arbitrary percentage

of the ad damnum as a suggested basis for establishing the principal amount of
the bond. Modern litigation practices being what they are, the monetary
demand which caps a plaintiff's complaint is likely to be sanguine at best--and
more often than not, the merest of velleities. After all, the only requirement is
that a pleader set forth "a demand for judgment for the relief to which he deems
himself entitled." Fed.R.Civ.P. 8(a)(3) (Emphasis supplied). In any event, the
amount claimed by the plaintiff bears no necessary relationship to the "costs,
expenses, and attorneys' fees," D.P.R.L.R. 5, which the defendant can expect

either to incur or to recover: a suit upon a $1,000,000 promissory note is not

likely to be ten times more expensive to defend than would be the case if the
note were in the face amount of $100,000. Moreover, if the prayer for judgment
was to dictate the amount of security to be posted, a nondomiciliary plaintiff
could undercut the entire purpose of the local rule by the simple expedient of
inserting in his complaint a modest demand; he would have nothing to lose, for
it is firmly settled that the ad damnum does not constitute a ceiling of any sort
on the plaintiff's recovery. See, e.g., Morton Buildings of Nebraska Inc. v.
Morton Buildings, Inc., 531 F.2d 910, 919 (8th Cir.1976) ("[T]he law clearly
provides that a plaintiff is not strictly bound by the prayers for relief in the
complaint ...."); Farmer, 285 F.2d at 722 n. 2; Matarese v. Moore-McCormack
Lines, 158 F.2d 631, 633 (2d Cir.1946) ("[T]he demand for judgment does not
limit the ... amount of the relief except in case of a judgment by default."). See
also Fed.R.Civ.P. 54(c). From our vantage point, using such a conjectural
figure as a basis for meaningful judicial action is fraught with peril, and ought
to be avoided except where compelling reasons exist.
38

The payment assurance required of the appellant was, therefore, twice

debauched: no evaluation was made of Dr. Aggarwal's ability to post bond, and
undue reliance was placed upon the amount claimed in his suit. Since the
district court in this case plucked the $5000 grape from the vine before it had
ripened, we are constrained to remand so that the entire question of security can
be reviewed in the proper context. The district court should vacate the bond
previously set and reconsider the matter afresh.

39

The judgment of the district court is vacated and the case is remanded to the
district court for further proceedings consonant herewith.

Of the District of Rhode Island, sitting by designation

Since the bond was set above the stated minimum, it would have been
preferable for the court to have made somewhat more detailed findings as to the
type and kind of "costs, expenses and attorneys' fees," D.P.R.L.R. 5, which
foreseeably could have been awarded to PSM in the aftermath of this litigation,
so as to buttress the selection of the $5,000 figure. The district judge's
preliminary assessment of the merit (or better put, the lack thereof) of the suit,
in juxtaposition with the availability under Puerto Rican law of counsel fees in
favor of a prevailing defendant "[w]here a party has been obstinate," Rule
44.1(d), Puerto Rico Rules of Civil Procedure, 32 L.P.R.A. Appendix III
(1979), combine in this case, however, adequately to explain the indemnity
amount

28 U.S.C. 1915(a) provides in pertinent part:

Any court of the United States may authorize the commencement, prosecution
or defense of any suit, action or proceeding, civil or criminal, or appeal therein,
without prepayment of fees and costs or security therefor, by a person who
makes affidavit that he is unable to pay such costs or give security therefor.

In deference to the court below, it should be observed that Hawes, 535 F.2d at
144 (dicta), did set forth a partial listing of "pertinent factors for the district
court to consider" in respect to the dollar amount of a Local Rule 5 bond; and
failed to include among them specific reference to the state of the
nondomiciliary plaintiff's exchequer. Yet, we believe that the requirement
which we today impose is fairly implied in Hawes, e.g., id. at 145; and we note
that in Hawes, unlike this case, the appellants "made no attempt to show that
they are financially unable to post the amounts required by the district court."
Id. at 144

The appellee suggested, both in its brief and at oral argument, that the district
court may well have chosen to disbelieve Dr. Aggarwal's claim of
impoverishment, based on his retention of a distinguished law firm and on
some indications in the papers of the case that the appellant commuted once or
twice between Wisconsin and Puerto Rico. But, the district court made no
findings of this sort. While we agree that these topics may be relevant to an
overall inquiry into Dr. Aggarwal's mendicancy vel non, we decline PSM's
invitation to indulge in the tea-leaf reading which its suggestion implicitly
entails