Injunction Bonds - When is P’s liability under the bond triggered?

1. Injunction Bonds - When is P’s liability under the bond triggered? • Conventional Wisdom: • When D is subject to a preliminary injunction but then prevails on the merits at trial, she has been wrongfully enjoined, which triggers P’s liability under the bond. • Note FRCP & MRCP essentially get you to the same result here. • FRCP requires P to post bond in payment for costs incurred if D “wrongfully enjoined.” MRCP requires P to post bond for costs incurred if injunction dissolved (Missouri courts hold that dissolution of injunctions usually equals a determination that the injunction was wrongfully obtained). • What if D (as in Coyne-Delany) prevails on the merits at trial due to a change in the substantive law while the preliminary injunction was in place – should courts allow D to recover on the bond?

2. “Wrongfully Enjoined” cont’d • In a trademark infringement case the court issues a preliminary injunction enjoining D from selling his product in 30 states. At trial, the court determines that infringement occurred in only 3 states and narrows the injunction. Has defendant been wrongfully enjoined? • Yes – this is a classic case of D being wrongfully enjoined in at least 27 states. • P instigates a lawsuit and obtains a preliminary injunction. The lawsuit is later dismissed with prejudice due to P’s total failure to prosecute and the injunction is dissolved. Has defendant been wrongfully enjoined? • P files lawsuit and obtains preliminary injunction. The lawsuit is later dismissed because P & D have settled and agree to ask the court to dissolve the injunction. Has D been wrongfully enjoined?

3. If a preliminary injunction is wrongfully issued, can a court nevertheless refuse to enforce a bond that has already been set? • Rarely. There must be a very good reason for the court to refuse to enforce a bond once it has already been set. • Why? If a court can refuse to set a bond (federal) or set it at a nominal amount (Missouri) – why can’t it refuse to enforce it? • For what reason can a court refuse to enforce a bond? • Change in the substantive law (much like in Coyne-Delany) • D’s failure to mitigate damages • A court should not refuse to enforce the bond because P acted in good faith when bringing the lawsuit – bond is designed to protect D against judicial error regardless of P’s lack of malice

4. Does the bond amount limit P’s liability for the wrongfully issued injunction? • General Rule – the bond amount is the limit of P’s liability • Why? Bond is a compromise between P&D’s interests -- alleviates D’s harm from risk of error but also allows P to know ahead of time what liability is. • BUT: • Some other source of law may provide independent liability for P aside from the bond • E.g., malicious prosecution • Some statutes specifically provide greater recovery than the bond amount

5. What damages can D recover on the bond? • D can recover only those actual losses stemming from the wrongful granting of the preliminary injunction/TRO. • Can’t recover damages caused by the litigation generally • What are the kinds of damages caused by the wrongful granting of provisional relief that D can recover? • e.g.,lost profits if operation of business wrongfully enjoined • e.g., storage costs of construction equipment during period construction project enjoined • e.g., maybe atty’s fees related to defending against, dissolving the temporary injunction or setting the bond amount (depending upon the jurisdiction) • recover as damages (not as fees) • unlikely to recover any attorneys fees in federal court

6. Temporary Restraining Orders • What are they? Temporary emergency injunctions (usually last several days at most) that are designed to prevent injury until a preliminary injunction hearing can be held. --I--------------------I---------------------------I----------------------------------------------------------------------------I------- Complaint TRO Prelim. Injnxn Trial Hearing Hearing • Critical showing for plaintiff: • MRCP 92.02(a)(1) &(b)(1) – P must demonstrate that immediate & irreparable injury, loss or damage will result in the absence of relief. • FRCP 65(b)(2) – For TROs issued without notice P must show specific facts in affidavit/verified complaint that immediate and irrep. injury loss or damagewill result before adverse party can be heard • Courts say that the same substantive standards apply to TROs with notice • Note – Courts generally also weigh the other factors relevant in preliminary injunction cases (check jurisdiction to see how treat them) – P’s harm showing is most critical

7. TROs & the Notice Requirement • If Carroll was decided under FRCP 65 or its state counterpart (Missouri/Maryland), would the court have granted the TRO? Why or why not? • Why is notice regarding the hearing so important under the rules? • Does Carroll rely on the rules or is it worried about something else?

8. How often will P actually dispense with notice before getting a TRO? • There is no point in seeking a TRO if you can’t find D to serve it on him/her. • We will deal with this more re contempt – but bottom line is anyinjunction is only binding on someone if they have notice that it exists (that’s another kind of notice requirement) • The need to give D’s notice of the existence of the TRO when issued usually means you can give them notice before the hearing so that they can defend themselves at the hearing too. • When, if ever, will P’s be unable to find D before the hearing but be able to serve D after the hearing w/ the TRO?

9. How much notice is required for a TRO? • With preliminary injunctions: • Notice cannot be dispensed with – see FRCP & MRCP rules. • All preliminary injunction hearings are typically dealt with as written motions on at least 10-14 days notice. These time lengths are generally governed by local rules. • What type of notice is typically required of TRO requests – assuming P is not trying to dispense with notice altogether? • Under FRCP? • Can P wait until the last minute to give notice even if P knows where D is? In what circumstances is delayed notice okay? • How does MO law deal with notice issue?