Current rules create incentives for plaintiffs to aim for steep judgments, block defendants’ access to appeals process

PHOENIX – The Arizona Chamber Foundation today released a Policy Brief that questions whether defendants in the Arizona legal system have adequate access to a fair appeals process.

The Foundation’s paper, Bonds. Appeal Bonds: Protecting the Right to Appeal in the Era of Multimillion Dollar Verdicts, finds that the lack of monetary caps on appeal bonds can prompt defendants to settle with plaintiffs rather than post an appeal bond with a price tag so steep that it could lead to bankruptcy.

At the conclusion of a trial, the plaintiff or defendant has the right to appeal the judgment. But to stay the execution of the judgment and protect assets from collection, a defendant must post an appeal bond. Those bonds are usually set at a level equal to the full amount of the judgment, so in cases with large judgments, a defendant could be forced to cease operations or liquidate assets in order to post the bond. To stave off bankruptcy, defendants often seek a settlement, effectively cutting them off from the appeals process and their full due process.

“Defendants have the right to appeal judgments, but that right is at risk in this era of multimillion dollar judgments,” Arizona Chamber Foundation Executive Director Suzanne Taylor said. “Defendants are often faced with no good options; they either risk financial collapse by posting an appeal bond or they hold their nose and seek a settlement.”

Thirty eight states have made moves to restore defendants’ access to a fair appeals process by placing monetary caps on appeal bonds, and five others do not require any appeal bond, automatically staying the execution of the judgment when an appeal is filed. Arizona is one of seven states that offer no such protection to defendants, which creates an environment for plaintiffs’ lawyers to pursue cases that are intended only to force a settlement.

“Expensive appeal bonds can negatively impact a company’s ability to operate. That’s money that can’t be used create more jobs and engage in other economic activity,” Taylor said. “Placing a monetary cap on appeal bonds – as 38 other states have done – could improve Arizona’s business environment by lessening the risk of being able to appeal an adverse judgment.”

The complete Policy Brief can be read here

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