How does Supersedeas Bond Work? | Appeal Bond | Surety Bond

How Supersedeas Bond Work | What is an Appeal Bond

A supersedeas bond, sometimes called an appeal bond, is a specialized type of surety bond that defendants purchase when filing an appeal on a court judgment. Supersedeas bonds temporarily delay the plaintiff's ability to enforce the decision while the appeal is pending. This allows the appellant time to go through the appeals process before paying damages or taking court-ordered actions.

How Do Supersedeas Bonds Work?

Supersedeas bonds function by providing security to guarantee the appellant will fulfil the terms of the judgment if their appeal ultimately fails. Here is an overview of how these important bonds work:

• Plaintiff awarded favorable judgment - In the initial court case, the plaintiff wins a judgment against the defendant. This may include monetary damages or orders to take specific actions.

• Defendant appeals the judgment - The losing defendant appeals the unfavorable decision to a higher court. This pauses the plaintiff's ability to enforce the decision right away.

• Defendant purchases a supersedeas bond - To delay the judgment during the appeal, the defendant purchases a supersedeas bond from a surety company.

• The bond guarantees payment if the appeal is lost - If the defendant fails the request, the bond ensures they will pay the judgment. The plaintiff can collect money from the surety company secured by the glue.

• Bond returns if the defendant wins - If the appeals court overturns the initial judgment in the defendant's favor, the posted bond collateral is returned to them.

In summary, a supersedeas bond allows appellants to press pause on an adverse judgment while their appeal goes through the court system. If upheld on appeal, the bond protects the plaintiff by securing funds to fulfil the decision.

When are Supersedeas Bonds Required?

The specific rules surrounding how to obtain a supersedeas bond vary by jurisdiction. Generally, they are mandated when a defendant wants to delay a judgment while filing an appeal.

Here are some common situations when these bonds are likely required:

• Appealing money judgments - If the initial decision awarded monetary damages to the plaintiff, posting a bond allows the defendant to delay payment during the appeal.

• Appealing injunctive relief - When the judgment requires the defendant to take or refrain from certain actions, a bond allows delaying compliance with the order during the appeal.

• Appealing final civil judgments - In civil cases between private parties, a bond is usually required to stay enforcement during an appeal. This includes contract disputes, personal injury lawsuits, and malpractice cases.

• High risk of non-payment - If the significant concern is that the defendant won't pay the judgment after losing an appeal, posting a bond may be mandatory.

• Judicial discretion - The presiding judge decides whether a superseding bond is required to delay enforcement while appealing a judgment.

In most civil cases, if a defendant wants to postpone a judgment while appealing, posting a supersedeas bond is legally required. This secures the judgment amount for the plaintiff if the appeal fails.

Consequences of Not Filing a Supersedeas Bond

If an appellant fails to file a superseding bond when required, the stay of the initial court judgment will be dissolved. This allows the plaintiff to take immediate action to enforce the terms of the decision.

Here are some potential consequences if a proper bond is not secured:

• Assets can be seized - If the judgment awarded monetary damages, the plaintiff can work with law enforcement to hold bank accounts, property, or other assets to satisfy the judgment.

• Court orders take effect - If the initial judgment included injunctive relief, those mandates to take specific actions or constraints immediately go into effect without a bond.

• An appeal may be dismissed - The appeals court can dismiss the appeal and let the initial judgment stand if the appellant does not secure a bond.

• Contempt charges possible - Not complying with court orders due to lack of bond may result in civil or criminal contempt charges.

• Attorney's fees awarded - The plaintiff's attorneys may file to recoup all legal costs from collection efforts without a bond.

In summary, not securing a required supersedeas bond can deflate the appellant's attempt to delay enforcement while appealing.

How is the Bond Amount Determined?

The required dollar amount of a supersedeas bond depends on the specifics of each case and governing laws. Generally, the amount is tied to the monetary terms defined in the initial judgment.

Here are some common methods used to calculate the bond sum:

• Equal to full judgment - In many cases, the total bond amount equals the full judgment sum awarded, including any damages, fees, and costs.

• 125-150% of judgment - Some jurisdictions require the bond amount to be set at 125-150% of the judgment value. This provides extra protection to cover potential added costs during the appeal.

• Sufficient to fully secure - If there is a significant risk of non-payment, the court may order the bond amount to be adequate to fully block the expected payout. This often exceeds the original judgment value.

• Capped at defined limit - Certain states limit maximum bond amounts, such as $25 million. The required bond will be lower than the judgment or the capped amount.

• Judicial discretion - The judge has significant control in setting an appropriate bond amount for injunctions or complex cases with non-standard judgments.

The goal is to set the bond amount high enough to fully cover the expected payout if the appeal fails while being reasonable.

What Types of Collateral Can Back a Supersedeas Bond?

Because supersede bonds are obtained through professional surety companies, collateral must be pledged to financially secure the bond amount. Different forms of collateral may potentially be accepted, including:

• Cash - Posting the full bond amount in currency provides the surety maximum security, often resulting in lower premium rates.

• Real estate - Pledging property equity in real estate assets like homes or buildings can serve as bond collateral. The property cannot already be heavily leveraged.

• Marketable securities - Publicly traded stocks and bonds with a reasonably consistent valuation may potentially back a supersede's bond.

• Bank letters of credit - Rather than putting up collateral, the appellant's bank may issue a letter of credit vowing to pay the bond amount if needed. This obligates the bank to pay if the appellant fails to adhere to the judgment.

• Personal guaranty - Wealthy appellants may personally guarantee the bond with their net worth and finances. However, this still carries risk, so it may not always be accepted.

The surety company determines whether the offered collateral is acceptable based on its risk analysis and underwriting standards.

What is the Supersedeas Bond Cost?

The total cost to purchase a supersedeas bond can vary substantially based on these key factors:

• Bond amount - The higher the required bond amount, the more premium must be paid. Larger bonds mean more risk taken on by the surety provider.

• Quality of collateral - Better collateral, like cash or liquid assets, reduces risk and may decrease the premium rate charged. Weaker collateral results in higher costs.

• Creditworthiness - For appellants proposing a personal guaranty over hard assets, their credit rating and finances directly impact bond pricing. Higher credit equals lower rates.

• Duration of appeal - The longer and more complex the expected request, the more risk the surety company assumes. Extended demands increase the bond premium cost.

• Individual surety's rates - Each surety applies its proprietary pricing models and underwriting formulas, so shopping around helps find the best rate.

Typical premiums range from 1% to 15% of the required annual bond amount. So, a $1 million bond may cost between $10,000 to $150,000 annually. High-risk bonds often exceed 5-6% in annual premiums. The full bonus is usually paid upfront after the bond is approved.

How Long Does it Take to Get an Appeal Bond or Supersedeas Bond?

The time required to successfully obtain and file a supersedeas bond depends on the efficiency of the underwriting and approval process. Here are the typical steps:

• Contacting surety providers - The first step is the appellant or their attorney reaching out to potential surety companies to start the bond application process and get quotes.

• Surety underwriting - The surety thoroughly reviews the appellant's finances, assets, credit, and case details to make an underwriting and approval decision. Depending on the surety's workload, this may take anywhere from several days to a few weeks,

• Posting bond collateral - Once approved, the appellant must deposit the required collateral with the surety company. Finalizing these assets often takes several additional days.

• Filing bond with court - Completed bond forms are prepared and filed with the appeals court as required in that jurisdiction.

• Judge approves bond - The judge reviews the filed bond and authorizes it, enacting the stay of the judgment.

Expect the total process to take 2-6 weeks from initially contacting surety providers through filing an approved supersedeas bond with the court. It may take over 6 weeks for complex, high-risk cases with large bonds.

Can a Supersedeas Bond be Waived?

In certain circumstances, getting a superseded bond partially or fully waived by the court may be possible. Reasons a judge may consider waiving the bond include:

• The appellant cannot afford premium or post-collateral

• Requiring a full bond would cause undue financial hardship

• The appellant poses a very low flight risk and has a history of paying judgments

• The appeal has strong merits in the likelihood of reversal

However, courts are generally reluctant to waive the bond requirement for civil judgments. Requesting a waiver does not automatically stay the judgment.

The judge has full discretion in allowing bond waivers or reductions. If granted, alternative conditions like asset seizure may still be ordered if the appellant doesn't pay after losing the appeal.

Do Bonds Work Differently for the Criminal Appeal Process?

In criminal cases, the rules surrounding appeal bonds differ somewhat from civil lawsuit bonds. In general:

• Monetary penalties ordered in criminal cases often require a bond to delay payment during appeal. This includes fines, restitution, and other financial judgments.

• No financial bond is required in most jurisdictions for non-monetary sentencing like incarceration, probation, and supervised release. The appeal itself institutes an automatic stay of these penalties.

• For violent felonies, a judge has discretion on whether incarceration and similar penalties can be stayed pending a criminal appeal, regardless of any bond.

• Prosecutors may request additional conditions like GPS monitoring for those appealing violent crime convictions and sentences.

So, while monetary criminal judgments frequently necessitate an appeal bond, avoiding jail, prison, probation, or parole during a criminal appeal generally does not require posting a separate adhesive. The charges determine whether penalties are automatically delayed pending the appeal decision.

Frequently Asked Questions

What happens if the appellant loses their appeal?

If the appeals court upholds the original adverse judgment, the terms will be enforced, often immediately. For monetary damages, the plaintiff collects funds secured by the surety bond collateral. For non-monetary decisions, the appellant must promptly comply with all orders.

Can interest accrue on a judgment during an appeal?

In many jurisdictions, post-judgment interest accumulates on the initial damages awarded, increasing the total owed while pending the appeal's conclusion. The required bond must be sufficient to cover all accruing interest costs.

Who gets the bond money if the appellant wins their appeal?

The bond is exonerated and released if the appellant wins their appeal and the initial judgment is vacated. The appellant then receives their posted bond collateral back, less any fees paid to the surety company for providing the bond.

Can plaintiffs get a supersedeas bond when they appeal?

Yes, plaintiffs or defendants can purchase a supersedeas bond when filing appeals from civil judgments. If the plaintiff wants to delay complying with a judgment against them, they must secure an appropriate adhesive.

Can these bonds be used across different states?

Appeal bonds are regulated at the state level. However, most surety companies hold licenses in multiple states, allowing them to arrange bond coverage for appeals proceeding through court systems in different jurisdictions.