Putting a limit on the amount of money a businesses has to post as a bond before appealing a decision they disagree with is an issue the New Jersey Civil Justice Institute has been working on for many years. While our legislature fails to act, other states are moving forward on this issue, putting New Jersey at a further disadvantage when it comes to economic development and business growth.
New Jersey’s current rule regarding appeal bonds does not reflect the consequences of contemporary litigation and the current state of the economy. It can be difficult for businesses of all sizes to obtain the financing they need in order to secure large appeal bond requirements, which require most companies to put at least the full amount awarded in a sort of escrow account while appeals are ongoing. Even large employers can have a difficult time doing so, especially in cases where they rent office space and therefore lack the collateral necessary for securing capital. In these cases, final judgment rests more on economic factors rather than it does on both parties trusting that their case has been fairly decided.
These appeal bonds disproportionately impact businesses and service providers that do not own large facilities or possess hard assets against which a bond can be levied, including high tech, bio-tech, and research-based companies all of which are major drivers of economic growth in New Jersey.
While the New Jersey legislature refuses to move legislation forward that would fix this problem (note how A1055/S2052 have both stalled in committee), other states continue to see the value in making sure final verdicts reflect the facts in the case rather than financing options. Maryland recently passed HB 164/SB301, which caps appeal bonds in that state at $100 million. There is an indication that the legislature will consider creating a lower cap for small businesses, potentially $1 million, in future sessions.
New Jersey should take a close look at the impact Maryland’s legislation has on the state’s legal system and business climate if it doesn’t want to fall even further behind.