An interesting article in the National Law Journal of March 26, 2007 talks about five states that have instituted caps on stay bonds for defendants who appeal their cases. A stay bond is an amount of money that a losing party must post with the trial court so that if the defendant loses the appeal, the winning party will have a fund with which to satisfy the judgment.
From a Plaintiff’s perspective, a stay bond is a great thing. Whenever I get a large verdict at a the trial court level, I am usually faced with an opposing party or its counsel threatening an appeal. They usually do this as a tacit threat to further dely my collecting the debt for which I was hired to pursue. Whenever I am threatened in this fashion, I simpy smile and respond that I would actually appreciate the defendant filing an appeal because in order for stop me from pursuing further collection action, the defendant has to post a stay bond with the trial court. By doing this, I will not have to jump through anymore hoops to collect my client’s money when the defendant loses the appeal. I am actually thankful for the stay bond requirement.
I once was given a $1.8 million judgment to collect. The defendant/debtor filed an appeal to the Michigan Court of Appeals, but his attorney forgot to post a stay bond. I sent a court officer to his house to clean it out. I also filed a lawsuit against his college aged children for fraudulent transfer of funds as he was paying for their college educations. This was enough to bring him to his knees and to tender a settlement check to us for $1.6 million. The stay bond is a good thing.
Michigan, thus far, does not have a cap on stay bonds. The trial court is charged with the duty of assessing just how large a stay bond must be posted. Typically, stay bonds are assessed at 120% to 150% of the judgment. If the Michigan legislature reduces or sets limits on stay bonds, this could take away a very large tool that we collection attorneys have in collecting judgments. Fortunately, the stay bond limits in Alaska, Kentucky, Maryland, New Mexico and Wyoming are pretty substantial. In fact, Wyoming’s stay bond cap is for $2,000,000 on individuals. I suppose that if Michigan were to contemplate a stay bond along these lines, it would not have a great affect on most collection law practices. Nevertheless, its an uncomfortable feeling for collection attorneys whenever a legislative body looks at the law in our specialty. After all, many of us are still reeling from the effects of the Fair Debt Collection Practices Act.