Bonds in Colorado Courts: a Primer for Practitioners

• Publication year: 2005
• Pages: 59

34 Colo.Law. 59 Colorado Bar Journal 2005.

2005, March, Pg. 59. Bonds in Colorado Courts: A Primer for Practitioners

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59

Vol. 34, No. 3, Pg. 59

The Colorado Lawyer
March 2005
Vol. 34, No. 3 [Page 59]

Specialty Law Columns
The Civil Litigator
Bonds in Colorado Courts: A Primer for Practitioners
by Martin D. Beier

The Civil Litigator column addresses issues of importance and interest to litigators and trial lawyers practicing in Colorado courts. The Civil Litigator is published six times a year

Column Editor

Richard L. Gabriel of Holme Roberts & Owen llp, Denver - (303) 861-7000, richard.gabriel@hro.com

About The Author

This month's article was written by Martin D. Beier, Denver, a director with Silver & DeBoskey, a Professional Corporation - (303) 399-3000, beierm@s-d.com.

This article describes the types of bonds usually encountered in trial and appellate practice. It discusses recent developments in the legislature and courts affecting such bonds and raises questions for practitioners to consider when the need for a bond arises.

In 2003 and 2004, both the General Assembly and Colorado Court of Appeals refined the legal landscape regarding bonds required in trial court and on appeal. Generally, there are four types of bonds involved in civil cases: non-resident cost bonds, supersedeas bonds, the "additional undertaking" in forcible entry and detainer ("FED") actions, and appeal bonds.

This article describes the types of bonds usually encountered in trial and appellate practice, and discusses new developments in the law. The article also considers questions that practitioners may want to consider when the need for a bond arises.

Non-Resident Cost Bonds

A commonly overlooked bond in civil practice is the non-resident cost bond. The bond requirement is statutory and the failure to adhere to the legal requirements can have significant consequences on a lawsuit at any stage of the proceedings.

Use in State Courts

Since the late 1800s, the Colorado legislature has required that non-residents provide security for the costs of litigation incurred by those sued in Colorado courts. In its present iteration, Colorado's cost bond statute ("Cost Bond Statute" or "Statute")1 requires that

in all cases in law and equity where the plaintiff . . . is not a resident of this state, the person or plaintiff . . . before he institutes such suit, shall file or cause to be filed with the clerk of the court . . . an instrument in writing, of some responsible person, being a resident of this state, . . . whereby such person shall acknowledge himself bound to pay . . . all costs which may accrue.2

This requirement also exists "if at any time after the commencement of any suit by a resident of the state, he shall become non-resident."3

If a non-resident plaintiff files suit without posting the requisite bond, the defendant is entitled to an order from the court requiring that the bond be posted. The Cost Bond Statute specifically provides that, if the plaintiff "neglects or refuses, on or before the day of such rule named, to file such instrument, the court, on motion, shall dismiss the suit."4 (Emphasis added.)

The Colorado Supreme Court has declared that this language requiring dismissal for failing to file a non-resident cost bond "is unequivocal, and leaves nothing to the discretion of the court."5 Of particular note to practitioners is that the Statute specifically makes the plaintiff's attorney liable for the costs upon the dismissal for a failure to file a cost bond.6 Although at one time it was determined that indigency did not excuse a non-resident from filing a cost bond,7 the Colorado Supreme Court has ruled that the requirement may be waived and dismissal may not be based solely on the inability to pay costs.8

The mandate to dismiss upon the failure to file a cost bond was recently applied and discussed by the Colorado Court of Appeals in Hytken v. Wake.9 The Hytken court determined that the standard of review applicable to a trial court's decision that a plaintiff has engaged in neglect or refusal to file a cost bond is for abuse of discretion.10 Significantly, as described by the Hytken court, "[a]n action brought by a non-resident plaintiff cannot proceed without the filing of a cost bond once a defendant moves to compel such a filing."11 (Emphasis added.)

After reviewing prior case law, the Hytken court ruled that there are only two recognized exceptions to the non-resident cost bond requirement: (1) waiver by the defendant (by not moving in the trial court for a cost bond when the plaintiff failed to file one); and (2) proven indigency of the plaintiff.12 The Hytken court held that "neglect" under the Cost Bond Statute is determined on "purely objective facts" without account for the reason for failing to file the bond. Noting that the burden is on the plaintiff to file the bond, the court held that "failure to do so for any reason other than indigency or a defendant's waiver mandates dismissal."13

Use in Federal Courts

Prior to the promulgation of the Federal Rules of Civil Procedure in 1937, the non-resident cost bond requirement applied in state actions removed to federal court.14 More recently, however, judges in Colorado's federal district court have changed that position. Although the Tenth Circuit has not ruled directly on the issue, several federal district court decisions state that Colorado's cost bond requirement does not apply to actions in the U.S. District Court for the District of Colorado.15 Such opinions state that federal judges have discretion to require non-resident cost bonds, but that they are not required to follow either the forum practice or the forum statute pertaining to cost bonds.16

Amount of the Bonds

The General Assembly appears to have left the amount of the non-resident cost bond completely to the trial court's discretion.17 The Hytken opinion, without citing or referencing the Statute, states only that "[t]he reasonableness of costs and their amount are matters within the sound discretion of the trial court."18 Hytken provided some guidance on the factors to consider when the amount of the cost bond is set, through its implicit approval of the trial court's analysis in that case. The Hytken case expressed approval that the trial court

took note of the complexity and breadth of the case, the amount of damages sought, the numerous factual bases allegedly supporting the claims, the long period over which the claims occurred, the large number of defendants, and the need for expert witnesses.19

As noted, the amount of the non-resident cost bond is within the trial court's discretion and an action "cannot proceed" without a bond being filed. Thus, practitioners also need to consider whether the non-resident cost bond should be set high enough to cover factors such as travel costs; deposition costs;20 costs to prepare for and depose non-local opposing experts; increased telephone, fax, and courier costs due to the greater distances involved; and any case-specific consideration by which the costs increase because one party resides out-of-state.

Outstanding Issues

Despite the longevity of the Cost Bond Statute on Colorado's books, there remain several important, but unanswered questions about its application. Following is a discussion of three important issues: (1) whether the cost bond requirement applies to a counterclaim asserted by a non-resident defendant; (2) whether a hearing must be held on the amount of the non-resident cost bond; and (3) whether a non-resident cost bond is required for an original action under C.A.R. 21.

Application to Counterclaim: The express terms of the Cost Bond Statute refer only to "the plaintiff, or the person for whose use the action is commenced." It does not address whether a non-resident litigant can avoid the requirement by letting his or her opposition win the race to the courthouse door. The Statute is intended to protect residents defending against non-resident claims. Thus, arguably, a non-resident counterclaim poses the same risk, meaning that non-resident defendants asserting counterclaims also should have to post cost bonds.

By contrast, if the counterclaim is compulsory under Colorado Rules of Civil Procedure ("C.R.C.P.") 13(a), Colorado is not necessarily the defendant's choice of forum and the Cost Bond Statute arguably should not be applied. One solution may be to require a cost bond of a non-resident defendant who files a permissive counterclaim, but not of one filing a compulsory counterclaim.

Hearing Requirement: Although no published opinion previously addressed whether a hearing must be held on the amount of the non-resident cost bond, the Hytken decision has language that could imply that such a hearing is required, if requested. In Hytken, the court held that no hearing was required because "plaintiffs did not request a hearing on costs, and there was no statutory requirement that the court hold such a hearing."21 However, it is equally fair to read Hytken as giving the court discretion to hold a hearing, but not to require one.

The mandatory...