What is a Supersedeas Bond?

by Joshua Malone

This blog post intends to describe and explain one of our specialties – the supersedeas bond.

When a judge rules a monetary judgment in favor of a plaintiff, the judge orders the defendant to pay the plaintiff in the amount of the judgment. However, if the defendant disagrees with the judge’s ruling, the defendant appeals the decision to a court of appeals. If the defendant wishes to stop the plaintiff from executing the lower court’s judgment, the defendant needs to post a supersedeas bond. (Please note: most supersedeas and appeal bonds are for defendants, however plaintiffs may need this bond as well.)

The supersedeas bond guarantees the payment of a judgment plus costs and interests in the event the defendant again loses his case in the appeal court. The plaintiff cannot execute his lower court judgment if the defendant has posted the supersedeas bond. The word “supersedeas” describes how the bond “supersedes” the lower court’s judgment. New Jersey, Texas, and Federal courts refer to this bond as a Supersedeas. New York courts usually refer to a supersedeas bond simply as an “appeal bond.” To read rules 2:9-5.(a) and 2:9-6.(a) governing the supersedeas bond in New Jersey, click here.

Sureties classify a supersedeas bond as an open-penalty bond. This means the bond penalty may actually increase by an additional amount. Interest and other costs account for the additional amount beyond the bond penalty. The surety and the defendant, under the terms of the bond, are liable for the additional amounts of interest and costs. In New York courts, post-judgment interest equals 9% per year, while in New Jersey the interest equals only 0.5%. Of course, the defendant only has to pay post-judgment interest in the event he loses again on appeal.

Open-penalty bonds present a greater risk for sureties because of the potential for unpredictable additional increases in liability. Therefore, underwriters usually require collateral in the full amount of the bond and sometimes more if they believe the appeals process could go on for a very long time. Additionally, underwriters never issue a court bond based on the merits of the case because of the unpredictable and complex nature of litigation. Underwriters do not have the time or expertise to analyze the merits of an ongoing litigation case.

The appeals court eventually determines whether or not the defendant needs to pay the lower court’s judgment partially or in full, or whether the defendant has to pay the judgment at all. In order to discharge the bond and surety from all liability, the defendant needs to provide the surety with an entered order of the court cancelling the bond or expressing satisfaction of the judgment.

NJ Supreme Court Supersedeas Bond

NJ Supreme Court Supersedeas Bond

 

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