What is a cost bond in US litigation?
A cost bond (security for costs) is money or a surety bond a court may require a plaintiff to post to guarantee payment of the defendant's recoverable costs if the plaintiff loses. Because of the American Rule, these costs are usually limited to statutory costs like filing and transcript fees, not attorney fees.
When can a defendant require security for costs?
Authority is statutory and varies by state. Common triggers are a non-resident plaintiff or a foreign corporation plaintiff. Some states require bonds in specific actions such as shareholder derivative suits or certain corporate and defamation matters. Federal courts may apply the forum state's bond rule under local rules.
How much is a typical cost bond?
Because US cost bonds usually cover only narrow statutory costs, the amounts are modest, often a few hundred to a few thousand dollars, and much smaller than a Canadian security for costs order that tracks a share of actual attorney fees. Statutory-specific bonds (like some derivative suits) can be larger.
Why are US cost bonds smaller than Canadian security for costs?
The American Rule means a prevailing defendant generally cannot recover its attorney fees, so there is far less to secure. Canada's loser-pays system exposes plaintiffs to a substantial share of the defendant's actual fees, so Canadian security for costs orders are correspondingly larger.