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Tricks & Traps: Practical Tips for Your Appellate Practice
1. and
Practical Tips for Your Appellate Practice
by Mary H. Smith
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attention over the past couple of years than supersedeas practice. Because supersedeas issues arise in
almost every civil appeal, it is important to stay abreast of
these legal developments.
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judgment-debtor may supersede enforcement of a judgment
by: (1) ïŽling with the trial court clerk a written agreement
with the judgment creditor for suspending enforcement of
the judgment; (2) ïŽling with the trial court clerk a good and
sufïŽcient bond; (3) making a deposit with the trial court
clerk in lieu of a bond; or (4) providing alternate security
ordered by the trial court.
When the judgment is for money, the amount of the
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satory damages awarded in the judgment, interest for the
estimated duration of the appeal, and costs awarded in the
judgment.1āļāļ
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of ïŽfty percent of the judgment-debtorâs current net worth or
twenty-ïŽve million dollars.2
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tions have arisen.
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cases, attorneyâs fees are neither compensatory damages nor
costs for purposes of suspending enforcement of a judgment
pending appeal.3āļāļ
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peals were split on the issue.4
A. Generally, Attorneyâs Fees Are Not
Compensatory Damages.
To determine whether attorneyâs fees are included in the
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Id.
In re Nalle Plastics Family, Ltd. Pâship,āļ
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See, e.g., Fairways Offshore Exploration, Inc.
v. Patterson Servs., Inc. āļ
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pet.) (attorneyâs fees are compensatory damages that must be superseded); Corral-Lerma
v. Border Demolition & Envtl., Inc., No. 08āļ
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[mand. pending]) (same); Clearview Props.,
L.P. v. Prop. Tex. SC One Corp. āļ āļ
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pet.) (per curiam) (attorneyâs fees are costs
that must be superseded); Shook v. Walden,
www.tarrantbar.org
â
February 2014
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Court used basic principles of statutory construction. The
Court ïŽrst looked to the statute itself to see if it deïŽned
the term âcompensatory damages.â5 Because it did not, the
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Ultimately, the
Court relied upon its precedent and the ordinary meaning of
the phrase âcompensatory damages.â7
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between attorneyâs fees and damages by emphasizing the
difference between compensation owed for an underlying
harm and fees that may be awarded for counselâs services.8
The Legislature also has made such a distinction. Indeed,
the primary statute that designates when attorneyâs fees
may be recovered provides that â[a] person may recover reasonable attorneyâs fees from an individual or corporation,
in addition to the amount of a valid claim and costsâ when
certain claims are at issue.9
Courts interpreting that statutory language have held
âthat the phrase âin addition toâ suggests that the Legislature
intended to differentiate between attorneyâs fees, damages
awarded for a valid claim, and costs.â10āļāļ
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Court conïŽrmed this construction in 2009, noting that âsuits
cannot be maintained solely for the attorneyâs fees; a client
must gain something before attorneyâs fees can be awarded.â11 Therefore, as a general rule, attorneyâs fees are not
compensatory damages for purposes of suspending enforcement of a judgment pending appeal.
There is one notable exception to this general rule that
practitioners should be aware of. If the underlying suit concerns a claim for attorneyâs fees as an element of damageâa
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may properly be included in the deïŽnition of âcompensatory
damagesâ for purposes of superseding the judgment.12
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tions of compensatory damages and costs and
need not be superseded); PopCap Games, Inc.
v. MumboJumbo, LLC, 317 S.W.3d 913, 914
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In re Nalle Plastics Family, Ltd. Pâship,āļ
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S.W.3d at 171.
Id. at 171-72.
Id. 172-74.
Id. at 172 (citing Landa v. Obert,āļ āļ
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weight of authority is against the proposition
that the plaintiff has the right to claim his
counsel fees . . . as a part of his damagesâ)
& Wm. Cameron & Co. v. Am. Surety Co. of
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1932) (noting that â[c]ounsel fees incurred in
prosecuting a suit for or defending against a
wrong are not ordinarily recoverable as actual
damagesâ)).
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(emphasis added).
Id. at 173 (citing Shook v. Walden, 304 S.W.3d
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MBM Fin. Corp. v. Woodlands Operating Co.,
L.P.,āļ
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sis added).
In re Nalle Plastics Family, Ltd. Pâship,āļ
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S.W.3d at 174-75.
Id. at 175.
Id.āļ
āļBLACKâS LAW DICTIONARY 398 (9th ed.
2008)).
Id. (citing McClelland v. McClelland, 37 S.W.
2. B. Attorneyâs Fees Are Not Costs.
To determine whether attorneyâs fees are âcostsâ for
purposes of superseding a judgmentâa term undeïŽned by
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ïŽling fees, jury fees, courthouse fees, and reporter fees . . .
.â14 The Court also noted that both courts and the Legislature have recognized that the term âcostsâ generally does
not include attorneyâs fees.15
Even though attorneyâs fees are like costs in that both
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curity only for costs themselvesânot everything similar to
them. Attorneyâs fees are not costs for purposes of superseding the judgment.
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held in 2012 that âthe plain language of [TRAP 24.1] does
not include a contingent money judgment in calculating net
worth.â17 Indeed, TRAP 24.2 speaks in terms of the judgment-debtorâs âcurrent net worth.â18 Until the liability set
forth in the judgment is certain (after the appellate process
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contingent on futureāļ
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of a liability depends on future events, it cannot be deducted
when calculating a judgment-debtorâs current net worth.19
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when a creditor contests a judgment-debtorâs net worth afïŽdavit, the court âmust issue an order that states the debtorâs
net worth and states with particularity the factual basis for
that determination.â Courts have construed this to mean
that, â[i]n setting the amount of supersedeas security pendāļ
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ïŽnancial condition of each judgment-debtor.â20 However, oftentimes in business litigation, the parties are not individuals or even individual companies, but rather conglomerate
businesses that include subsidiaries and afïŽliates.
Under Generally Accepted Accounting Principles
(âGAAPâ), accountants must create consolidated ïŽnancial
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(â[A]ttorneyâs fees, in this state, in view of
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cannot be classed as costs, and that the court
would have no power to so declare such fees as
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Civ. Prac. & Rem. Code § 38.001 (providing that
â[a] person may recover reasonable attorneyâs
fees . . . in addition to the amount of a valid
claim and costsâ) (emphasis added)).
Id.āļ āļ
Bus. StafïŽng, Inc. v. Jackson Hot Oil Serv., 392
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(op. on motion) (emphasis added) (citing McCullough v. Scarbrough, Medlin & Assocs., Inc.,
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2012) (op. on motion) & Anderton v. Cawley,
statements for afïŽliated companies rather than individual
ïŽnancial statements for each company.21 The rationale is
that consolidated ïŽnancial statements are necessary for a
fair presentation of these companiesâ true ïŽnancial situations.
So what happens when a party obtains a joint-and-several judgment against several afïŽliated companies and those
companies seek to supersede the judgment pending appeal?
In setting the bond amount, must the trial court consider
the net worth of each individual entity, or should it consider
only the consolidated ïŽnancial statement of the controlling
entity? Houstonâs Fourteenth Court of Appeals answered
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Even though courts generally calculate net worth according to GAAP principles, Houstonâs Fourteenth Court
held that the GAAP consolidation rule does not displace the
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ment-debtor must be determined separately, unless there is
a ïŽnding of alter ego.23 Without a ïŽnding of alter ego, the
court held that using the GAAP consolidation rule would
impermissibly comingle the companiesâ assets.24 This holdāļ āļ
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Court that consolidated ïŽnancial statements constitute no
evidence of an entityâs ability to satisfy a judgment.25
Houstonâs Fourteenth Court also held that a judgmentdebtor does not have to present audited net worth evidence
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have been met. Instead, a judgment-debtor can meet its
burden of proof by (1) preparing its own balance sheet and
swearing to its own net worth or (2) presenting evidence
from a bookkeeper with knowledge of the debtorâs records
and a balance sheet of the debtor using GAAP principles to
show net worth.27
The trick under TRAP 24.2 is knowing what is included in the bond calculation and how to establish net worth.
When faced with a supersedeas issue, just remember these
four facts: (1) attorneyâs fees are neither compensatory damages nor costs; (2) the trial courtâs judgment is just a contingent liability; (3) consolidated ïŽnancial statements cannot
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mony is unnecessary. â
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āļsee
also Montelongo v. Exit Stage Left, Inc., 293
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18
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19
Bus. StafïŽng, Inc. āļ
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20
G.M. Houser, Inc. v. Rodgers āļ
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21
FASB Accounting Standards CodiïŽcation
(âASCâ) Topic 810, available at http://www.
fasb.org.
22
Hunter Bldgs. & Mfg., L.P. v. MBI Global, L.L.C.,
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available at http://www.14thcoa.courts.state.
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Id.āļ āļ
Id. at 7 (citing In re Smith āļ
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in a post-judgment net worth proceeding is relevant to the determination of a judgment-debtorâs net worth for purposes of Rule 24 but may
not be used to enforce the judgment against
the unnamed alter ego or any other non-judgment debtor)).
Akin, Gump, Strauss, Hauer & Feld, L.L.P. v.
Natâl Dev. & Research Corp. āļ
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statements . . . are not evidence that a judgment would have been collectible from Panda
International as of or after February 2000.â).
MBI Global, L.L.C. āļ
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Id.
February 2014
â
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