The Arizona Supreme Court amends the rules for supersedeas bonds effective January 1, 2019.

The Arizona Supreme Court recently granted a petition to amend Rule 7 of the Arizona Rules of Civil Appellate Procedure (ARCAP).  The amendments include two key changes to the rules for supersedeas bonds:

• The amendment specifies that attorneys’ fees and prejudgment interest should be considered when calculating the bond amount.
• The amendment tailors the bond requirements to the type of relief awarded and adds bonding rules for declaratory judgments and injunctions.

In Arizona, supersedeas bonds are governed by A.R.S.§ 12-2108 and ARCAP 7.  The legislature adopted § 12-2108 in 2011.  The statute mandates that the bond amount necessary to stay execution of a civil judgment pending appeal “shall be” the lesser of (1) the “total amount of damages awarded excluding punitive damages”; (2) one-half of the appellant’s net worth; or (3) $25 million.  The Arizona Supreme Court later incorporated the same language into ARCAP 7(a)(4).  See Kresock v. Gordon, 239 Ariz. 251, 253, ¶ 5 (App. 2016).

Although the statute and rule refer to “total . . . damages awarded,” it is not clear that the legislature intended the bond cap in § 12-2108(A)(1) and ARCAP 7(a) to be set based on compensatory damages only, or if an attorneys’ fee award should be included as part of the “total damages.”  Arizona allows a court to award fees and costs in many types of lawsuits (e.g., in breach-of-contract claims) and, consequently, fees and costs often comprise a significant portion of the judgment.  Some legislative history of § 12-2108 indicates that lawmakers referred to “damages awarded” and “value of the judgment” interchangeably, but a 2015 Court of Appeals decision held that “total amount of damages awarded” under § 12-2108(A)(1) excludes attorneys’ fees, costs, and other non-damage components of the judgment.  City Center Executive Plaza, LLC v. Jantzen, 237 Ariz. 37 (App. 2015).

The State Bar of Arizona filed a rule change petition intended to clarify this and other issues in the supersedeas bonding scheme.  The petition proposed that ARCAP 7(a)(4) be amended to specify that the bond amount should be determined based on the “total amount of damages, costs, attorneys’ fees, and prejudgment interest included in the judgment.”  It also proposed additions to the rule clarifying the bonding requirements for declaratory and equitable relief judgments, and family court monetary awards.

The Supreme Court entered an order adopting the proposed changes to ARCAP 7 effective January 1, 2019.  It is unclear whether the legislature plans to adopt a corresponding change to § 12-2108, or whether the amended ARCAP 7 will be effective absent a statutory amendment.