In a civil litigation case, your client may be required to secure a supersedeas bond in order to move forward with an appeal to overturn a lower court’s decision. It is important for the client to understand the process of obtaining this type of bond, but also what a supersedeas bond is
Below you’ll find useful information you and your client will need to know before moving towards securing a supersedeas bond:
What is a Supersedeas Bond?
A supersedeas bond, also known as an appeal bond, is specifically used when a court’s judgment or ruling is being appealed in a lawsuit. The bond is meant to guarantee to the court that when the appeals court’s decision is handed down, the appellant or judgment debtor will satisfy the judgment should the judgment be affirmed.
The bond behaves as a kind of insurance for the judgment creditor or appelle. While it may appear as if the supersedeas bond only benefits the appellee, there is a benefit for the appellant as well,asthe bond stops all collections activity while the appeal court’s decision is still being determined. This can also buy the appellant time to prepare financially if the decision of the lower court isn’t overturned.
The Requirements to Get a Supersedeas Bond
To successfully apply for a supersedeas bond several items such as the following are needed:
- An Application
- Court complaint
- The Judgment/Order
- The Notice of Appeal
Your client should be prepared to produce these documents before seeking a supersedeas bond. The court documents are to ascertain the judgment amount and help determine the amount of the bond needed, as well as necessary legal information.
Due to the high risk and probability of a claim, collateral in the full amount of the bond is typically required when seeking a supersedeas bond. There are several exceptions to this general rule, and to consider providing a bond without collateral, surety insurers review the company or individual’s financial statements to determine if the financial strength is significantly greater than the bond required.
The Cost of a Supersedeas Bond
The cost of a supersedeas bond depends on the size of the judgment, the applicant, and if collateral is required, the type of collateral that is used. The premium rate of the bond is a percentage of that total bond amount, which can range anywhere from .30% to 4%. For example, if the appellant needs to post a $1,000,000 appeal bond, and the premium rate is set at .1% then their premium for the bond would be $10,000. The bond premium is in addition to the collateral that the appellant may have to post.
When collateral is required, there are four types of collateral that sureties will accept: cash, letters of credit from banks, real estate, and marketable securities (stocks and bonds) held in non-retirement accounts.
Types of Collateral
Regarding the collateral itself, the four different types of acceptable collateral can be used in combination with one another:
Using cash as collateral for a supersedeas bond carries several advantages, such as some sureties paying interest on the cash deposit. Another advantage of using cash as collateral is that it can shorten the time it takes to acquire the supersedeas bond versus posting another type of collateral.
Letters of Credit from a Bank
A letter of credit is essentially a promise by a bank to pay a beneficiary (in this case, the surety company) a specified amount upon demand, which is typically equal to the bond amount. Given the liquid nature of a letter of credit, this form of collateral is seen as very similar to cash collateral by sureties. If using this type of collateral, the surety would first approve the bank as the surety’s risk is with the bank’s solvency. So the surety needs to ensure the bank isn’t at risk of failing. It’s important to note that sureties have their own letter of credit format that is generally provided once the bank has been approved
Real estate is also an option, but there are only two sureties that currently consider taking real estate as collateral for supersedeas bonds. The sureties will primarily consider residential real estate (single and multi-family) and commercial properties (office, industrial, and retail). In some instances, they will accept raw land in very well-developed and high-demand areas. Sureties typically require a property appraisal, title insurance, and will discount the value of the property to account for market fluctuations. Using real estate as collateral can be a lengthy process, usually 30 to 60 days, depending on the size of the bond and type of property.
This type of collateral includes stocks and bonds held in non-retirement accounts, as well as mutual funds, exchange-traded funds, and money market funds. If the appellant wants to use marketable securities for collateral, they must first provide the surety company with their most recent account statement and the value of the account usually needs to exceed the amount of the bond. If the surety deems the assets acceptable, they will enter into an account control or pledge agreement with the brokerage firm and the client
What Bond Amount Does my Client Need to Post?
The supersedeas bond amount an appellant must post is generally the amount of the original judgment and interest during the appeal process.
The way the bond amount is calculated and the specific appeal bond requirements vary from state to state. As one of the leading national providers of court surety bonds, we have collected the various state appeal bond requirements into a chart for easier reference. Explore the link below and click on the state where you are required to obtain an appeal bond, a page will appear listing the requirements for that specific state:
Working with a Surety Broker for a Bond
To avoid a potentially long and drawn-out process to secure a supersedeas bond, it is essential for an appellant to work with an experienced surety broker that specializes in supersedeas bonds. The myriad of benefits that come from working with at surety broker that specializes in supersedeas bonds is paramount to avoiding delays or mishaps in the bond application process.
We at CSBA have that expertise and experience, as well as access to surety insurers that other surety brokers do not, and the ability to use a wider variety of forms of collateral which further benefits your client’s ability to secure an appeal bond.
We have over 110 years of combined experience on a range of civil litigation matters. Since 1984, we have helped attorneys and their clients navigate the process of securing supersedeas bonds, provided declarations and affidavits to courts, consulted on preparing pre-trial reports, and served as expert witnesses, In our time dedicated to appeal bonds, we have worked with almost every major law firm in the field, and as a result have gained a deep understanding of the appeals process at local, state, and federal levels.
This is the expertise an attorney needs at their disposal when the stakes are high for their client.
If you’re looking to guide your client on how to get a supersedeas bond, you have come to the correct place. We encourage you or your client to reach out to us and begin the process of obtaining a supersedeas bond.
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