On motion of a party who is defending a civil claim, the court may order security for costs. MCR 2.109(A). Whether to require security is discretionary and requires a substantial reason. In re Surety Bond for Costs, 226 Mich App 321, 331 (1997). “A ‘substantial reason’ for requiring security may exist where there is a ‘tenuous legal theory of liability,’ or where there is good reason to believe that a party’s allegations are ‘groundless and unwarranted.’” Id. at 331-332, quoting Hall v Harmony Hills Recreation, Inc, 186 Mich App 265, 270 (1990). MCR 2.109 does not “prohibit[] a court from imposing bond on its own initiative.” Zapalski v Benton, 178 Mich App 398, 404-405 (1989) (the trial court did not abuse its discretion in sua sponte ordering plaintiff to file security regarding certain claims that rested upon tenuous legal theories).
MCR 2.109 does not contain an express time limitation for requesting security for costs. Nevertheless, the parties should apply for security as early as practicable. Hall v Harmony Hills Recreation, Inc, 186 Mich App 265, 269 (1990). A party’s delay in bringing a motion for security presumably would permit a trial court to consider laches in the exercise of its discretion whether to grant the requested relief. Goodenough v Burton, 146 Mich 50, 52 (1906).
The trial court is not required to conduct an evidentiary hearing to set a surety bond. Dunn v Emergency Physicians Med Grp, PC, 189 Mich App 519, 523 (1991). A trial judge may set the bond in light of his or her own experience. Belfiori v Allis-Chalmers, Inc, 107 Mich App 595, 601 (1981).
MCR 2.109(B) provides several circumstance in which security for costs may not be ordered. For example, if the party’s pleading states a legitimate claim, and shows by affidavit that he or she is financially unable to furnish a security bond, financial inability is a basis for proceeding without security. MCR 2.109(B)(1). This does not necessarily require a party to be indigent. Hall v Harmony Hills Recreation, Inc, 186 Mich App 265, 272 (1990). In addition, various government entities and employees are exempt from supplying security for costs. MCR 2.109(B)(2).
Courts may consider the party’s “likelihood of success” on a legal theory in determining the legitimacy of a claim. In re Surety Bond for Costs, 226 Mich App 321, 333 (1997). The “‘legitimacy of the claim will [not] always be determinative. The rule clearly allows for sound trial court discretion. We can imagine few cases, however, where a discreet trial court will require an indigent plaintiff, pleading a valid theory of liability, to post security.’” Hall, 186 Mich App at 272.
E.Objection to Sufficiency of Security
“MCR 3.604(E) and [MCR 3.604(F)] govern objections to the surety.” MCR 2.109(A). “In an appeal to the circuit court from a lower court or tribunal, an objection to the surety is heard in the circuit court.” MCR 3.604(F)(3).
Within seven days of receiving a copy of the bond, the moving party may “serve on the officer taking the bond and the party giving the bond a notice that the party objects to the sufficiency of the surety.” MCR 3.604(E). The notice “must be filed as a motion for hearing on objections to the bond.” MCR 3.604(F). Failure to provide notice of an objection waives all objections. MCR 3.604(E).
“On demand of the objecting party, the surety must appear at the hearing of the motion and be subject to examination as to the surety’s pecuniary responsibility or the validity of the execution of the bond.” MCR 3.604(F)(1). “After the hearing, the court may approve or reject the bond as filed or require an amended, substitute, or additional bond, as the circumstances warrant.” MCR 3.604(F)(2). See also MCR 2.109(C).
“The court may order new or additional security at any time on just terms, (1) if the party of the surety moves out of Michigan, or (2) if the original amount of the bond proves insufficient. A person who becomes a new or additional surety is liable for all costs from the commencement of the action, as if he or she had been the original surety.” MCR 2.109(C).
After giving a reasonable opportunity to comply with the order requiring security, the court may dismiss the claim. In re Surety Bond for Costs, 226 Mich App 321, 332 (1997).
A trial court’s decision whether to require a security bond is reviewed for an abuse of discretion. In re Surety Bond for Costs, 226 Mich App 321, 331 (1997).
The trial court’s decisions regarding the legitimacy of a claim and a party’s financial ability to post bond are reviewed for clear error. In re Surety Bond for Costs, 226 Mich App at 333.