The Texas Supreme Court has stayed a trial court order requiring a party to post a supersedeas bond in the amount of attorney’s fees and litigation costs awarded under Rule 13, Texas Rules of Civil Procedure, and § 10.04, CPRC (frivolous filings).
In re Reynolds Energy Transport, LLC and Reynolds Transportation, Inc. (No. 22-0912) arose from a personal injury action in which Plains All-American Pipeline and Reynolds were co-defendants. Plains sought sanctions against Reynolds for allegedly filing groundless pleadings that resulted in Plains’ joinder in the underlying lawsuit. A San Antonio district court found in favor of Plains and awarded $428,895.95 in attorney’s fees and defense costs. Reynolds filed a notice of appeal and posted a supersedeas bond in the amount of the court costs ($350). Plains objected, arguing that Reynolds should have posted the full amount of the judgment plus prejudgment interest. The trial court ordered Plains to post a bond in the full amount within 48 hours and applied a 5.5% interest rate, bringing the total amount to more than $478,000. Plains sought mandamus, which the San Antonio Court of Appeals denied. Reynolds is seeking mandamus from SCOTX.
The Court issued a stay order relieving Reynolds of complying with the trial court’s order increasing the amount of the bond while it is considering the mandamus petition. The primary issue is whether attorney’s fees and costs are “compensatory damages” subject to the supersedeas requirements of § 52.006, TCRP. The statute requires the amount of security to equal the sum of the amount of compensatory damages awarded in the judgment, interest for the estimated duration of the appeal, and costs awarded in the judgment. As Reynolds argues in its petition, SCOTX has held that attorney’s fees and costs, though they compensate a party for prosecuting or defending a claim, are not compensatory damages. See In re Nalle Plastics Family Ltd. P’ship, 406 S.W.3d 168 (Tex. 2013) (orig. proceeding) (additional citations omitted). Consequently, Reynolds is not required to file a bond in the full amount of the sanctions award.
Alternatively, Reynolds contends that a sanctions award is punitive in nature (they are designed to deter bad behavior) and, as such, are not compensatory. Another issue of interest in the case is whether the trial court’s order requiring Reynolds to increase the amount of the bond within 48 hours violated Rule 24, Texas Rules of Appellate Procedure, which permits a judgment debtor 20 days to post the increased bond. This is important because Plains is attempting to execute the judgment because it argues that Reynolds did not post any security for it, much less the right amount.
We’ll keep any eye on this case, though it appears to us that Reynolds has the case authority to prevail.