Tricks & Traps: Practical Tips for Your Appellate Practice
Practical Tips for Your Appellate Practice
by Mary H. Smith
attention over the past couple of years than supersedeas practice. Because supersedeas issues arise in
almost every civil appeal, it is important to stay abreast of
these legal developments.
judgment-debtor may supersede enforcement of a judgment
by: (1) ﬁling with the trial court clerk a written agreement
with the judgment creditor for suspending enforcement of
the judgment; (2) ﬁling with the trial court clerk a good and
sufﬁcient bond; (3) making a deposit with the trial court
clerk in lieu of a bond; or (4) providing alternate security
ordered by the trial court.
When the judgment is for money, the amount of the
satory damages awarded in the judgment, interest for the
estimated duration of the appeal, and costs awarded in the
of ﬁfty percent of the judgment-debtor’s current net worth or
twenty-ﬁve million dollars.2
tions have arisen.
cases, attorney’s fees are neither compensatory damages nor
costs for purposes of suspending enforcement of a judgment
peals were split on the issue.4
A. Generally, Attorney’s Fees Are Not
To determine whether attorney’s fees are included in the
In re Nalle Plastics Family, Ltd. P’ship,
See, e.g., Fairways Offshore Exploration, Inc.
v. Patterson Servs., Inc.
pet.) (attorney’s fees are compensatory damages that must be superseded); Corral-Lerma
v. Border Demolition & Envtl., Inc., No. 08
[mand. pending]) (same); Clearview Props.,
L.P. v. Prop. Tex. SC One Corp.
pet.) (per curiam) (attorney’s fees are costs
that must be superseded); Shook v. Walden,
Court used basic principles of statutory construction. The
Court ﬁrst looked to the statute itself to see if it deﬁned
the term “compensatory damages.”5 Because it did not, the
Court relied upon its precedent and the ordinary meaning of
the phrase “compensatory damages.”7
between attorney’s fees and damages by emphasizing the
difference between compensation owed for an underlying
harm and fees that may be awarded for counsel’s services.8
The Legislature also has made such a distinction. Indeed,
the primary statute that designates when attorney’s fees
may be recovered provides that “[a] person may recover reasonable attorney’s fees from an individual or corporation,
in addition to the amount of a valid claim and costs” when
certain claims are at issue.9
Courts interpreting that statutory language have held
“that the phrase ‘in addition to’ suggests that the Legislature
intended to differentiate between attorney’s fees, damages
awarded for a valid claim, and costs.”10
Court conﬁrmed this construction in 2009, noting that “suits
cannot be maintained solely for the attorney’s fees; a client
must gain something before attorney’s fees can be awarded.”11 Therefore, as a general rule, attorney’s fees are not
compensatory damages for purposes of suspending enforcement of a judgment pending appeal.
There is one notable exception to this general rule that
practitioners should be aware of. If the underlying suit concerns a claim for attorney’s fees as an element of damage—a
may properly be included in the deﬁnition of “compensatory
damages” for purposes of superseding the judgment.12
tions of compensatory damages and costs and
need not be superseded); PopCap Games, Inc.
v. MumboJumbo, LLC, 317 S.W.3d 913, 914
In re Nalle Plastics Family, Ltd. P’ship,
S.W.3d at 171.
Id. at 171-72.
Id. at 172 (citing Landa v. Obert,
weight of authority is against the proposition
that the plaintiff has the right to claim his
counsel fees . . . as a part of his damages”)
& Wm. Cameron & Co. v. Am. Surety Co. of
1932) (noting that “[c]ounsel fees incurred in
prosecuting a suit for or defending against a
wrong are not ordinarily recoverable as actual
Id. at 173 (citing Shook v. Walden, 304 S.W.3d
MBM Fin. Corp. v. Woodlands Operating Co.,
In re Nalle Plastics Family, Ltd. P’ship,
S.W.3d at 174-75.
Id. at 175.
BLACK’S LAW DICTIONARY 398 (9th ed.
Id. (citing McClelland v. McClelland, 37 S.W.
B. Attorney’s Fees Are Not Costs.
To determine whether attorney’s fees are “costs” for
purposes of superseding a judgment—a term undeﬁned by
ﬁling fees, jury fees, courthouse fees, and reporter fees . . .
.”14 The Court also noted that both courts and the Legislature have recognized that the term “costs” generally does
not include attorney’s fees.15
Even though attorney’s fees are like costs in that both
curity only for costs themselves—not everything similar to
them. Attorney’s fees are not costs for purposes of superseding the judgment.
held in 2012 that “the plain language of [TRAP 24.1] does
not include a contingent money judgment in calculating net
worth.”17 Indeed, TRAP 24.2 speaks in terms of the judgment-debtor’s “current net worth.”18 Until the liability set
forth in the judgment is certain (after the appellate process
contingent on future
of a liability depends on future events, it cannot be deducted
when calculating a judgment-debtor’s current net worth.19
when a creditor contests a judgment-debtor’s net worth afﬁdavit, the court “must issue an order that states the debtor’s
net worth and states with particularity the factual basis for
that determination.” Courts have construed this to mean
that, “[i]n setting the amount of supersedeas security pend
ﬁnancial condition of each judgment-debtor.”20 However, oftentimes in business litigation, the parties are not individuals or even individual companies, but rather conglomerate
businesses that include subsidiaries and afﬁliates.
Under Generally Accepted Accounting Principles
(“GAAP”), accountants must create consolidated ﬁnancial
(“[A]ttorney’s fees, in this state, in view of
cannot be classed as costs, and that the court
would have no power to so declare such fees as
Civ. Prac. & Rem. Code § 38.001 (providing that
“[a] person may recover reasonable attorney’s
fees . . . in addition to the amount of a valid
claim and costs”) (emphasis added)).
Bus. Stafﬁng, Inc. v. Jackson Hot Oil Serv., 392
(op. on motion) (emphasis added) (citing McCullough v. Scarbrough, Medlin & Assocs., Inc.,
2012) (op. on motion) & Anderton v. Cawley,
statements for afﬁliated companies rather than individual
ﬁnancial statements for each company.21 The rationale is
that consolidated ﬁnancial statements are necessary for a
fair presentation of these companies’ true ﬁnancial situations.
So what happens when a party obtains a joint-and-several judgment against several afﬁliated companies and those
companies seek to supersede the judgment pending appeal?
In setting the bond amount, must the trial court consider
the net worth of each individual entity, or should it consider
only the consolidated ﬁnancial statement of the controlling
entity? Houston’s Fourteenth Court of Appeals answered
Even though courts generally calculate net worth according to GAAP principles, Houston’s Fourteenth Court
held that the GAAP consolidation rule does not displace the
ment-debtor must be determined separately, unless there is
a ﬁnding of alter ego.23 Without a ﬁnding of alter ego, the
court held that using the GAAP consolidation rule would
impermissibly comingle the companies’ assets.24 This hold
Court that consolidated ﬁnancial statements constitute no
evidence of an entity’s ability to satisfy a judgment.25
Houston’s Fourteenth Court also held that a judgmentdebtor does not have to present audited net worth evidence
have been met. Instead, a judgment-debtor can meet its
burden of proof by (1) preparing its own balance sheet and
swearing to its own net worth or (2) presenting evidence
from a bookkeeper with knowledge of the debtor’s records
and a balance sheet of the debtor using GAAP principles to
show net worth.27
The trick under TRAP 24.2 is knowing what is included in the bond calculation and how to establish net worth.
When faced with a supersedeas issue, just remember these
four facts: (1) attorney’s fees are neither compensatory damages nor costs; (2) the trial court’s judgment is just a contingent liability; (3) consolidated ﬁnancial statements cannot
mony is unnecessary. ■
also Montelongo v. Exit Stage Left, Inc., 293
Bus. Stafﬁng, Inc.
G.M. Houser, Inc. v. Rodgers
FASB Accounting Standards Codiﬁcation
(“ASC”) Topic 810, available at http://www.
Hunter Bldgs. & Mfg., L.P. v. MBI Global, L.L.C.,
available at http://www.14thcoa.courts.state.
Id. at 7 (citing In re Smith
in a post-judgment net worth proceeding is relevant to the determination of a judgment-debtor’s net worth for purposes of Rule 24 but may
not be used to enforce the judgment against
the unnamed alter ego or any other non-judgment debtor)).
Akin, Gump, Strauss, Hauer & Feld, L.L.P. v.
Nat’l Dev. & Research Corp.
statements . . . are not evidence that a judgment would have been collectible from Panda
International as of or after February 2000.”).
MBI Global, L.L.C.