Issues & Legislation

New Jersey Needs an Appeal Bond Cap

Defendants, like plaintiffs, deserve to appeal a trial court decision they believe is unfair. Unlike plaintiffs, defendants in New Jersey must pre-pay to do so.

THE PROBLEM

A key protection against an unfair civil verdict is the ability to seek recourse through an appeal. In order to access an appeal, however, a defendant in New Jersey is required by law to post the entire amount awarded as a bond. Judges can also require that additional bond money is posted to secure attorneys’ and court fees. It can be difficult for many small and mid-sized businesses to obtain the financing they need in order to secure large appeal bond requirements. Even large employers can have a difficult time doing so, especially in cases where they rent office space and don’t have access to a lot of capital. Unfortunately, the result is that the cost of proceeding with litigation – even with a strong case warranting further review – is unattainable for many defendants.

THE CONSEQUENCES

Pressure to settle. Even though rulings may be overturned or significantly reduced on appeal, the high costs of an appeal bond may deter legitimate appeals and force payment for claims that arguably should not be paid. This deprives the courts of the opportunity to review the claim, and may cause solid New Jersey businesses irreparable harm to their reputation and economic viability.

Suppression of growth. Should a company choose to proceed with an appeal, the inability to obtain or afford the bond may result in a company filing for Chapter 11 bankruptcy as a means to stay the judgment. It is a tremendous disruption to the business, its employees, and its consumers. The funds expended by a business to finance a bond for the duration of an appeal – which may last months or years - are lost and never recovered, even if the appeal is ultimately successful. These funds could have been used for additional innovation, expansion, and job creation. Instead, they are wasted.

Decline in key industries. These appeal bonds disproportionately impact businesses and service providers that do not own large facilities or possess hard assets against which a bond can be levied, including high tech, bio-tech, and research-based companies – all of which are major drivers of economic growth in New Jersey.

NJLRA'S SOLUTION

New Jersey’s current law regarding appeal bonds does not reflect the consequences of contemporary litigation. We can begin to remedy this situation by instituting a cap of $50 million for appeal bond, or the total value of the monetary judgment, whichever is less. This is the same bond cap amount which New Jersey currently grants only to tobacco companies.