What is a preliminary injunction?
A preliminary injunction is a tool used by litigants to obtain relief from the
However, there is also another, less
cited provision of Rule 65(c), which states that Unless the court, for good
cause shown, shall otherwise order, no restraining order or preliminary
injunction shall issue except upon the giving of security by the applicant, in
such sum as the court deems proper, for the payment of such costs and damages
as may be incurred or suffered by any party who is found to have been
wrongfully enjoined or restrained.
While, on its face, this language
provides that, every time a party files a motion for preliminary injunction, courts
are required to consider whether a bond should be posted, in our experience,
courts rarely impose such obligation. However, we have recently seen courts
request briefing on whether a bond should be required, and there may be a trend
towards giving due consideration to such question. The bond requirement can
shape a party’s decision to seek a preliminary injunction in the first place
and can have a significant impact if an injunction is ultimately granted.
The Purpose of the Bond Requirement
The bond requirement in Rule 65(c) serves to protect a party against whom
an injunction has issued from suffering uncompensated losses. Because
injunctions are often granted early in litigation, before discovery is complete
and before the merits of the claim have been fully adjudicated, there is an
inherent risk that an injunction could later prove to have been improperly
granted. The bond requirement provides a way to mitigate that risk and for the party
against whom the injunction was wrongfully issued to be made whole.
Courts exercise broad discretion in
deciding whether to require a bond and, if so, in what amount. Although there
is limited case law on the issuance of bonds as they relate to preliminary
injunctions, the factors courts consider in determining whether to issue a bond
in similar circumstances are instructive:
1. Likelihood of damages. The central
consideration is whether the party opposing the injunction has shown that it
may suffer damages if the injunction later proves wrongful. Courts generally
require the damages to be adequately supported beyond mere conclusions.
2. Amount of damages. If damages are determined
to be possible, the court assesses the potential magnitude of damages. As with
the likelihood of damages, the party opposing the injunction must provide
support for the amount of damages claimed. The bond that issues should be
commensurate with the amount of damages claimed and supported. Minimal or
speculative damages may justify a nominal bond or no bond at all, while substantial
damages that are properly supported may warrant a higher bond.
3. Financial hardship. Courts may take
into account the movant’s ability to post a bond. Requiring a prohibitively
large bond could effectively deny injunctive relief, even where the moving
party has shown irreparable harm and likelihood of success on the merits and
would otherwise be entitled to an injunction.
4. Balancing of harms. Ultimately, courts
seek to balance the equities between the parties. The bond should provide fair
protection to the party against whom the injunction issues, without effectively
prohibiting the moving party from obtaining an injunction they would otherwise
be entitled to.
Impact on Parties
The possibility of having to post a
bond in connection with obtaining a preliminary injunction has significant
strategic implications for parties considering moving for a preliminary
injunction. The moving party must evaluate not only its likelihood of success
on the merits and whether they may suffer irreparable harm without an
injunction, but also whether it can afford the security that may be required by
the court. For parties with limited resources, the prospect of posting a
substantial bond may deter them from seeking an injunction altogether.
Even where the moving party is willing
to post a bond in order to obtain an injunction, the requirement adds financial
risk. If the injunction is later deemed to have been improperly issued, the
party against whom the injunction was issued may recover damages against the
bond, and the moving party would not be entitled to reclaim that portion of the
bond that it posted. Thus, parties must weigh the benefits and drawbacks of
seeking a preliminary injunction carefully.
Conversely, for parties against whom
an injunction is sought, raising the bond issue can serve as a strategic
deterrent. By presenting evidence of potential damages, the party may persuade
the court to require a significant bond, thereby discouraging the moving party
from seeking an injunction at all or increasing the moving party’s financial
stake in the litigation.
If a preliminary injunction issues and
the court requires a bond, the moving party must promptly arrange to post the
security in the required amount. This can be a logistical hurdle, especially if
the bond is substantial and the moving party must secure financing. On the
other hand, if the court grants an injunction without requiring a bond, the moving
party obtains the full benefit of the injunction without any additional
financial burdens. The absence of a bond typically reflects the court’s
conclusion that the party against whom the injunction is sought failed to sufficiently
prove the likelihood of damages or the amount thereof, or that there was some
other equitable consideration that weighed against the issuance of a bond.
Conclusion
Rule 65(c) of the Massachusetts Rules
of Civil Procedure reflects a balancing act that involves protecting parties
from wrongfully issued injunctions while ensuring that parties are not denied the
potential for equitable relief due to financial barriers. Courts exercise
considerable discretion in applying the bond requirement, guided by evidence of
potential harm and balancing of equities between the parties. For parties
seeking a preliminary injunction, the possibility of a bond is a critical
factor in deciding whether to pursue an injunction, while for parties opposing
such injunctions, raising the issue can be a valuable strategic tool.
A welcome and frequent contributor to
REBA News, Stephen is an associate in the litigation and real estate
departments of Moriarty, Bielan & Malloy LLC. He can be contacted at swiseman@mbmllc.com.
