Settle or Go To Trial - Better Factor In Cost of Appeal Bond

Minutes after the Rhode Island Lead Paint Public Nuisance Trial Verdict came in against three of the four defendants, my cell phone starting ringing.  Security analysts, assuming that Sherwin-Williams, NL Industries, Millennium Holdings would appeal the verdict, wanted to know the details about the appeal bond. 

Officially called "Suersedeas bond," that cost might not be seriously considered in strategic decisions about settling versus going to trial.  It's a requirement of federal courts and every state court.  Requirements vary widely and the jurisdiction the case could be tried in has to also be factored in.  For instance, some require defendant to post the full amount of the judgment plus interest.  And that's exactly what forced Texaco ["Pennzoil v. Texaco"] into bankruptcy. 

In the current edition of Jones Day PRACTICE PERSPECTIVES: PRODUCT LIABILITY & TORT LITIGATION, attorneys Richard G. Stuhan and Sean P. Costello deconstruct this issue.  Their main point is, "Failing to take the appeal bond into account in the early stages of case evaluation and strategy can put a defendant and its lawyers in a very uncomfortable position if, despite their best efforts and superlative lawyering, the company loses at trial and faces an adverse judgment."

This can hit especially hard, continue Stuhan and Costello, if the defendant is a smaller company.  Even if in that jurisdiction the bond is relatively low, the company might not be able to raise the funds without complex financing.  In that situation, the decision of settling v. going to trial becomes much more complex.

For large companies which are able to pony up the cost of the judgment and interest, there's no certainty that they will get that money returned if they win on appeal.  Indeed, point out Stuhan and Costello, companies might have to actually sue to get the money returned. 

The good news is that during the past eight years, many states have reformed the appeal-bond statues. A major reform has been caps.  That was driven by the American Tort Reform Association.

Stuhan and Costello suggest further reforms such as "to reverse the presumption by making a stay of execution the default rule, without any bond requirement ... and putting the burden on the plaintiff to demonstrate that a bond (or a larger bond) should be required."

This bond-appeal discussion is part of the edition's theme of business-focused solutions.  PRACTICE PERSPECTIVES is headed by product liability partner Mickey Pohl, based in the Pittsburgh office.  He is the lead counsel for Sherwin-Williams in lead-paint litigation.