As part of the 2003 tort reform package, the Texas legislature provided relief for judgment debtors pending appeal, by limiting the amount of a supersedeas bond to the lesser of $25,000,000 or one-half of the judgment debtor's net worth. But there's a catch – this rule doesn't apply in federal court.
Under Fed. R. Civ. P. 62(d), a federal court judgment may be superseded by filing a supersedeas bond. But Rule 62(f) creates an exception: if a judgment is a lien on the judgment debtor's property under the law of the state where the federal court is located, the judgment debtor is entitled to the same stay of execution the state court would give.
For Rule 62(f) to apply, the creation of a judgment lien need not be automatic, as long as only ministerial acts are required for the judgment creditor to perfect the lien. In a 1993 case (Castillo v. Montelepre), the Fifth Circuit held that Rule 62(f) applies in Louisiana, where the judgment creditor must record the judgment with the "recorder of mortgages" to perfect the lien, because that act is ministerial in nature.
But not so in Texas, where an abstract of the judgment, rather than the judgment itself, must be recorded. In MM Steel, L.P. v. JSW Steel (USA) Inc., decided on November 14, the Fifth Circuit resolved a difference of opinion among Texas federal district courts, holding that the slightly more complicated Texas procedure requires more than ministerial acts, and thus does not trigger Rule 62(f). The court also cited provisions of Texas law permitting the release of a judgment lien from homestead property and allowing discretionary judicial release of the judgment lien on property when security for the judgment has been posted and the lien does not provide substantial additional security.
The case was decided over a vigorous dissent, which argued that the steps necessary to obtain and record an abstract of judgment are just not that complicated or difficult. So it is possible, but by no means certain or even likely, that the case will be considered by the Fifth Circuit en banc. Meanwhile, Texas federal judgment debtors must plan on having to file a full supersedeas bond without the benefit of the 2003 tort reform statute. Just as the $25,000,000-or-½-net-worth limitation does not apply, so presumably the statutory limitation to compensatory damages, interest, and costs does not apply, meaning that in federal court, judgment elements such as attorneys' fees and exemplary damages must also be superseded.
A final note: perhaps the Texas Legislature should consider amending the judgment lien statute to provide for the recording of the judgment itself, rather than an abstract of the judgment. That would bring Texas's procedure closer to Louisiana's, although the Fifth Circuit might still hold that the statutory exemption procedures prevent Texas from qualifying for Rule 62(f) relief.
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