The Appeal Bond: How It Works, How It’s Fixed, and Practical Lessons from State v. IBM
Graham T. Youngs†
Earlier this year, a trial court in Indiana ordered IBM to post a $25 million appeal bond staying execution of a $78 million judgment. The litigation arose from IBM’s breach of a contract requiring it to automate much of Indiana’s welfare services. The amounts of both the judgment and appeal bond are perhaps extraordinary. Still, the IBM case highlights lessons for attorneys requesting stays in more commonplace civil cases.
This Article begins by explaining why a party would need to request an appeal bond and the requirements for doing so. It then addresses how courts determine the amount to fix for such a bond. It concludes by offering some practical considerations for both defendants (judgment-debtors) and plaintiffs (judgment-creditors).
The Appeal Bond: How to Stay Execution of a Judgment Pending Appeal
An appeal bond—often referred to as a supersedeas bond—is an “appellant’s bond to stay execution on a judgment during the pendency of the appeal.” It is not required before a party may file an appeal, but a bond is a condition precedent for staying execution of a judgment pending appeal. Because an appeal bond is required before a court will issue a stay, defendants’ and plaintiffs’ counsel should factor the cost of posting an appeal bond into their litigation strategy at the outset of the case. Before delving further into this litigation strategy, however, note how a party goes about obtaining a stay in the first place.
Indiana Trial Rule 62 states that “enforcement of a judgment or appealable interlocutory order will be suspended during an appeal upon the giving of an adequate appeal bond with approved sureties, an irrevocable letter of credit from a financial institution approved in all respects by the court, or other form of security approved by the court.” Under Trial Rule 62, a party thus obtains a stay as a matter of right when a bond is given.
As a general rule, a motion for stay pending appeal must first be filed with the trial court. But there are two general exceptions. First, a party may file a stay directly in the Court of Appeals if the trial court or administrative agency issuing the order does not have authority to issue a stay. Second, a motion for stay may be filed directly in the Court of Appeals where “extraordinary circumstances exist which excuse the filing of a motion to stay in the trial court or Administrative Agency altogether . . . .”
If a stay is denied by the trial court (or one of the exceptions applies), a party may seek a stay with the Court of Appeals. The motion to stay must include certified or verified copies of (1) the judgment or order to be stayed; (2) an order denying the motion for stay; (3) other parts of the Clerk’s Record or Transcript that are relevant; (4) an attorney certificate evidencing the date, time, place and method of service made upon all other parties; and (5) an attorney certificate setting forth in detail why all other parties should not be heard prior to the granting of said stay. A motion to stay should of course also include reasons why the Court of Appeals should issue the stay.
Once fixed, the Court of Appeals may reconsider the trial court or administrative agency’s decision to grant or deny a stay. Additionally, “the Court on Appeal may grant or deny the stay and set or modify the bond, letter of credit, or other form of security.” If the Supreme Court of Indiana grants transfer and vacates the Court of Appeals’ opinion, the transfer order does not automatically vacate orders concerning appeal bonds.
Fixing the Amount of an Appeal Bond
Indiana Trial Rule 62 vests the trial court with broad discretion to fix an appeal bond: “In its discretion and on such conditions for the security of the adverse party as are proper, the court may stay the execution of or any proceedings to enforce a judgment pending the filing and disposition of . . . an appeal.” Trial Rule 62(D)(2) further provides as follows:
The bond or letter of credit shall be conditioned for the satisfaction of the judgment in full together with costs, interest, and damages for delay, if for any reason the appeal is dismissed or if the judgment is affirmed, and to satisfy in full such modification of the judgment and such costs, interest, and damages as the appellate court may adjudge and award.
So this raises a question: in what amount should the trial court fix the bond?
Where a party has a money judgment the analysis is relatively straightforward: “[T]he amount of the bond or letter of credit shall be fixed at such sum as will cover the whole amount of the judgment remaining unsatisfied, costs on the appeal, interest, and damages for delay . . . .”
There is however one nuance where money damages are concerned. An Indiana statute caps the amount of an appeal bond at $25 million “regardless of the total amount of the judgment.” In the IBM litigation, the State of Indiana argued that the trial court could fix an appeal bond in excess of $25 million. The State posited that, because Trial Rule 62 is a rule created by the Indiana Supreme Court, it trumped any statutory limit imposed by the legislature. IBM countered that the statute imposed a hard-and-fast cap. In agreeing with IBM, the court observed that Indiana Code § 34-49-5-3 imposed a substantive right and capped the bond at $25 million. The court also noted that “IBM earns annual revenues in the billions of dollars,” so it “would have to suffer a disaster of Enron-level scandal to no longer be a viable company . . . .” But this apparent conflict between statute and trial rule is likely to arise in relatively few cases.
Where a judgment is non-monetary—for example the disposition of real estate—the analysis can become more complicated. According to Trial Rule 62, “when the judgment determines the disposition of the property in controversy as in real action, replevin, and actions to foreclose liens or when such property is in the custody of the sheriff . . . the amount of the appeal bond or letter of credit shall be fixed at such sum only as will secure the amount recovered for the use and detention of the property, the costs of the action, costs on appeal, interest, and damages for delay.”
Consider, for example, a specific-performance judgment ordering one party to sell real estate to another party. What factors should the court consider when setting a bond amount? Prudent counsel might suggest the court consider the cost of increased interest rates as part of the “damages for delay” and fix the monetary bond accordingly. Counsel could also consider non-monetary security—perhaps requesting their client be named as an insured on an insurance policy—to mitigate harm from damage to the property during the pendency of an appeal.
Why an Appeal Bond Matters: Some Practical Considerations
The considerations for litigating issues involving both stay and appeal bonds of course differ from the perspective of the defendant (judgment-debtor) and the plaintiff (judgment-creditor). Generally speaking, for the defendant (judgment-debtor), posting an appeal bond allows it to pursue an appeal by delaying execution of the judgment. For the plaintiff (judgment creditor), the appeal bond ensures that it will still be able to collect the judgment even after an appeal.
The defendant’s primary concern is ensuring that it has sufficient resources to post an appeal bond, thereby delaying execution of any judgment pending appeal. Failing to account for the cost of an appeal bond could foreclose altogether a defendant’s otherwise meritorious appeal.
In the case of a large corporate entity, posting a large appeal bond—like one for the statutory maximum of $25 million—may cause discomfort but likely will not foreclose the appeal itself. IBM, for example, apparently has annual revenues in the billions of dollars, so it has the resources to post a $25 million bond, stay execution of the judgment, and pursue an appeal.
However, in other instances—particularly where the defendant is a small business and the judgment is large—the defendant may not have the financial resources to post a substantial bond. If the defendant fails to post the bond, then the plaintiff (judgment-creditor) is free to execute on its judgment regardless of whether the defendant appeals. Thus, a defendant that is unable to post an appeal bond could be forced into financial ruin even though it has an otherwise meritorious issue for appeal.
From the plaintiff’s perspective, on the other hand, the bond secures its judgment pending appeal. Although a plaintiff may have little concern about collecting from a large corporate entity like IBM, the stakes could be different where the defendant is smaller or the judgment is particularly large. If the defendant loses on appeal the bond ensures the plaintiff will still have something to collect. So, for the plaintiff judgment-creditor, an appeal bond virtually assures quick and easy collection of the judgment proceeds (plus post-judgment interest) if the Court of Appeals affirms.
†Graham T. Youngs is an associate attorney at Steuerwald, Hannon & Witham, LLP. His practice includes representing local governmental units as well as civil litigation in state and federal trial and appellate courts.
 See Judge orders IBM to post $25M bond in Indiana welfare case, Associated Press (Jan. 3, 2018), http://www.nydailynews.com/newswires/news/business/judge-orders-ibm-post-25m-bond-indiana-welfare-case-article-1.3735525; see also Order on IBM’s Motion to Stay Enforcement of Judgment Pending Disposition of Appeal and Order on Appellate Bond Amount, State v. Int’l Bus. Machines Corp., No. 49D01-1005-PL-021451 (Marion Cty. Sup. Ct. Jan 2, 2018) [https://perma.cc/L8A6-WTDA].
 Supersedeas Bond, Black’s Law Dictionary (10th ed. 2014).
 See Ind. Trial Rule 62(D)(1) (“No appeal bond or other security shall be necessary to perfect an appeal from any judgment or appealable interlocutory order.”); see also Ind. App. R. 18.
 Dzur v. N. Ind. Pub. Serv. Co., 278 N.E.2d 563, 564-65 (1971) (“[I]n order to stay an execution of judgment a supersedeas bond must be given and approved by the appropriate court.”).
 In the IBM litigation, the trial court noted that “irrevocable letter of credit” has been defined as “a written commitment by a federally insured financial institution to pay all or part of a stated amount of money, until the expiration date of the letter, upon presentation by the [beneficiary] of a written demand therefor.” See Order on IBM’s Motion, supra note 1, at *9 (quoting 48 CFR 52.228-14(a)).
 T. R. 62(D)(1) (emphasis added).
 Ind. Appellate Rule 39(B) (“Except as provided in (C)(2)(b), a motion for stay pending appeal may not be filed in the Court on Appeal unless a motion for stay was filed and denied by the trial court or by the Administrative Agency if it has authority to grant a stay.”).
 App. R. 39(C)(2).
 In lieu of the “order denying the motion for stay,” it may include “a verified showing that (a) the trial court or Administrative Agency has failed to rule on the motion within a reasonable time in light of the circumstances and relief requested; or (b) extraordinary circumstances exist which excuse the filing of a motion to stay in the trial court or Administrative Agency altogether.” See id.
 App. R. 39(C)(1)-(5).
 Although not strictly required by the appellate rules, counsel might consider framing a stay motion in terms of the elements used to litigate injunctive relief: (1) the reasonable likelihood of success on appeal; (2) the harm to the applicant; (3) the balance of harms, weighing the harm to the applicant versus that to the party opposing the application; and (4) the public interest. See 24 George T. Patton, Jr. & Bryan H. Babb, Indiana Practice Series § 8.6 (3d ed. 2017).
 Ind. Appellate Rule 18 (“After the trial court or Administrative Agency decides the issue of a stay, the Court on Appeal may reconsider the issue at any time upon a showing, by certified copies, of the trial court’s action.”).
 Marshall Cty. Tax Awareness Comm. v. Quivey, 780 N.E.2d 380, 386 (Ind. 2002).
 Tr. R. 62(B).
 Tr. R. 62(D)(2).
 Ind. Code § 34-49-5-3(a) (2018).
 See Order on IBM’s Motion, supra note 1, at *6, 8-12.
 See id. at *6-7.
 See id. at *5-6.
 Id. at *8-12.
 Id. at *12.
 Tr. R. 62(D)(2).
 See Order on IBM’s Motion, supra note 1, at *12.