The applicability of state appeal bond caps in suits brought in federal courts pursuant to diversity jurisdiction.

• Author: Wenger, Jesse

INTRODUCTION I. OVERVIEW OF SUPERSEDEAS BONDS IN FEDERAL AND STATE COURTS A. Staying a Judgment on Appeal in Federal Court 1. Brief History of Supersedeas Practice in the Federal Courts 2. Current Approach to Supersedeas Practice in the Federal Courts B. Staying Judgments on Appeal in the State Courts and the Push for Appeal Bond Reform 1. Motivation for Appeal Bond Reform 2. Varieties of Appeal Bond Reform Statutes and Their Underlying Rationales II. BRIEF OVERVIEW OF THE COURT'S ERIE DOCTRINE EVOLUTION A. The Evolution of the Court's Hannu-Prong Analysis B. The Evolution of the Court's RDA-Prong Analysis 1. Outcome-Determinative Approach 2. Federal-State Interest-Balancing Approach 3. Modified Outcome-Determinative Approach 4. A Rebirth of Byrd? III. APPLYING THE ERIE DOCTRINE TO STATE APPEAL BOND REFORM STATUTES AND FEDERAL RULE OF CIVIL PROCEDURE 62(d) A. Hanna-Prong Analysis of Rule 62(d) and State Appeal Bond Reform Provisions 1. State Appeal Bond Reform Statutes Do Not Affect Rule 62(d)'s Process Requirements 2. Appeal Bond Caps and Judicial Discretion 3. The Case for Accommodation B. RDA-Prong Analysis of Rule 62(d) and State Appeal Bond Reform Provisions 1. Outcome-Determinative Test 2. Byrd Balancing of State and Federal Interests CONCLUSION INTRODUCTION

Since 2000, forty-one states have passed appeal bond reform statutes, a tort reform measure that, in some shape or form, caps the amount of a supersedeas bond a defendant must secure in order to stay the execution of a judgment while pursuing an appeal. (1) The state statutes vary widely in their operation, but their underlying goal is to protect a defendant's right to appeal massive damages awards without putting himself in dire financial straits just to secure a sufficient supersedeas bond. (2) Prior to the wave of reform beginning in 2000, state courts often required a bond in the amount of the full judgment plus costs and interest, which could be prohibitively expensive if the verdict was for hundreds of millions--or billions--of dollars. (3) This Comment addresses whether state statutes capping supersedeas bond amounts are applicable in federal courts exercising diversity jurisdiction, or whether such statutes conflict with Federal Rule of Civil Procedure (FRCP) 62(d)--the rule governing postjudgment stays pursuant to supersedeas bonds.

Section I.A begins with a discussion of the origins and evolution of supersedeas practice in the federal courts. Section I.B continues with an explanation of why tort reformers pushed for appeal bond reform and describes the approaches that various states currently take toward supersedeas practice. Part II provides a brief summary of the evolution of the Erie (4) doctrine. Finally, Part III evaluates the applicability of state appeal bond reform statutes in federal courts exercising diversity jurisdiction, in light of the Court's Erie jurisprudence. This Comment concludes that federal courts should interpret Rule 62(d) as not entirely covering the issue of how much a defendant must secure by supersedeas bond in order to stay execution of a judgment during appeal. Rather, federal courts should go on to apply Erie and its progeny in deciding this issue. Under a traditional Erie analysis, however, the applicability of appeal bond reform statutes is not likely to be deemed outcome-determinative. Yet, if a court were to accept the argument that the applicability of appeal bond caps is an outcome-determinative decision because such caps sufficiently alter the settlement landscape, then balancing the state's interest in capping appeal bonds with the federal interest in applying Rule 62(d) leads to the conclusion that federal courts sitting in diversity should apply the state statutes capping appeal bonds.

1. OVERVIEW OF SUPERSEDEAS BONDS IN FEDERAL AND STATE COURTS

   When a defendant in a civil suit is held liable for monetary damages following an adverse judgment, he has several options for obtaining review of the verdict. A defendant may, for example, seek a new trial or review of the judgment in the trial court, (5) or he may seek appellate review if his postverdict motions prove unsuccessful. (6) This Comment focuses on the circumstances surrounding an appeal of an adverse judgment. When a defendant seeks to avail himself of the appellate process to review the verdict and damages award, the parties are confronted with a problem: the judgment debtor (the losing defendant) does not want to pay the award before the appellate review process is complete, while the judgment creditor (the winning plaintiff) wants to collect the judgment without delay. The procedural solution to this conflict of interest has been to stay execution of the judgment, usually conditioned on the judgment debtor posting a supersedeas bond or otherwise securing the judgment until the final disposition of the defendant's appeal. (7) The supersedeas bond serves to "preserve the status quo while protecting the non-appealing party's rights pending appeal." (8) The supersedeas bond maintains the status quo by allowing the defendant to stay enforcement of the judgment, thereby allowing the defendant to avoid the risk of having to pursue the plaintiff and seek restitution if the appeal is successful, while simultaneously securing the monetary award for the plaintiff in the event the appeal is unsuccessful. (9)

   1. Staying a Judgment on Appeal in Federal Court

      In the federal courts, FRCP 62 governs the stay of proceedings to enforce a judgment. While Rule 62(a) generally affords judgment debtors an automatic fourteen-day stay after entry of an adverse judgment and Rule 62(b) gives the trial judge the discretion to stay any enforcement proceeding pending the disposition of certain postverdict motions, it is Rules 62(d) and Rule 62(f) that govern stays during the pendency of an appeal. Rules 62(d) and 62(f) are the two primary alternatives the Federal Rules provide for the

      stay of monetary judgments pending appeal. (10) Rule 62(f) provides that "[i]f a judgment is a lien on the judgment debtor's property under the law of the state where the court is located, the judgment debtor is entitled to the same stay of execution the state court would give." (11) If a judgment debtor is able to meet the requirements of 62(f), including the conditions required by state law for a stay of execution, the district court must grant the stay. (12) Alternatively, Rule 62(d), the primary focus of this Comment, automatically stays a monetary judgment once the judgment debtor posts an appropriate supersedeas bond. (13) However, it is important to note that a defendant's appeal is not dependent upon obtaining a supersedeas bond. A defendant can always appeal a verdict from the district court without meeting any of Rule 62's requirements. In that scenario, the judgment creditor can move to collect the judgment as soon as the fourteen-day automatic stay has elapsed. (14)

      1. Brief History of Supersedeas Practice in the Federal Courts

         The federal court system has incorporated supersedeas practice since the Judiciary Act of 1789. (15) Before the adoption of the Federal Rules of Civil Procedure in 1938, the rules and procedures for obtaining a stay upon appeal were codified by statute. (16) Present-day Rules 62(d) and 62(f) are substantively the same as the versions contained in the original 1938 edition of the Rules. Rule 62, however, does not "precisely define the amount and conditions of a supersedeas bond." (17) The original version of the Rules filled this gap with Rule 73(d), which, in relevant part, directed that when a defendant obtained a supersedeas bond to stay the enforcement of a monetary judgment

         the amount of the bond shall be fixed at such sum as will cover the whole amount of the judgment ..., costs on the appeal, interest, and damages for delay, unless the court after notice and hearing and for good cause shown fixes a different amount or orders security other than the bond. (18) When the Federal Rules of Appellate Procedure (FRAP) became effective in 1968, FRAP 8 abrogated and supplanted FRCP 73. (19) However, the rulemakers neither amended FRCP 62 to include the substance of former FRCP 73(d) nor wrote FRAP 8 to contain the detail of the rule it supplanted. (20) Without FRCP 73(d) directing courts regarding the sufficiency of a supersedeas bond, the federal courts were left to decide the amount a defendant had to secure via supersedeas bond in order to receive a stay under FRCP 62(d).

      2. Current Approach to Supersedeas Practice in the Federal Courts

         After the Federal Rules of Appellate Procedure supplanted former FRCP 73, the federal courts first had to decide whether posting a supersedeas bond would be a procedural requirement for obtaining a stay pursuant to FRCP 62(d). Former Rule 73(d) had explicitly provided for a stay by "security other than the bond" if a defendant could show good cause, (21) but Rule 62(d) simply states that the "appellant may obtain a stay by supersedeas bond." (22) While some courts viewed the supersedeas bond as a necessary condition for obtaining a stay under Rule 62(d), (23) most courts took the position that Rule 62(d) provided a stay as a matter of right if a defendant posted a supersedeas bond but retained the discretion to allow for unsecured stays or stays secured by alternative means. (24)

         Next, the federal courts needed to determine the amount of the judgment a defendant would have to secure by supersedeas bond when pursuing a stay as a matter of right under Rule 62(d). Again, the prevailing view in the federal courts has been to follow the directive contained in former Rule 73(d) and to require a supersedeas bond in the amount of the full judgment plus costs and interest while giving the district courts discretion to set the bond at a lower amount if an appellant shows good cause. (25) Many jurisdictions across the nation have explicitly provided for this method of calculating the amount of a supersedeas bond in their...