BILL ANALYSIS

C.S.H.B. 4381

By: DeAyala

Judiciary & Civil Jurisprudence

Committee Report (Substituted)

BACKGROUND AND PURPOSE

The small business community has raised concerns regarding reforms to the laws on superseding money judgments. Current law regarding these judgments, which requires a cash bond of 50 percent of a business's net worth, can pose significant concerns for smaller businesses, especially those with assets primarily, if not exclusively, in non-liquid assets, such as real estate or personal property. For these businesses, withdrawing working capital from their primarily non-liquid operations could cripple their ability to sustain the business pending appeal of a judgment. And because they must post security or liquidate their income-producing assets, such as real estate, in order to pursue their right to appeal, these businesses may have no choice but to give up their right to appeal altogether. C.S.H.B. 4381 seeks to address these concerns by providing for a judgment debtor with a net worth of less than $10 million to post alternative security for a judgment.

CRIMINAL JUSTICE IMPACT

It is the committee's opinion that this bill does not expressly create a criminal offense, increase the punishment for an existing criminal offense or category of offenses, or change the eligibility of a person for community supervision, parole, or mandatory supervision.

RULEMAKING AUTHORITY

It is the committee's opinion that this bill does not expressly grant any additional rulemaking authority to a state officer, department, agency, or institution.

ANALYSIS

C.S.H.B. 4381 amends the Civil Practice and Remedies Code to require a trial court to allow the judgment debtor to post alternative security for a money judgment pending appeal in a civil action with a value sufficient to secure the judgment under the following conditions:

·         the judgment debtor has a net worth of less than $10 million; and

·         on a showing by the judgment debtor that posting the amount of security required for the money judgment would require the debtor to substantially liquidate the debtor's interests in real or personal property necessary to the normal course of the debtor's business.

The bill requires the judgment debtor during an appeal to continue to manage, use, and receive earnings from such interests in the normal course of business. The bill entitles the judgment debtor, pending appeal of the judgment to a court of last resort, to a redetermination of the amount of security required to suspend enforcement of a judgment under applicable law or under Rule 24, Texas Rules of Appellate Procedure, if an appellate court reduces the amount of the judgment that the trial court used to set security.

C.S.H.B. 4381 applies only to a civil action commenced on or after the bill's effective date.

EFFECTIVE DATE

September 1, 2023.

COMPARISON OF INTRODUCED AND SUBSTITUTE

C.S.H.B. 4381 differs from the introduced only by including a Texas Legislative Council draft number in the footer.