supersedeas austin bar 2015

Tips for Superseding Travis CountyDistrict Court Judgments

D. Todd Smithwww.appealsplus.com

January 15, 2015

1/15/15 Copyright © 2015 Smith Law Group, P.C.

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Overview

• Why, what, and how supersede?

• What are the limits on “compensatory damages

awarded in the judgment”?

• What is “the estimated duration of the appeal”

• What is included in the net-worth calculation?

• Interwoven practical tips


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Why, What, and How?

Why supersede?

• To prevent the judgment creditor from enforcing

the judgment while the case is on appeal

• To limit the opponent’s ability to obtain post-

judgment discovery while the appeal is pending


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Why, What, and How?

• What supersede? TRAP 24.2(a)(1) (via CPRC ch. 52)

– Compensatory damages awarded in the judgment

– Interest for the estimated duration of the appeal

– Costs awarded in the judgment

• But the amount must not exceed the lesser of

– 50% of the judgment debtor’s current net worth, or

– $25 million


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Why, What, and How?

• How supersede? TRAP 24.1(a) (via CPRC ch. 52)

– Bond or cash deposit

– Written agreement

– Alternate security as ordered by the court


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Why, What, and How? Special Rules

Some special rules worth mentioning briefly…

• Non-monetary judgments TRAP 24.2

– Trial court sets the amount and type of security,

subject to minimums based on value of real or

personal property

– For non-monetary/non-property judgments, trial court

has discretion to deny supersedeas if the judgment

creditor posts security


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Why, What, and How? Special Rules

• The State gets its own rule

– Filing NOA supersedes judgment automatically

– But this is subject to TRAP 24.2: Trial courts have

“discretion to deny any party—even the State—the

right to supersede a non-money, non-property

judgment” (In re State Bd. Of Educ. Cert.)

• Presentation assumes a money judgment


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Calculating Bond Amount

• Start with this handy form, which is available

online (Google “travis county supersedeas xls”)


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What Are “Compensatory Damages”?

We’re learning what they’re not…

Here’s a gimme—

• Punitive damages

– Had to be superseded under former law

– Since 2003, generally agreed they need not be


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Not “Compensatory Damages”

• Attorney fees in:

– Breach of contract cases in which fees were

recovered under Chapter 38 (In re Nalle Plastics)

– TUFTA cases, even though actual damages are not a

prerequisite to fees (In re Corral-Lerma)

• But what about attorney fees as damages?

– SCOTX says they must be superseded

– “If the underlying suit concerns a claim for attorney's

fees as an element of damages, . . . then those fees

may properly be included in a judge or jury's

compensatory damages award.” (Nalle)


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“Compensatory Damages”?

• Pre-judgment interest?

– Generally must be superseded

• Post-judgment interest?

– 3rd and 14th Courts said yes, even if the principal need

not be secured (i.e. on attorney fees and punitives)

– However, SCOTX now says no to post-judgment

interest on attorney fees or “any other category of a

judgment not required to be included in the security

amount” (In re Corral-Lerma)


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What Is the “Estimated Duration of Appeal”?

• Shook v. Walden (3rd 2010)

– Issue was whether one or two years was reasonable

– 3rd Court held security for one year of post-judgment

interest would comply with CPRC § 52.006(a)(2)

– Court stated parties could go back to trial court if

appeal lasted more than one year

• Outside the 3rd Court, look to OCA data

• Trial court’s determination will most likely stand


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Practice Tips

• Try to reach agreement on amount and type of

security, using form as a starting point

• If can’t agree, submit form to District Clerk’s

financial office for review

• TRAPs require that clerk approve a bond

– What constitutes approval?

– How get approved when e-filed?


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District Court Contacts

• Robert Chappell; (512) 854-6933

• Autumn Gustafson; (512) 854-4250


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Bonds

• Sureties will charge a premium of about 2% and

generally want the bond to be fully collateralized

• TRAP 24.1 lays out elements/conditions, e.g.—

– Payable to judgment creditor

– Payable if judgment debtor does not appeal or does

not perform judgment

• Tip: When representing judgment creditor, make

sure and ask appellate court to render judgment

against surety


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District Clerk’s Surety Requirements

• Corporate (underwritten bond) sureties

– Must have raised corporate seal imprinted on the bond

– Copy of power of attorney for the underwriting agent

must be attached


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District Clerk’s Surety Requirements

• Non-corporate sureties

– Require two sureties in addition to the principal

– Business sureties must attach a financial statement

– Personal sureties must attach a financial statement if

liability amount exceeds $10,000

– District Clerk reserves the right to ask for a financial

statement from any surety if it appears the personal

sureties may hold common assets


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Cash Deposit in Lieu of Bond

• Avoid paying bond premiums, but not completely

free. By statute, clerk retains—

– 10% of any interest earned on funds deposited into

registry

– 5% up to $50 of any non-interest bearing funds

withdrawn from registry

• Tip: Before tendering funds in lieu of bond,

obtain an order for those funds to be placed in an

interest-bearing account. This can usually be

handled on the uncontested docket.


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Alternate Security

• Holding securities or other items of value in

registry

– Obtain an order allowing in lieu of bond or cash

– Surrender certificate(s) or ownership papers to District

Clerk

• Among more interesting items surrendered—

– Racehorse (the papers, not the animal)

– Mink coat

– Computer hard drive

– Jewelry


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What Goes Into the Net-Worth Calculation?

• Assets less liabilities, as determined by GAAP,

when security is set

• Is the underlying judgment included as a liability?

– No—it’s a contingent liability. McCullough (5th 2012)

and others.

• Homestead may also be excluded

– Montelongo (8th 2009)

– No abuse of discretion—judgment was a contingent

liability and homestead could not be levied


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Effect of Negative Net Worth?

• A judgment debtor with a negative net worth is

excused from posting supersedeas

– In re Smith (SCOTX 2006)

– G.M. Houser, Inc. v. Rodgers (5th 2006)

• But subject to contest under TRAP 24.2(c)


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Net Worth Procedure

• In theory, filing a TRAP 24.2(c) affidavit should

be sufficient to stay execution.

• In practice—

– File a “notice of supersedeas by affidavit of net worth”

and deposit a de minimis amount into registry

– Puts opposing counsel and the clerk on notice that

judgment can’t be executed upon


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Net Worth Procedure

• At that point, onus is on the judgment creditor to

file a contest and set for hearing

• Discovery limited to net worth


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Substantial Economic Harm

• Trial court “shall” lower security amount if

judgment debtor “is likely to suffer substantial

economic harm” from default amount

• If found, amount must be lowered to something

that would not cause “substantial economic

harm” (whatever that means)


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Continuing Jurisdiction & Appellate Review

• Even after plenary power expires, trial court

retains continuing jurisdiction over supersedeas

• Appellate review is available and can be based

on conditions at time of judgment or those arising

later

Tips for Superseding Travis CountyDistrict Court Judgments

D. Todd Smithwww.appealsplus.com

January 15, 2015