Supersedeas Austin Bar 2015

Tips for Superseding Travis County
District Court Judgments
D. Todd Smith
www.appealsplus.com
January 15, 2015

1/15/15 Copyright © 2015 Smith Law Group, P.C.
2
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

3
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

4
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

5
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

6
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

7
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

8
Calculating Bond Amount
• Start with this handy form, which is available
online (Google “travis county supersedeas xls”)

9
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– Had to be superseded under former law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

10
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– SCOTX says they must be superseded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)

11
“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)

12
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

13
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?

14
District Court Contacts
• Robert Chappell; (512) 854-6933
• Autumn Gustafson; (512) 854-4250

15
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

16
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

17
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

18
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.

19
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

20
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

21
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)

22
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

23
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

24
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)

25
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

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