Appeals Bond Caps

The FICPA worked diligently with a group of nearly 15 different companies and organizations to support caps on appeal bonds.  The two bills the group put forward were HB 841 by Rep. Frank Attkisson and SB 2250 by Sen. Daniel Webster.

When a party loses a judgment, bond must be posted equal to the amount of judgment in order to prevent the prevailing party from seizing the assets while the judgment is under appeal. With the increase in lawsuits and the increased judgments, the losing party can no longer afford the cost of the bond, which forces the business into bankruptcy or unfairly forces the business into a settlement to protect its business.

Originally HB 841 would have provided for a $25 million cap for an appeals bond for companies with more than 400 employees.  For individuals and companies with less than 400 employees, the appeal bond cap will be $1 million or one percent of net assets.  After working on a lobbying team with 15 organizations and companies supporting this change, many hours of negotiations between the House and Senate, and push back from the trial bar, the final product contained in HB 841 includes a $50 million hard cap on all appeal bonds, subject only to a yearly Consumer Price Index adjustment.  For judgments of less than $50 million, the judge is authorized to reduce or eliminate a bond for good cause shown, but not if insurance is available.

At least 25 states either have no bonding requirement at all or have enacted appeal bond reforms that cover all defendants and all types of judgments, including other southern states such as, Georgia, North Carolina, Texas and Virginia.

At least 11 other states have passed legislation capping appeal bonds in certain types of cases and for certain types of damages.  There are only 12 states in the union that have not enacted some form of appeal bond caps – though many of these states are considering reform now.  South Carolina is presently considering legislative reforms to lesson the burden of appeal bonds.

HB 841 passed the House 119-0 on May 2 and the Senate 40-0 on May 4 and is awaiting approval by the Governor.