Legislative session years in Texas always bring uncertainty into legal practice. When the Legislature passes new laws impacting courts, the Texas Supreme Court has to make rules to give those laws effect. This week Todd Smith and Jody Sanders discuss several recent rule changes and additions from the Texas Supreme Court that will impact trial and appellate lawyers. These include important changes to supersedeas rules, electronic filing of orders and judgments, and permissive appeals. Join them for a detailed breakdown of the changes and how it might impact your practice.
In this episode, it’s just Todd and me. If you read our episode with Jerry Bullard, you probably know that a lot of things went on in the legislature that are going to impact some of our appellate and trial court practices going forward. Todd and I thought we’d take a few minutes and maybe run down some of those legislative changes that have now been implemented by the Texas Supreme Court and Court of Criminal Appeals in the form of proposed or already passed rules. We wanted to hit a couple of highlights and we may have a few more of these episodes going forward as the rules continue to develop and get put out while the court takes on with the legislature has assigned them to do moving forward. That’s the purpose of this episode.
The Supreme Court advisory Committee which is working with the Supreme Court to enable the new legislative changes has given us a lot to talk about and we could do this with guests if we wanted to but we haven’t had an opportunity for the two of us to nerd out on something. This is a good chance to do that. We will continue to monitor what the Supreme Court is doing in terms of releasing preliminarily approved rules.
It would make sense if we talked about some of those things in the ways that they will affect practitioners, trial lawyers, and appellate lawyers alike going forward. The one that we thought we might focus on, and we will have time to talk about some more but there were some changes to the supersedeas rules and the Texas Rules of Appellate Procedure TRAP 24.1 and 24.2.
However, before we launch into the changes, which we think are good changes, we thought it might be beneficial to have a relatively succinct conversation about what supersedeas is and some of the background that will help set up this topic for discussion because we haven’t talked a lot. We haven’t focused very many episodes on supersedeas.
We had Dan Huckabay from Court Surety Bond Agency come on the show back in October 2020. That episode focused on how to get a bond, which was something that a lot of lawyers didn’t know how to do. It’s still very useful information so we refer readers back to Dan’s episode, but that’s only part of what supersedeas involve.
This is a very quick overview. There are a couple of different ways of looking at supersedeas generally. We are talking about something that happens after the signing of either a final judgment or an order that can be taken up on interlocutory appeal. However, the idea in part is to protect the judgment creditor by providing some type of security for either the amount that the debtor has been ordered to pay in a judgment or to maintain the status quo during an appeal from a temporary injunction or something like that.
If you have got a judgment or if you are the judgment creditor, you want some assurance that you are going to get paid and that’s from the judgment creditor’s perspective what supersedeas is all about. It is to try and maximize your ability to secure the judgment so that your collection efforts later are minimized. However, from the debtor’s perspective, you don’t want any more interference with your business operations than you have to have having suffered an adverse result on appeal maybe looking at a big dollar judgment, lots of damages, and so forth to pay.
From the judgment debtors’ perspective, what you want to do is you want to prevent the judgment creditor from using the methods that are provided for in the rules of civil procedure regarding the execution of a judgment post-judgment discovery. Also, other kinds of collections processes can be a hassle from judgment debtors’ perspective. Those are the two different viewpoints that courts have to consider when looking at these issues.
To overview what’s potentially involved in enforcing a judgment from the judgment creditor perspective, one thing that people worry about is, “I have to supersede this right away because otherwise, I’m going to start losing property.” That’s not true because we have built into our rules that you can’t get a writ of execution until 30 days after the judgment is assigned or a motion for a new trial is decided.
While it is an important issue from the Judgment debtors’ perspective, you need to be planning. It’s very unlikely there’s going to be anything that’s going to happen immediately after the judgment is signed but one thing that can happen immediately after is the filing of an abstract of the judgment, for example, the deed records in the county wherever the judgment debtor owns property. That doesn’t do anything immediately either but it does create a judgment lien.
That’s one reason to supersede a judgment is to undo an abstract or prevent there from being a judgment lien attached to the property but there are also things that we don’t always think about like getting a turnover order under the Civil Practice and Remedies Code. That’s a powerful remedy for a judgment creditor to go and get non-exempt property.
There are things that we don’t deal with all that often in our practices like garnishing property or garnishing wages and things like that, but there are a few methods that can make it inconvenient for judgment debtors like post-judgment discovery, for example. You will often see discovery that’s authorized under the Rule of Civil Procedure 621a. You can do anything you can do leading up to the judgment discovery-wise to post-judgment to get out whatever the judgment debtor’s assets are.
There can be a lot of written discovery that can be pushed in judgment depositions. You feel for clients in that situation because the signing of the judgment isn’t the end. To some degree, it’s just the beginning. There are some other provisions like Rule 628 that allow early execution if there’s an affidavit stating that the judgment debtors are about to transfer or hide property. In my experience, that’s not used all that often, but that’s another method that can be used to try and get at the judgment debtor assets.
That takes us to the basics of how to avoid those things, the rules for superseding judgments. As we know, filing a notice of appeal unless you are a government agency or government entity is not going to be enough to supersede the judgment. We would have to direct our readers to TRAP 24.1 which lays out the basic methods of superseding a judgment. Those are filing a written agreement to supersede the judgment, a “good and sufficient bond,” which is the focus of Dan Huckabay’s episode with us. Also, cash deposit in lieu of bond or alternate security order by the court.
I have litigated some of these alternate security issues and other issues throughout my career and you can spend a lot of money from the client’s perspective on either side of this. Looking at those basic ways though that’s not our focus in this episode. Let’s talk about what has to be superseded. A lot of us who have done this type of work can almost recite this rule for memory. What you have to post security on is an amount equaling the sum of compensatory damages awarded in the judgment. It’s one element. The second is interest for the estimated duration of the appeal which is another cost.
It used to be a lot a lot more than that. It used to have to supersede the entire amount of the judgment but many years ago now, the legislature removed that to where you only have to supersede those things, compensatory damages not punitive damages, and not treble damages under the DTPA, those sorts of things. This is one example and we are going to talk about another one of the legislature making decisions that make it easier for judgment debtors to appeal and not have put more of their property at risk or put up as collateral than it has to be.
Another feature of that 2003 change was to put caps on the amount of security that had to be brought. For money judgments, the amount must not exceed less than 50% of the judgment debtor’s net worth or $25 million. This is another very ripe area for litigation and you have seen this. There’s a big disagreement about what someone’s net worth is.
That can be its huge fight with its own separate discovery and evidentiary hearings and all that because of challenge. Essentially, the trial court has to set a net worth so both sides are going to have to put on evidence to get there.
It took a while for this to shake out, but it’s pretty clear now that if you file what we call a negative net worth affidavit, it means that if you can show that you are your net worth is less than zero, then that is de facto supersedeas. There’s a provision in the rules that says that if you are the judgment creditor and you don’t like the net worth, then you can certainly challenge that. That’s the process that you are alluding to. In my experience, these are like temporary injunction hearings. There’s a full presentation of evidence. The trial court has to make findings. It has to pick a number of what the judgment debtor’s net worth is.
That’s exactly my experience.
I have advised clients to hire a forensic accountant because you are in for a fight. This was a good rule because companies were at risk of bankruptcy. If they couldn’t supersede the judgment, then all the devices that we talked about could have been employed to go and get their assets. Between the legislature and to some degree, the Texas Supreme Court, the trend over the last many years has certainly been to make it easier for judgment debtors to appeal in the supersede judgments.
However, it is important to remember that just because there’s a bond set, just because there’s a net worth affidavit whether it’s negative or not to establish the supersedeas amount doesn’t mean that it’s fixed in stone. There’s a review process built into the rules. You can file a motion to review the security amount in the court of appeals. There can be a whole nother round of essentially appellate briefing addressing this narrow issue of security on appeal.
It’s a lot like its own little mandamus proceeding while ostensibly the whole appeal is going forward too.
We could spend a whole episode talking about all this stuff because it’s super interesting. As we suggested, it’s something that true appellate nerds like. It’s worth mentioning too, just briefly before we launch into the changes that we have this whole idea of non-monetary final judgments. This is where it gets tricky because you can do the math and figure out, “I have got an expert and an affidavit that says, ‘My client’s net worth is X,’” but when you don’t have a money judgment, the rules say that the trial court must fix the amount of security that the judgment “debtor” must post.
That’s where you get into a soft area where the trial court has a lot of discretion. This hits when you are dealing with temporary injunctions. It’s the best example because, first of all, the idea of a TI is to preserve the status quo. If you get that, what are the circumstances under which that TI can be superseded on appeal so that whatever was happening before the TI can return to the state of being as it were?
These are difficult issues to litigate. I guess where we can wind this episode up is with something that we say fairly often which is, “Don’t try this at home.” If you are dealing with these issues as a litigator or as a trial lawyer, at least call your friendly neighborhood appellate lawyer who’s got some experience with this. You can read the rules, but there’s no substitute for talking to someone who’s litigated these issues before.
It’s unique, special, and a little bit strange.
It’s all of those things. Like so many things that we as lawyers generally do now, it’s very research and writing-intensive and the documentary evidence needs to be shorted up or else you run the risk of, “It’s all fine and good,” depending on which side of the issue you are on. It’s fine and good to have gone and gotten this temporary injunction but if you lose it, the other side is able to supersede it.
You need to be prepared that getting a TI isn’t the end of the road. You have got to that’s right you prepared to deal with the supersedeas issues on appeal. That’s probably as much depth that we need to go into for background and to remind ourselves and our readers of all the different things that are in play. Also, frankly, why was the rule changed to TRAP 24.1 and 24.2?
I think that that’s right and I can’t remember how many years ago now. The Texas Supreme Court had a case called in re Longview Energy that was a seminal mandamus on supersedeas issues. One of the things that the court went at length to talk about was that Texas is and has historically been a debtor-friendly state. That is reflected in our supersedeas rules. Todd mentioned the courts have to strike the balance.
In our state, the legislature and courts have struck that balance in favor of the judgment debtor. In Federal court, you are pretty much going to supersede the whole judgment, but here, as Todd said, it is compensatory damages, which is truly damages. It’s not attorney’s fees. It’s not punitive damages. You see some eye-popping judgments that could be tens of millions of dollars, but when you get down to what the actual supersedeas pieces for your client, it can be a much smaller number.
It is not necessarily insignificant, but some of the changes to the rules reflect the policy balance that courts and the legislature have struck. I know saying policy balance in the term of courts would probably make some of our new Supreme Court justices blanch, but it is because these rules reflect legislative policies put into action.
As Todd talked about you, there are several ways you can do it. The one that was always the most nebulous and unknown in the rule 24.1 context was alternate security. What did it mean? I will tell you I have had it come up in several cases and it’s not clear. Courts had discretion to allow or not allow, but the idea behind it was, let’s say that you have a client that for instance owns a bunch of real estate, and maybe that real estate gives them a pretty significant net worth but it’s not liquid. It’s not something that they can cash in and may create problems for them to do a bond because they can’t necessarily generate revenue that’s going to pay the bond premium as well.
If you had that land as collateral potentially, the idea would be that you pledge that is alternate security because it could be a very significant part of a judgment debtor’s net worth. If it’s unencumbered, it’s not going anywhere. They are secured to the same extent as would be maybe a bond company that’s going to use that same land as collateral but then also charge a premium on top of it. Things like securities, stocks, bonds, and things that can be pledged that have intrinsic value don’t necessarily have to be liquidated at a loss.
That was the idea. In the cases I have had it come up in, it’s never worked because, on the one side, you have the judgment debtor saying, “I have these assets I want to pledge.” Usually, you have the judgment creditor saying, “I’d prefer a bond because then I know I’m going to get cash and I’m not going to have to be the person that’s in charge of either taking possession of this land or liquidating this land trying to sell it. I’d much rather just have the bond,” which I completely understand from a practical perspective.
It was up to a trial court as to what you do with this. That’s why I never saw it aloud because if they didn’t allow it, it’s an abusive discretion standard and I never saw a court of appeals overturn that on the alternate security front. In these rule changes, the legislature and by extension, the rules that the court wrote have given us some guideposts for alternate security.
What’s not clear to me because the way that the rule reads now or will read is, that you can provide alternate security under rule 24.2e which is the provision I’m going to talk about or ordered by the court. This leaves open the possibility that what I’m about to tell you is not the only way that you can post alternate security, but it’s going to be probably the most common way going forward. There’s still some wiggle room for ways to get alternate security outside of this context, but 24.2e is going to be the way going forward that you are going to see alternate security used.
What it says is it’s going to apply to a judgment debtor with a net worth of less than $10 million. I think the idea of this is to not necessarily benefit people with high net worth, a lot of assets, large companies, and things like that, but these are the people. I use people collectively talking about entities and people who are going to be the most impacted by a significant judgment. Someone who may have a high net worth, or what a lot of us would think of as a high net worth, but less than $10 million still may have a real crunch trying to figure out a way to put up either half of their net worth or the judgment amount.
Also, getting a bond and being able to pay bond premiums. This gives them away if they have assets that could be used to satisfy their supersedeas obligations. To do that, if they have less than $10 million net worth which is talked about can be its fight but if you can cross that threshold and you have evidence to support that, then the judgment debtor has to make a showing of the posting security and the amount under whatever it is.
Whether it’s half the net worth, the judgment amount, or compensatory damages would require the judgment debtor to substantially liquidate the judgment debtor’s interest in real or personal property necessary to the normal course of the judgment debtor’s business. This means what I talked about. If you have for instance a lot of your net worth tied up in land that you can’t necessarily give over or liquidate or turn into cash, this gives you a way to say, “I have a high net worth. If we posted half of that, it would secure the judgment but to do so, I’m going to have to sell off all my land holdings to come up with the cash to be able to post a bond and to continue to pay the bond premiums going forward.”
If you can make that showing, the trial court has no discretion and has to allow the judgment debtor to post that alternate security with a value sufficient to secure the judgment. This does give an avenue to go outside of the traditional bond route and to avoid the bond premiums that are not recoverable in Texas State court. They may be in the Federal court but if you look at what bond premiums are on or if you have to get a letter of credit, you are talking somewhere between 1% and 4% of the amount of the bond every single year. If you start doing the math on that, it adds up very quickly over the 2 or 3 years it can take.
I wonder why our legislature hasn’t conformed Texas law to Federal law on that. Granted, that’s a big hammer. I have been in Federal court when there’s been a loss and suddenly, you are looking at a large bill as part of the bill of cost for that bond premium. It can be devastating. What it means is it may even encourage more resolutions of significant cases on appeal in Federal court.
As you pointed out, we don’t have that in state courts. What we have in terms of appellate costs is usually pretty nominal for the most part. I’m curious as to, and I don’t remember. Maybe we should have asked Jerry this when we had him on last time, but what has been the movement toward bringing Texas law into alignment with Federal law on that? I don’t know the answer off the top of my head. I did also notice as you were talking there about that sub-part too that there’s no discretion. The word must is used which is the new shall.
That is a change they keep making in the rules in Texas they cross out this shall and put in must instead.
I don’t think there was any ambiguity in shall but that’s another debate. As you pointed out, the first level fight here is, “Is your net worth less than $10 million?” You can count on a fight happening with that.
In Texas, you cannot use the judgment amount to reduce your net worth. If you have a net worth of $10 million in a $10 million judgment, your net worth is not $0. Your net worth is still $10 million for judgment supersedeas purposes.
People keep trying.
I know they do and maybe one day the Supreme Court will say it’s okay, but so far the courts of appeals have rejected that pretty uniformly.
It all comes down to the generally accepted accounting principles. Any forensic accountant that you get to testify looking at what are truly GAAPs or Generally Accepted Accounting Principles is going to say that this contingent liability is not in the debt factor.
It’s hard to say it’s anything but contingent when you are also appealing it and challenging it at the same time. It does seem to be a little bit inconsistent to both positions but you leave that to the experts who can say what GAAP requires.
I do like the fact that there’s no discretion because I have been in a situation where it was exactly the scenario that you described. It was a client who had land or other assets. Not securities, but interest in a limited partnership. We were having a hard time figuring out how to convert that interest in a limited partnership into alternate security and the best argument we could make was he could pledge it as an asset.
You then have the issue of, “Are you able to pledge that asset? What other encumbrances are on it? What does the partnership agreement say?” There are a lot of limitations on that but if you are dealing with a straight-up situation where your clients have land, real estate and it’s got value, yes, execution and getting paid is going to be a lot easier if you are just talking about a bond for the reasons you said. It’s not to mention the fact that one thing that appellees need to remember to do is to request the judgment be rendered against the surety that the rules provide for.
That’s something that gets overlooked a lot. If you have got a bond situation where there is, a supersedeas bond in place, as an appellee, don’t forget to do that. I like how this is shaping up to make it better for judgment debtors. $10 million is a lot of money but this is not Microsoft, Amazon, or something like that.
You are right. $10 million is a lot of money, but for example, if you live in Austin, Texas, and have owned your house for about fifteen years, you may be surprised at what your net worth might look like on paper. It adds up quickly for people who may have a small business or are a little bit older and have some interest in oil and gas properties. The numbers come up quicker than you think they do. I think this applies to a lot of people.
That’s the problem that you have to show and another thing that’s in the rule which is sub-3 is that during the appeal, if you have pledged your alternate security, the judgment debtor gets to continue to manage using received earnings from whatever it is you have pledged in the normal course of business, which was another place that was a little bit unclear before. “You post this land. What happens if you get rents and revenues? Does that go to the judgment debtor? Does that go to the creditor?” This makes it clear that it’s the person who has pledged the land gets to continue to use that.
That’s a good clarification. When I first read this sub-part, I thought it meant something else because I have had a situation where you are not supposed to be hindered from transferring assets in the ordinary course of business. I had a client who was accused of fraudulent transfer and he ran a real estate speculation organization. That was their business. It is transferring real estate but this doesn’t quite go to that. You have made clear to me that what this gets at is if there’s any income generated off the property that’s pledged, that stays with the judgment debtor.
For example, the person that I see as one of the ones that this is intended to benefit. Let’s say somebody in West Texas who owns a lot of land and maybe has a ranch or something, you are using that land to raise cattle. If you sell a cattle off of that, you can keep the money from that. You may have some oil and gas interest on that property that is paying you royalty interests or whatever it is.
You can continue to use and reinvest those revenues, which in the long run probably benefits the judgment creditor to some extent because it’s going to make sure that you keep your net worth and do not have to pay bond premiums. You are using up your available cash and you end up with whatever you have left at the end of it.
Again, it’s a good rule but you think about gambling with your real estate. That’s what this is. You are in a position as a judgment debtor where money judgment is enforceable pending appeal unless you supersede, as we talked about. You either have to follow the general rules of supersedeas which is to put up a bond that involves a premium as you said.
You put up a cash deposit which involves allocating whatever is I’m sure a significant amount of your available cash and putting it in an interest-bearing account in the court registry or in a CD or something like that. You can reach an agreement with your opposing counsel on that. The bottom line is it’s never a good thing to be the judgment debtor.
Not and I’m not suggesting that.
I know you are not. This is a good solution as we said, but again, what we need to remember here and I have touched on a little bit is just because this rule is here, it doesn’t mean the opportunities for advocacy have gone away.
No. If anything, they are now going to be even a little bit greater because you have first the net worth question and then you now have to put on the showing that it’s going to require you to substantially liquidate your interest in real or personal property necessary to the normal course of your business. Those are several elements that are going to have to be proven with testimony and with evidence probably with some expert testimony as well about rents, revenues, costs, and available cash. You will probably have to have an accounting expert or maybe even a bank expert or supersedeas person to talk about the cost for letters of credit, bond premiums, and all that run.
That’s 100% correct. New legislation so often we see as full employment act for appellate lawyers, at least, in the short term, but this is one where I do think this benefit is going to come with some cost. The cost is going to be if the judgment creditor is more than likely going to fight you on net worth starting with that. As I touched on, if you are talking about something in the neighborhood of $10 million or even considerably less than that, as a trial lawyer who is trying to litigate this issue, I would recommend that people do not rely on their clients to establish net worth here.
You should have books and records, profit and loss statements, balance sheets, and things that an accounting expert can look at and give you credible testimony of what the client’s net worth is. It seems simple, assets less liabilities, but as we have talked about, you still have folks trying to slip in the amount of the judgment as being liabilities. Again, the standard is generally accepted accounting principles and who’s qualified to testify about that? Not me.
Also, to your point, if for instance one of their significant assets is an interest in a limited partnership, how do you value that, and the answer is, there are a lot of different ways you can do that. You probably need someone with the expertise to be able to come in and explain under generally accepted accounting principles how you got there.
That’s the alternate security piece which we will probably see used more because it was so hard to get it in the past. I don’t know how much but when you are talking about the appellate lawyer full employment part of this, it is subsection F and this is a huge change for anyone that has done bonds in Texas for very long. It’s because the rule in Texas forever has been, that if you appeal a judgment and you win in the intermediate court of appeals, it does not change your supersedeas.
For example, you have a $10 million judgment from the trial court. You get that substantially reduced or you even get it rendered to a take-nothing judgment in the intermediate court of appeals. Your client still has to maintain whatever supersedeas they had in place on that $10 million judgment until the Texas Supreme Court review process is complete which has always seemed a little weird if you think about it because you have appealed.
However, the logic behind it and I get it is, that a court of appeals judgment isn’t final until the Texas Supreme Court has had it’s say or it hasn’t gone to that step and the mandate has finally been issued. All the re-hearings are done, but there’s a real practical effect in there that your client can be spending tens and hundreds of thousands of dollars in the meantime on bond premiums.
Subsection F finally fixes that. If you have an appeal and the appellate court reduces the amount of judgment that the trial court used to set the bond or deposit. At that point, the judgment debtor can go back while the appeal still pending. Whether it’s at the court of appeals rehearing stage or at the Texas Supreme Court stage ask the trial court, which all the supersedeas enforcement determination takes place in the trial court. The court of appeals wants no part of it unless they are doing a review of what’s trial court has done.
The trial court gets to re-determine what the correct amount of the bond depositor security could be which can be a huge change going forward for people that may help out judgment debtors. It’s not one that judgment creditors are going to like necessarily because it does reduce some leverage that they have. However, it’s one that probably strikes a pretty common sense balance that if you have won in an appellate court, then you probably deserve to have that re-determined at the trial court stage.
It does make a lot of sense. What happened in the trial court was technically a final judgment but if your final judgment is reversed or modified, it’s not final anymore. It’s a sensible change. Thinking back to your basic property law, do we want money tied up doing nothing for years potentially? While an appeal gets decided, how much do we want to bank on whether there’s going to be a Texas Supreme Court review when statistically the odds are very low that it’s going to happen? I agree. This is another example of something that did need to be changed and I’m happy that the legislature did it. It also provided appellate lawyers some more work.
I will throw this out there. I have represented clients on both sides of these issues as judgment creditors and judgment debtors. One thing for both sides to think about is when you are coming up with supersedeas, there are the methods that a judgment debtor can use to force supersedeas essentially and they get to do that. However, think about the practicalities. Todd and I mentioned the bond premiums, for example. If you have a client that has a decent net worth and can find a way to supersede the judgment but it’s going to require them to use up all of their available cash and start eating into assets to pay bond premiums, think about it as the judgment creditor, if that makes sense for you.
It’s because at the end of the day, if what you are essentially left with is mostly exempt property, does it make sense to require them to do that when you might be able to get some type of cash or some resolution because you can come up with an agreement to supersede the judgment which could be them paying over some cash to you for you to waive the requirement of a straight supersedeas fund.
Be creative and practical when you are looking at this from the outset or even later on in the appeal if it turns out that it’s creating issues because these things can cost a significant amount of time and money to litigate the supersedeas’ stuff. As Todd and I mentioned, the motion to review process can be like a mandamus. It can take a lot of time, money, and effort from both the parties in the trial and appellate courts. Consider if that practically makes sense even if it’s legally permissible.
The first thing I advise trial lawyers who reach out to me on these issues to do, or at least, I ask the question, “Is there any possibility that this can be handled by agreement?” A lot of times, by the time you have been through a trial, the parties don’t want to cooperate. That’s pretty short-sighted.
It could be the time I am supposed to puff up and say, “We are going to go collect everything now.” Depending on how the parties have conducted themselves in litigation, it probably is a pretty good predictor of what the response would be. I have seen it where the parties couldn’t stand each other and there was never going to be any agreement.
There is a ton of leverage in being a judgment creditor because even if it gets superseded, it doesn’t necessarily stop the post-judgment discovery. The trial court still has the discretion to allow that. It does create some leverage if you are trying to get a case settled or resolved.
Once there’s a supersedeas of whatever kind that’s sufficient under TRAP 24, I think that should moot the discovery, if there is any out there. However, it does it does stop every other method. This is a black-or-white issue. You have either superseded or you haven’t under the law but it’s like everything else in litigation. If you can figure out a way to not fight about it any more than you have to, it goes against our nature sometimes because we are trained to fight.
You have to think ultimately about what’s in the client’s best interest. I will say that sitting on the judgment creditor side of this, yes, the legislature has made it easier and better for judgment debtors, but you still have some powerful weapons at your disposal as a judgment creditor particularly, turnover receiverships.
We haven’t even talked about fraudulent transfer lawsuits. It’s something else to be mindful of. That’s beyond the scale of our discussion, but there’s so much satellite litigation that spins off of this. It was exactly what the Texas Supreme Court was trying to avoid, and not only the Supreme Court. These changes come from the legislature, but the legislature and the Supreme Court are of one mind on this issue.
You don’t want to spend money litigating this stuff. You want to spend your money litigating the merits. Bottom line, whichever side of the situation you are on, strongly consider whether there’s any ground for agreement and I would suggest don’t disagree just to disagree. However, at the same time, it’s a case-by-case decision.
You have to be assured that what you are getting from the judgment debtor if the judgment creditor is correct, honest, truthful, and legitimately represents what they can or can’t do. That’s part of your duty to your client to make sure that you know it you understand and you believe it. There are a lot of caveats here, but you are right. As a general principle, it can take a lot of time and resources that could better be used elsewhere to have some of these fights when maybe you don’t have to.
Before we move on from this rule change, I do want to say that we ought to point out. This is the order from Miscellaneous Docket 23-9062. This rule change and all the supersedeas issues, the rule is out in the comment period but the rule change is anticipated to take effect on January 1, 2024. The Supreme Court has followed its more traditional path of releasing proposed rules, allowing time for public comment, and then the effective date of the rules being a little bit later than some of the ones that have been released lately.
Before we move on from this set of rules completely, we have talked about this a little bit during our last episode with Jerry Bullard, but it is important to note that this TRAP 24.1b2 has been changed to make a supersedeas bond effective upon filing and not when approved by the trial court clerk. We covered that last time but that is a noteworthy change. It makes it easier and simpler procedurally to get a bond in place without having to wait on a clerk to apply their signature when it makes no difference at all on what’s being done.
A party can still challenge it if you think whatever was filed doesn’t meet the statutory requirements or isn’t a proper bond. You can still file a motion to get the court to review it and see if it’s true but it does make it a whole lot quicker that once you file it, it’s effective.
I have seen parties want to challenge a bond because the surety wasn’t sufficient. “They didn’t have an AM Best rating of four stars,” or whatever it is. It’s good to not have that lay in the hands of the clerk. If someone wants to challenge the sufficiency of the bond. You don’t have to be a $1 billion bond company to sign a supersedeas bond. You can be an individual.
What this does to me is it puts a bond in the same position as a negative net worth affidavit. It’s effective immediately, and then you have the failsafe provisions and the rules that allow challenges. If there are problems, you are free to raise those as a judgment creditor and for the trial court to do something about it. If you don’t like what the trial court did, there’s a process for getting the Court of Appeals to review it.
That’s all we have to say for now on supersedeas. Do you want to talk about some of these other rule changes that have been announced? We have the final rules now in Miscellaneous Docket 23-9071 involving Rules of Civil Procedure 21, 165a, 239a, and a few others including the rules on findings of fact, conclusions of law, Rule 306a, and a few more. These are notable.
This is the case when the Supreme Court announced these rule changes, it made them effective immediately before the comment period. However, now what the court has done is it’s taken to account public comment and gone ahead and issued an order declaring these changes to be final. Some of these are worth talking about.
I think that’s right and we don’t have to go through every one. The gist of all of these changes is the new requirement that the trial court has to send through some electronic filing service provider the actual orders, notices, or judgments that it signs which has not been standardized across Texas’ 254 counties before now. It very well could be you file something in a case somewhere and you don’t get a ruling.
It turns out the court signed and ruled on it. It went into the court’s file. Your time for appeal or some other deadline was running from the time of that order and you don’t find out about it until after that period passes. That has been a problem for years and years. As long as I have been practicing law, that’s been a problem and it varies wildly by county and by judges. There was no standardization. I think that this is the attempt to finally get that to happen by requiring the court to send out these orders through the electronic service provider when they sign them in the interim.
What we have been hearing a little bit, I have got some on-the-ground intel that this rule was supposed to go into effect and be implemented on September 1, 2023. We are getting reports over Twitter that some larger counties were going to have a difficult time implementing this on time. One cautionary tale I would say is this is great. I love it. This is something that the judicial committee on information technology has been trying to get adopted for quite some time either through a rule change or through something on the electronic service provider end of things.
This is mostly what JCIT was wanting but I don’t think if you are a lawyer with cases in one of those places that has been historically not provided copies of orders, I would wait a little while longer before I rely exclusively on this rule. It’s going to make things so much better in terms of maintaining your case files and keeping your staff from having to make ten phone calls trying to find out if an order has been signed in a rural county.
Let’s face it. It’s typically a rural county where this happens, although not exclusively. It was especially tricky in the rural counties that didn’t have great online docket systems. It was a phone call. You had to call the clerk. I have to think that at the end of the day, this is a good rule for clerks, too because they control the whole process of releasing an order into the eFiling system. It does put the burden notably on the clerk and not on the trial courts.
That’s who we are talking about being affected here, but there has to be an offset between the reduction in phone calls to the clerk’s offices, the additional effort in uploading, and whatever you have to do to get an order into the eFiling system. You could design a process for that as a clerk that wouldn’t chew up hours out of your day. I wouldn’t think so. The trial court signed a lot of orders. There’s no question there. We need to be mindful.
This does add something of a burden to the clerks and JCIT is going to be looking at that. Part of this very order in paragraph five charges JCIT with studying and making recommendations on copying court orders, notices, and other documents in civil cases to re:SearchTX. That’s what this is designed to do. That was the problem. re:SearchTX was created and designed as a PACER-like system for Texas state court cases where you could go and look at documents and download them even as a non-party.
The big glaring hole in that system was that because courts were not eFiling their orders, the orders were not getting into re:SearchTX. You couldn’t rely on it that way. It’s frustrating even now to get involved in a new case and try to figure out what’s going on. The trial lawyers are busy. They don’t have staff. They can’t just share their file with you for whatever reason or their file is not maintained the way you would want it to be. You can go and get all the pleadings off of re:SearchTX, but you cannot go and get all the orders.
Order as we know and what we do are everything. A judgment is something that’s going to be challenged or a ruling on a summary judgment. The nuts and bolts of the case are the pleadings, but what the trial court does and how it exemplifies its decisions through orders is everything. We can’t quite yet count on all clerk’s offices being in compliance with this rule, but I know JCIT’s meeting soon. It’s the first meeting that we would have had since these rules were announced in the legislative session.
I know we are going to be talking about how we can make it easier for clerks to comply with this and how we get the message out to clerks that they need to do this. What we hear from them a lot in meetings, and this is all public record. I’m not giving anything away is, “It’s great for the legislature and the Supreme Court to tell us that we have to do something but they are not giving us any money to do it with.”
It does it does create a burden for clerks but once this is fully implemented, it’s going to be great for so many reasons. It’s going to make informing your clients easier because you are going to be able to forward stuff that wasn’t coming into your inbox before. You are going to be able to download it straight to your system instead of having to go in and get it and scan it. I don’t want to say it’s a sea change. That’s a big phrase but it is an extremely important accomplishment and it will help make re:SearchTX what it was supposed to be.
That is the big takeaway here is that this process once implemented is going to give you electronic notice of orders, judgments, and findings of fact. The things that necessarily impact your deadlines, particularly on appeals. Keep an eye out for that but until it’s fully up and running, keep doing your due diligence and don’t rely on the fact that this rule exists going forward.
Moving on through the rule changes in the same order, as you suggested, what you see is a lot of changes made to conform existing rules to the notice requirement. For example, the Dismissal for Want of Prosecution Rule 165a specifically requires notice to be given as provided in what is now Rule 21(f)(10). It’s the rule requiring clerks to send notices through the eFiling system.
That’s a problem if you don’t get notice of a DWOP. It could happen. Now, the clerks are required to give you notice of DWOP using that same method. It’s the same thing. It’s Rule 239a for Notice of Default Judgment. Again, default judgment is another form of final judgment that the deadlines start right away. The clock starts ticking on day zero for getting a notice of appeal or a motion for a new trial on file.
This is going to help cut down on the Rule 306(a)(4) motions for extending the time to file post-judgment motions within certain parameters. What would happen is you would have a situation like we described where someone didn’t get notice of a judgment or the rules to allow for that and allow you to file a post-judgment motion if you can show that you didn’t get a notice within a certain range of time. The numbers for those should go way down. As long as the party is represented by counsel and is getting notice through the eFiling system, I would think that would cure a lot of those issues.
One note on defaults for trial lawyers or appellate lawyers for that matter under the new 239a, you need to certify to the clerk not only the last known mailing address but the last known email address of the party. Update your affidavit forms and stick that in there.
Again, Rule 246, Clerk to Give Notice of Settings. You have to get notice through the eFiling system now that incorporates Rule 21(f)(10) of Trial Court Settings, which is great. Be sure and look at that. It’s the same thing on Rules 297 through about 300 or has to do with findings of fact and conclusions of law. There are some interesting changes in terminology here about trial courts having to send their findings of fact and conclusions of law rather than file them. I’m not sure I understand the purpose of that change but the timeline hasn’t changed.
I guess the notice now runs from the date it’s sent as opposed to being filed in the court’s record. It is weird when was it entered versus when was it filed. When was it effective? I don’t know if under this new rule now. It’s when it was sent.
I’m sure there’s a good reason for that. It was thoroughly debated.
We will have to have somebody on from there to tell what it meant.
This is a 297. There are three shalls struck through that I see in favor of must which, I’m all for consistency. That’s great. A similar change is made to Rule 298 about Additional or Amended Findings, Rule 299 Omitted Findings, and Rule 299a about keeping findings of facts separate from the judgment. There’s Rule 306a that incorporates 21(f)(10) and that’s the requirement that the clerk give notice of a judgment. This requires sending the judgment order. Whereas in the old days, all the clerk had to do was send the postcard by mail. A postcard wouldn’t say what the judgment was but just that there was a judgment. This is an important change. I like this much better. What else have we got in here?
I think that’s it from this one. It’s the same thing for appellate courts, but that has not been a problem. They are pretty good about eSending all their orders already.
That was already happening. We have gotten used to it now after many years of being in a mandatory eFiling jurisdiction. Of interest, I see courts starting to roll out electronic filing rules and criminal cases. I know we have got some folks that we are friendly with on Twitter who lament that the civil lawyers get all the bills and whistles.
Doug Gladden, I’m talking to you. Hopefully, Doug, this is going to be the beginning of something good on the criminal side, too. I know that is something that’s on the JCIT’s agenda. The criminal lawyers ought to have it as good as the civil lawyers for purposes of being able to file and rely on eFiling. Hopefully, that will happen. That takes us to the end of where we thought we might go.
I will throw out one more. We mentioned it with Jerry and it’s on the horizon. I filed this under the not reducing satellite litigation fees but the Supreme Court has amended it pursuant to what the legislature passed, Rule 28.3. Now, in a permissive appeal scenario, a court of appeals has to give specific reasons why it’s denying a permissive appeal. Stay tuned for what that’s going to mean.
Before, you got about a two-sentence paragraph that said it doesn’t meet the standards. Now, I’m wondering if we are going to get a three-sentence paragraph that says it doesn’t meet the standards, and here’s a sentence about why or if we are going to get more. This is because that can then be reviewed at the Supreme Court de novo. If they decide that the court of appeals got it wrong, they can send it back to them and say, “You get to take it.”
I have written on this a little bit and thanks for bringing that up. We talked about a little bit with Jerry and I gave some of my thoughts during that episode. I have got a Texas law book article that talks about this. It’s a great change for lots of reasons some of which I have already talked about on the show. Again, go to the Full Employment Act for Appellate Lawyers, if your argument is going to be that there’s a substantial disagreement over the controlling question of law.
It has to do with, “Is this going to be a potentially dispositive issue,” is the way I like to think about it. If you have potentially a dispositive issue, the inherent meaning of that is that it could be something that guides the conclusion of the case. What better opportunity is there for getting an appellate lawyer involved in your case in helping you to tee that issue up in the trial court and also in the appellate courts? What we have to remember is you have to get not only the permission of the trial court to do this but the permission of the court of appeals too.
That’s getting at what you are talking about whether it’s going to be 2 or 3 sentences. The legislature has seen fit to give the Supreme Court de novo review over that decision. Theoretically, we are going to start seeing our petitions for review focus should be limited to only the issue that the court of appeals erred because it’s an error. This is an important issue. The jurisprudence is still there but there’s no discretion in this decision and the Supreme Court is being charged with reviewing these de novo for an error of law, whether that standard was met or not.
We are going to start seeing decisions out of the court of appeals that have to confront the standard that’s been set that if you are going to deny, you got to explain why. You have to explain why the provisions in the rule weren’t met. I would say it’s going to have to be something more than 2 or 3 sentences.
There’s probably going to be some litigation over that question of how much you need to say before it’s not enough. Whether it gets sent back down because it’s conclusory and the Supreme Court wants more. There are a lot of things that are going to have to be figured out on this.
The de novo standard to me would imply that what we may be more likely to see than the court saying it’s not enough is to say, “No. The standard was met,” and then send it back. We are going to have to wait and see what the courts of appeals do here. Maybe we bookmark this and come back after we have seen it released and dive in. See what’s happening and how the Supreme Court is handling it because it is procedurally different than anything we have seen, this whole idea of de novo review.
It’s like a summary judgment, in that way, but how is the Supreme Court going to handle it? I don’t expect there to be a ton of cases but as I said in the article, if you have clients who are concerned about their net spend on litigation and you have got what you think in your evaluation is a good issue that could from the defense side get rid of the whole case, I would sure be looking at these very closely. It can go the other way. If I’m on the plaintiff side, maybe I’m not so excited about this but from the plaintiff side, what plaintiffs lawyers need to be mindful of is you are going to start seeing more of these and you need to be prepared to respond to them.
Sometimes, you may want the answer too. If it’s truly an unsettled question and you’d rather know now before you spend all the time and money going through a trial, it may be better.
We are going to wrap it up there for now. We are going to keep our eyes open for more rules, and announcements, and I expect we will probably have another episode or two along the same lines of what we have done. Thanks, everybody, for sticking with us, and we will see you next time.
Important Links
- Jerry Bullard – Past episode
- Dan Huckabay – Past episode
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