Unnecessary Supersedeas Bond Legislation

Rules 2:9-5 and 2:9-6 provide that an appellant who seeks a stay of a judgment pending appeal must, ordinarily, post a supersedeas bond or cash deposit “for the satisfaction of the judgment in full, together with interest and trial costs” and any additional interest, costs or damages as the appellate court may adjudge.  Rule 2:9-5(a) allows a court to alter that requirement “on good cause shown.” 

Bills have been introduced in both houses of the Legislature, however, that would cap the amount of the appeal bond or other security at $50 million, together with trial costs, regardless of the size of the judgment.  The legislation would permit courts to lower the amount of the bond, in their discretion.  Finally, “if an appellee proves by a preponderance of the evidence that an appellant is concealing its assets, or is dissipating or diverting assets outside the ordinary course of business to avoid payment of a judgment,” the court may enter orders that “are necessary to protect the appellee and require the appellant to post a supersedeas bond in an amount up to the total amount of the judgment.”

The reason for this legislation, which has been introduced in previous years as well, is unclear.  An analysis of entered judgments in New Jersey state courts would show that very few such judgments reach or exceed $50 million.  Presumably, the notion is that some subset of this very small group of potential appellants cannot afford to procure a bond or post other security in that amount, and that those appellants are prevented from appealing as a result.  But the Court Rules already allow courts the flexibility to relax the security requirements in such instances, irrespective of the amount of the judgment.  (Indeed, I have obtained such a relaxation in at least one instance.)

The sponsors did attempt to give somewhat more protection to appellees (that term is used in federal appeals; in state court, the winner below is known as a respondent).  But the requirement that appellees/respondents prove that appellants are dissipating or diverting assets before appellees/respondents can get full protection allows the horse to leave the barn and gallop far away before the barn door can be closed.  It also creates a new round of litigation that should not be required.  The legislation seems to presume that the trial court judgment is faulty, a presumption for which there is no basis whatsoever.  If anything, given the fact that roughly two-thirds of all appeals result in affirmances, any presumption would more appropriately run in favor of the trial court result.

Existing Court Rules rightly require that respondents be protected for the full amount that they won below, absent good cause.  Courts have, and have exercised, the discretion to alter that requirement when there is good cause.  The legislation is unnecessary and counterproductive.  It has not advanced in previous sessions and should not be adopted this time either.