Appeal Bond: What it is, How it Works, Special Considerations

What Is an Appeal Bond?

An appeal bond is an amount of money placed in holding while an appeal is being decided. An appeal bond is supplied by the appellant who is appealing the lower court's judgment and is usually in the amount of the original judgment (though it could be more).

Understanding an Appeal Bond

After a civil court ruling, the losing party can appeal by bringing the court case to the higher court. The higher court will only review issues objected to in the lower court during the initial trial, not new evidence. If the lower court ordered the defendant to pay a judgment, they usually wouldn't have to come up with the money until the appeals process has been exhausted.

An appeal, however, could take a long period of time to be ruled upon; in some cases, an appeal could take years. During this time, the losing defendant will have to spend out-of-pocket costs to cover their legal fees and any other costs related to the case. Since there is a possibility that the defendant may go bankrupt by the time the case is ruled on, they are required to post a surety bond before the commencement of the appeals process.

The surety bond, known as an appeal bond, is required by the Federal Rule of Appellate Procedure 7. It must be paid to the court or a third party to demonstrate good faith and intent to commit to the final ruling if the appellant loses.

The appeal bond also serves as a safety net bond, which helps protect the court from frivolous appeals or delaying tactics to avoid payment as these dishonest activities cost the court time and money. For instance, a defendant could file an appeal to stall payment of a court-ordered sum if an appeal bond was not required. Also, by posting an appeal bond, the defendant guarantees that the original judgment against them will be paid if they lose the appeal.

Types of Cases Requiring Appeal Bond

Appeal bonds are usually required in civil cases involving monetary judgments. These typically include contract disputes, personal injury lawsuits, property disagreements, and business litigation. Other common cases requiring appeal bonds include employment law disputes, product liability claims, and intellectual property conflicts with monetary awards.

Some jurisdictions have specific requirements for appeal bonds in certain case types. For instance, real estate cases like eviction proceedings or foreclosure disputes may require bonds in some states. Domestic relations cases, particularly those involving property division or alimony, and probate cases concerning will contests or estate distribution, might also require appeal bonds.

Cases less likely to require appeal bonds include criminal proceedings, civil matters resulting in non-monetary judgments, and some administrative appeals. Constitutional challenges and public interest cases may sometimes see bond requirements waived or reduced. Last, government entities acting as appellants are often exempt from posting appeal bonds.

Appeal Bond Vs. Supersedeas Bond

The terms "supersedeas bond" and "appeal bond" are often used interchangeably in legal contexts. While they serve similar purposes, there are subtle differences.

A supersedeas bond is specifically designed to stay the execution of a judgment during the appeal process. Its primary function is to prevent the prevailing party from enforcing the judgment while the case is being reviewed by a higher court. By posting a supersedeas bond, the appellant can effectively "freeze" the status quo, ensuring that no action is taken to collect on the judgment until the appeal is resolved.

An appeal bond, in its broadest sense, may encompass a wider range of purposes. While it often includes the function of a supersedeas bond, it can also serve additional purposes depending on the jurisdiction. For example, some courts may require an appeal bond even when there is no specific judgment to stay, such as in cases where the appeal is against a non-monetary decision or order.

The key takeaway is that both types of bonds serve to protect the interests of the prevailing party during the appeal process, though an appeal bond is a bit more vague.

Special Considerations

A losing defendant needs an appeal bond, which is required by both federal and state courts, to secure their right to appeal an adverse judgment and stay the plaintiff's execution of that judgment. The process of appealing involves posting a full judgment in addition to posting interest.

An appeal bond should be discussed early in a case since the cost of this bond can be high, and defendants are required to post this bond a few weeks after the judgment. The bond amount could be significantly larger than the value of the ruling since it is to be used to cover interest or other costs that may arise during the appeal process.

The amount of the bond is governed by state regulations, which vary from state to state. For example, in the state of California, the appeal bond amount must be 150% of the judgment amount.

In addition to an appeal bond premium, applicants must put up collateral worth 100% of the bond amount to qualify for an appeal bond. This collateral is put up with a surety company and is required due to the low likelihood of winning an appellate case. If the defendant doesn't post an appeal bond within two weeks after the lower court enters a judgment, the winning plaintiff can seize their property.

If the appeal is unsuccessful, the bond is in effect until the judgment, and all accrued interest and any awarded fees and costs are paid, which may take many years to finalize. After all, payments have been settled, the court discharges the bond, and the appellant is no longer responsible for the judgment.

The Bottom Line

Appeal bonds are financial guarantees required by courts to protect the winning party's interests during the appeals process, typically covering the full judgment amount plus anticipated interest and costs. They allow the losing party to delay payment of a judgment while appealing, but ensure funds will be available if the appeal fails, and are most commonly used in civil cases involving monetary judgments.