supersedeas advanced 2012

Current Issues in Supersedeas LawD. Todd Smithwww.appealsplus.com

September 6, 2012

04/13/2023 Copyright © 2012 Smith Law Group, P.C.

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Back to Basics: Why, What, and How?

• Why supersede?

To prevent the judgment creditor from enforcing the judgment while the case is on appeal


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• 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


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• How supersede? TRAP 24.1(a) (via CPRC ch. 52)

– Bond or cash deposit– Written agreement– Alternate security as ordered by the court


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Overview of Issues Covered

• Are attorney fees “compensatory damages awarded in the judgment”?

• What is “the estimated duration of the appeal”?

• What is included in the net-worth calculation?

• Do judgment-debtor-friendly state supersedeas rules apply to federal judgments?


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Attorney Fees as “Compensatory Damages”?

• Beware of the Shook/Fairways split

• Shook v. Walden (3CA 2010)

– Ch. 52 does not define “compensatory damages”– 3CA looked to definition in CPRC ch. 41 (“Damages”),

which shares “common origins” with ch. 52 (HB4)– Attorney fees for breach of contract are not “economic

damages” under ch. 41– Therefore, attorney fees are not “compensatory

damages” that must be superseded (at least not in breach-of-contract cases)


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• Fairways Offshore v. Patterson (1CA 2011)– Declined to follow Shook and held that fees are

“compensatory damages” that must be superseded– Nothing in HB4’s plain language evidences intent to

change law requiring security of fees or to exclude fees from “compensatory damages”

– Legislature could have defined term that way in ch. 52 if that’s what it meant to do


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• SCOTX has scheduled oral argument in a mandamus expected to resolve the split

• In re Nalle Plastics (No. 11‑0903)– Mandamus from unpublished order out of 13CA– Set for argument November 7, 2012


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Other Exclusions from Compensatories?

• Exemplary damages are excluded by definition

• Pre-judgment interest?– Generally must be superseded– But Shook suggests exception for “negligence award

for property damage”


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Other Exclusions from Compensatories?

• Post-judgment interest on trial attorney fees?– Generally must be superseded

• Post-judgment interest on exemplary damages?– Must be superseded per Texas Standard Oil & Gas,

L.P. v. Frankel Offshore Energy, Inc. (14CA 2011)– Dissent would have held otherwise– SCOTX denied mandamus

• All subject to the net-worth cap


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What Is the “Estimated Duration of Appeal”?

• Look to Office of Court Administration data

• Shook v. Walden (3CA 2010)– Issue was whether one or two years was reasonable– 3CA held that 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

• Trial court’s determination will most likely stand


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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: McCullough v. Scarbrough Medlin & Assoc. (5CA

2012) and others

• Homestead may also be excluded– Montelongo v. Exit Stage Left, Inc. (8CA 2009)– No abuse of discretion—judgment was a contingent

liability and homestead could not be levied


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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 (5CA 2006)

• But subject to contest under TRAP 24.2(c)


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Chapter 52 in Federal Court?

• Surprisingly few cases address whether defendants get benefit of friendly state rules

• FRCP 62(f)– State supersedeas rules apply if a judgment is a lien

on the judgment debtor’s property under state law– So, is a Texas judgment a lien under FRCP 62?


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Chapter 52 in Federal Court?

• For judgment debtors, problem is the additional step of abstracting judgment to create lien

• No 5th Circuit authority; district courts are split on whether TX meets “judgment as lien” standard– Yes: Umbrella Bank, FSB v. Jamison, 341 B.R. 835

(W.D. Tex. 2006) (Yeakel, J.) and one other– No: EEOC v. Service Temps, Inc., 782 F. Supp. 2d

288 (N.D. Tex. 2011) (Fitzwater, J.) and a few others


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Parting Practice Tip

• Travis County District Clerk has a handy form available online (Google “travis county supersedeas xls”)

Current Issues in Supersedeas LawD. Todd Smithwww.appealsplus.com

September 6, 2012

supersedeas advanced 2012

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