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The Tennessee tort reform legislation of 2011 reduced the maximum amount of an appeal bond required of the appellant when the case is appealed after plaintiff obtains a judgment under “any legal theory”. The new legislation repealed the old T.C.A. § 27-1-224 and replaced it with the following:
(a) If a plaintiff in a civil action obtains a judgment under any legal theory, the amount of the appeal bond necessary to stay execution during the course of all appeals or discretionary reviews of that judgment by any appellate court shall not exceed the lesser of twenty-five million dollars ($25,000,000) or one hundred twenty-five percent (125%) of the judgment amount.
(b) For purposes of determining the amount of the required bond, the court shall not include punitive or exemplary damages in the judgment amount.
(c) Notwithstanding subsections (a) and (b), if a party proves by a preponderance of the evidence that an appellant is dissipating assets outside the ordinary course of business to avoid payment of a judgment, a court may enter orders that are necessary to protect the appellee and establish the bond amount, which may include any punitive or exemplary damages.
(d) If the appellant establishes by clear and convincing evidence at a post judgment hearing that the cost of the bond and the obligation resulting from the surety's payment of the bond in an amount authorized by this section will render the appellant insolvent, the court shall establish a security in an amount, and other terms and conditions it deems proper, that would allow the appeal of the judgment to proceed, without resulting in the appellant's insolvency. This subsection (d) should be narrowly construed.
(e) If this section is found to be in conflict with any rules prescribed by the supreme court, this section shall apply notwithstanding § 16-3-406.
This new statute reduces the maximum appeal bond amount from $75,000,000.00 to $25,000,000.00. Further, the maximum amount for the appeal bond is actually the lesser of $25,000,000.00 or 125% of the judgment amount. Almost always, the 125% figure will be the one that is used.
According to subsection (b) the “judgment amount” discussed in subsection (a) does not include punitive or exemplary damages. Subsection (c) provides the recovering party with a procedure to establish that the appellant is dissipating assets and therefore that the Court “may enter orders” to protect the appellee. Finally, subsection (d) provides that the Court can provide the appellant with relief if the cost of the bond or the obligation for payment of the bond will cause the appellant to be insolvent. Defense attorneys need to be aware of these changes.
Overall, these changes are good for corporations and insurance companies that are sued in high risk litigation because they reduce the burden on appellants for bond requirements that can be onerous in certain situations. This legislation accomplished this by reducing the maximum appeal bond size to $25,000,000.00 and by preventing punitive and exemplary damages from being included in the appeal bond amount.
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