You convince the trial judge that your side will likely win on the merits and that in the time between now and trial your client will suffer harm that money can't fix. The judge enjoins the other side — under Rule 65 — from doing the hurtful stuff pending trial. But the court of appeals vacates the preliminary injunction because, it rules, your side waived its right to force arbitration by doing so much litigating before trying the arbitration gambit. Now what?
The Second Circuit held today that your client should in the normal case forfeit the money it posted as a bond. The bond aimed to protect the other side against loss in the event a court ruled the injunction a mistake. The court, as a matter of first impression for it, okayed a rebuttable presumption of harm from the bad bar order. The panel also held that the fees Nokia paid to comply with the injunction could count as damages but that fees for "litigating" the injunction couldn't. Nokia Corp. v. InterDigital, Inc., No. 10-1358-cv (2d Cir. May 23, 2011).
Blawgletter notes, as the court did, that the amount of a bond sets the upper limit on damages for wrongful injunction. Unless you also make out a claim for abuse of process or the like. Which you'll seldom find yourself able to do. Mainly because you have to show something like that the other side had no plausible basis for a claim.
Bonus: The Seventh Circuit also issued an opinion this week on preliminary injunction issues. Its case involved a dispute over a software license and the licensee's right to prevent the licensor from selling itself to someone the licensee didn't like or trust. The district court chose not to enjoin a merger between the licensor and a competitor of the licensee, citing the "uncertainty" of delaying the union as weighing against an injunction. The Seventh Circuit reversed. It held that the need to wait for an arbitrator's decision on the licensee's right to exercise a right to acquire the licensor hurt neither side more. The panel went on to impose 11 conditions on any merger between the licensor and the licensee's competitors. All of them sought to prevent the merger from becoming a fait accompli. The court deemed the 11 a series of "hold-separate" requirements. Roche Diagnostics Corp. v. Medical Automation Systems, Inc., No. 11-1446 (7th Cir. May 24, 2011).
The panel addressed the bond requirement thus:
Injunctions can injure litigants. MAS’s investors certainly are injured by both the district court’s injunction and our hold-separate order. And preliminary injunctions, which may be issued in haste, are more likely to be erroneous than injunctions issued at the close of the litigation. A party injured by an erroneous preliminary injunction is entitled to be made whole. Established doctrine has it that the damages payable to a person injured by an erroneously issued injunction cannot exceed the amount of the bond. Judges therefore should take care that the bond is set high enough to cover the losses that their handiwork could cause. A limit of zero–the upshot of an injunction without a bond–is bound to be too low.
Id., slip op. 6-7.