Waiver of Security

Rule 65(c) conditions every preliminary injunction and temporary restraining order on security “in an amount that the court considers proper,” and its text excuses only the United States, its officers, and its agencies.¹ Courts nonetheless waive the condition in a few recognized situations. Three recur: an indigent plaintiff, an injunction that exposes the restrained party to no compensable monetary loss, and a case in which the cost of a bond would effectively prevent enforcement of important rights affecting the public interest.²

Every waiver gives up something. The bond guarantees payment to the defendant for harms suffered if the injunction was erroneously issued, and it works alongside the demand for a comparatively high level of irreparable harm to limit the potential for abuse and error in injunctive orders.³ A waiver is therefore defensible only where the lost guarantee is worth little, as when an order cannot cost the defendant money, or where insisting on the bond would defeat a larger interest, as when the applicant cannot pay or the right belongs to the public. The Third Circuit has warned that any exception to the bond requirement “should be drawn narrowly.”⁴ The rule also gives the court a second lever, because it sets the amount at what the court considers proper, and facts that fall short of justifying a waiver may still justify a smaller bond.⁵

The subsections below take the recognized situations in turn: the order that threatens no monetary harm to the enjoined party, the applicant too poor to post a bond, and the suit that enforces a public right. The last subsection shows the comparison of hardships that underlies all three. A movant who says only that a bond is expensive has made out none of them, because each requires the court to set the enjoined party's possible loss against what the bond would cost the applicant and the public.

No Risk of Monetary Harm

Rule 65(c) measures security by a specific loss: “the costs and damages sustained by any party found to have been wrongfully enjoined or restrained.”⁶ An order that cannot cost the enjoined party any money therefore leaves the bond with nothing to pay, and the condition would charge the movant for protecting no one. Courts recognize an exception for such orders, and the circuits frame it in two ways: as a question of risk and as a question of proof.

The Third Circuit frames the exception around risk. At most, its earlier decisions excuse a bond when complying with the injunction “raises no risk of monetary harm to the defendant,” and the court itself supplied the emphasis on the word no.⁷ The test asks whether any monetary risk exists, so a small but real risk keeps the exception out of reach.

The facts of that case show how little it takes to defeat the exception. To the extent the district court rested on a finding that compliance posed no risk of harm to the defendants, the Third Circuit held that finding clearly erroneous.⁸ The order barred the overseas transfer of every last dime of the defendants' deposits in United States accounts without prior notice to the plaintiffs and court approval. It barred the disbursement of about $11 million from a bank account in the Eastern District of Pennsylvania on the same terms, and it barred all defendants from transferring assets anywhere in the world outside the ordinary course of their businesses.⁹ An order that only holds assets in place can look costless, since the money stays where it is. A defendant who cannot move or use its funds without permission, however, bears a restraint that can cost it money, and the court treated that restraint as enough to defeat a finding of no risk.

Other circuits state the exception through proof. The Tenth Circuit has held that a trial court may, in the exercise of its discretion, determine that a bond is unnecessary “if there is an absence of proof showing a likelihood of harm.”¹⁰ The Second Circuit has said that a district court “may dispense with security where there has been no proof of likelihood of harm to the party enjoined.”¹¹ These statements ask what the record shows, while the Third Circuit's language asks whether compliance carries any risk of loss. A defendant who wants security does well to put in evidence of what compliance will cost.

Two further decisions show the idea at work. The Fifth Circuit in Corrigan Dispatch Co. v. Casa Guzman, S.A. allowed a trial court to elect not to require security where the entire purchase price of a disputed sale had been paid into the registry of the court, which is the court's custody, where money is held until the dispute is decided. The Sixth Circuit in Urbain v. Knapp Brothers Mfg. required no bond where the defendant would not appear to face material damage.¹² A price held in the court's registry is already secured by the court, so a bond adds little. In the Third Circuit case, by contrast, the money sat in the defendants' own accounts under restraint, with no such arrangement behind it. What separates the two situations is who holds the money and whether the restraint deprives its owner of anything.

Even a record that shows no harm does not let a court waive security silently. In the Tenth Circuit decision, the appellees asked the court to presume that the trial court had decided a bond was unnecessary, and the court refused. A waiver of a Rule 65(c) bond is reviewed for abuse of discretion, and that test “cannot be employed in the absence of specific findings.”¹³ The judge must therefore state the basis for excusing security. The party that would bear the loss cannot be assumed to have none, and a court that never examined the question has not found the loss absent.

Calling an order a status-quo order decides nothing. Both orders above preserve the status quo, yet only the second leaves the enjoined party with little to lose. The question is what compliance costs the party who is restrained.

Exam Analysis Steps

Because the exception turns on what the order costs the enjoined party, the analysis runs from the order's effect to the record that supports excusing security. The steps are these:

Identify what the order commands or forbids and who the enjoined party is.
Ask whether complying could cost that party money, through lost sales, unperformed contracts, or funds it cannot use, because a security with no loss to cover has no work to do.
Test any claim of no loss against the record, looking for facts such as a purchase price already paid into the court's registry or an absence of proof of likely harm, rather than accepting a label such as status quo.
Confirm that the court expressly considered security and recorded its reason, since a waiver without findings cannot be reviewed for abuse of discretion.
Apply the circuit's formulation: the Third Circuit excuses a bond at most where compliance raises no risk of monetary harm, while the Tenth Circuit permits a finding that a bond is unnecessary where the record shows an absence of proof of likely harm.

The third step does the real work, because the first two are easy to answer in the movant's favor if a label is accepted in place of facts.

Indigent Applicants

Rule 65(c) gives a private applicant of limited means no exemption, because its text excuses only the United States, its officers, and its agencies.¹⁵ Courts nonetheless recognize indigent plaintiffs as one illustrative ground for waiving security.¹⁶ The no-risk exception looks at the enjoined party and asks whether the order can cost it money. The hardship exception looks at the applicant and asks what the bond itself will cost. The question matters because a bond the applicant cannot meet can leave a claimed right without interim protection, and a condition meant to restrain hasty applications then restrains poor ones.

The First Circuit gave the exception its fullest statement in Crowley v. Local No. 82. Union members there sued under a statute whose policy, as the district court read it, was to encourage members' suits to vindicate union democracy, and the district court found that posting a bond “would impose a severe financial hardship upon them.”¹⁷ The district court had applied four factors: the burden of compliance on the defendants, the plaintiffs' ability to pay, the impact on the plaintiffs' rights, and the plaintiffs' likelihood of success. The First Circuit accepted the first three and rejected the fourth, because likelihood of success is already accounted for in the decision whether to grant preliminary relief at all and generally is irrelevant to the bond.¹⁸ Counting the merits twice would let a strong claim stand in for the protection the bond gives the enjoined party if the prediction of success proves wrong.

As the First Circuit framed the inquiry, the court should consider, at least in noncommercial cases, the possible loss to the enjoined party together with the hardship a bond would impose on the applicant. It should also consider the impact a bond would have on enforcement of the federal right.¹⁹ The two considerations weigh against each other, so hardship to the applicant never stands alone. The second has a measure of its own: a bond burdens enforcement more where the applicant is an individual and the enjoined party is an institution with some control over the applicant than where both are individuals or both are institutions.²⁰ That comparison suits a union-democracy case, where members challenge the conduct of their own union.

Later authority describes Crowley as upholding the denial of a bond where the union members would have had financial difficulty posting it and the defendants faced a low burden from the absence of security,²¹ though the decision was reversed on other grounds.²² The Seventh Circuit likewise required no bond from an indigent plaintiff in Wayne Chemical v. Columbus Agency Serv. Corp.²³

The weight of the hardship depends on who the applicant is. Merchants, manufacturers, and other commercial applicants can be assumed capable of bearing most bond requirements, so hardship to them counts for less.²⁴

The same plea of hardship thus carries different weight from different applicants. In Crowley it came from individual members whose means could not support a bond, whose suit the statute was meant to encourage, and whose opponents faced a low burden without security. From the manufacturer it is a complaint about a cost that a commercial applicant is assumed able to bear.

The Third Circuit applies the weighing with a firmer hand. Even where the plaintiffs are indigent, a careful weighing of the equities must come before the bond requirement can be waived.²⁵ In Temple University v. White, the fact that the bond requirement effectively deprived indigent plaintiffs of a preliminary injunction did not work a sufficient hardship, because the underlying issue could still be resolved in the underlying litigation.²⁶ That reasoning shows what the court counts as hardship. Losing the interim order is a cost, but the claim survives for trial, so the loss alone falls short. In Crowley, by contrast, the applicants' poverty came with a statutory policy favoring suits like theirs and a low burden on the defendants.

Indigence thus works as an automatic waiver in neither circuit. It is one side of a balance whose other side is the enjoined party's possible loss, and the court keeps the authority the rule gives it over the amount, so it may set a modest sum in place of none.²⁷ A fact pattern that says only that the plaintiff cannot afford the bond is incomplete. The analysis also asks whether the applicant is an individual or a business, what compliance would cost the enjoined party, whether a statute favors suits of this kind, and which circuit governs. In the First Circuit, the strength of the plaintiff's claim stays out of that analysis.

Public-Interest Enforcement

Courts also excuse or reduce a bond when a suit enforces a right that belongs to the public as much as to the plaintiff, and the room Rule 65(c) leaves over the amount of security makes that adjustment possible.²⁹ In Crowley v. Local No. 82, Furniture and Piano Moving, the First Circuit described a line of cases in which no bond is required in suits to enforce important federal rights or “public interests.” The rights in those cases arose under comprehensive federal health and welfare statutes, which may set them apart by their importance from other federal statutory rights, and some of the cases involved indigent plaintiffs, from whom it would be unjust to require security.³⁰

From such cases the court drew a factor aimed at the right rather than at the applicant's finances: a court should ask what a bond would do to enforcement of the federal right, so as not to restrict it unduly.³¹ The comparison of the parties measures that impact. A bond weighs more heavily where the applicant is an individual and the enjoined party an institution with some control over the applicant than where both sides are individuals or both are institutions.³² A statute that depends on private suits for its enforcement, as the district court read the union-democracy statute in Crowley, loses force if only parties who can buy a bond are able to sue.³³

Decisions from other courts apply the idea. Bass v. Richardson excused the bond in a challenge to the administration of the Medicaid program, a comprehensive federal health program of the kind the second line of cases describes.³⁴ The Ninth Circuit held that a nonprofit environmental group would be denied access to judicial review if the court did not properly exercise its discretion to dispense with security.³⁵ In Youth Justice Coalition v. City of Los Angeles, a federal district court waived the bond in a civil rights claim. It relied on the movant's high probability of success, the City's failure to submit any evidence of damages from the injunction, and the burden a bond would place on the movant's constitutional rights.³⁶ The City's failure of proof overlaps with the proof-of-harm line discussed earlier, and the movant's likelihood of success would be left out of the bond analysis in the First Circuit.³⁷

The exception stays narrow. The Third Circuit has said that an exception to the bond requirement, if drawn, “should be drawn narrowly,” and it has recognized that other courts of appeals have held that certain noncommercial and public-interest cases may require dispensing with the bond.³⁸ The public label does not change the enjoined party's position, because a mistaken order costs the defendant the same whether the plaintiff sued for itself or for the public.

Government status is where the public-interest label is most often mistaken for an exemption. The text of Rule 65(c) exempts only the United States, its officers, and its agencies,³⁹ and re National Credit Management Group, L.L.C held that the State of New Jersey, suing to enforce a law that protects consumers from unfair commercial practices, was not exempt from the bond requirement.⁴⁰ The court treated the exception recognized in Temple University as a balance of the potential hardships each litigant would suffer from the injunction, and it held that when the balance “overwhelmingly favors” the party seeking the injunction, the district court may waive the bond.⁴¹ The State did not meet that standard, but its public purpose still mattered. Because the State was enforcing a consumer-protection law, a large bond was unnecessary, and the court set the bond at $10,000.⁴²

Together the decisions mark the range of results the public-interest factor produces. In the Medicaid challenge the court excused the bond, while the New Jersey court kept the requirement and reduced the amount. A public-interest plaintiff may therefore end with no bond, a modest bond, or a bond sized to the enjoined party's loss, and the facts that decide among them are the plaintiff's resources, the effect of a bond on enforcement, and the enjoined party's documented loss.

Weighing the Equities

Rule 65(c) exempts only the United States, its officers, and its agencies, and it leaves every other movant's security to what the court “considers proper.”⁴⁴ The exceptions in the preceding subsections therefore rest on one judgment about what is proper, and each applies a single comparison to different facts. The First Circuit drew that comparison from the decisions it surveyed in Crowley. At least in noncommercial cases, the court weighs the possible loss to the enjoined party together with the hardship a bond would impose on the applicant, and, so as not to restrict a federal right unduly, it weighs the impact a bond would have on enforcement of that right.⁴⁵ The First Circuit repeated the same two considerations in In re Kingsley, citing Crowley.⁴⁶ Neither consideration stands alone. Hardship to the applicant counts only against what the enjoined party could lose, and the effect on enforcement counts only in light of who is suing whom.

Exam Analysis Steps

Because the exceptions are applications of one comparison, a bond question is best run as a weighing exercise that begins with the enjoined party's side of the scale. The steps are these:

Estimate what the injunction could cost the enjoined party, since that loss is what the bond exists to repay and it fixes the weight on one side.
Identify the applicant, because a merchant or manufacturer is assumed able to bear most bonds and so claims little hardship, while an individual who cannot afford one has a real claim.
Ask what a bond would do to enforcement of the right being asserted, comparing the parties' positions, since the burden is heaviest where an individual faces an institution with some control over that individual.
Set the enjoined party's possible loss against the applicant's hardship and the burden on enforcement, and if the balance favors the applicant only modestly, consider a smaller bond in place of none.
Leave the strength of the applicant's claim out of the comparison.

Crowley shows the scale tipping toward the applicant. The plaintiffs were individual union members suing their own union under a statute that, as the district court read it, aimed to encourage such suits, and the district court found that a bond would impose a severe financial hardship on them. The court also noted that the defendants had so far used union funds to meet their legal expenses.⁴⁷ An individual facing an institution with control over the individual is the pairing in which a bond burdens enforcement most, and later authority describes the case as one in which the defendants faced a low burden from going without security.⁴⁸ With a light loss on one side and hardship plus impaired enforcement on the other, the comparison supported excusing the bond.

The Third Circuit sets a higher threshold. A district court in that circuit treated the exception as a balance of the potential hardships each litigant would suffer from the injunction and held that when the balance “overwhelmingly favors” the party seeking the injunction, the court has discretion to waive the bond.⁴⁹ That formulation asks for a lopsided balance before waiver, and the same circuit requires a careful weighing of the equities even where the plaintiffs are indigent.⁵⁰ The weighing can also end between the extremes. The court in that case concluded that the State should not be exempt from the bond requirement but that a large bond was unnecessary, and it fixed the amount at $10,000.⁵¹

One item on the district court's list in Crowley did not survive review. The district court had counted the applicants' likelihood of success, and the First Circuit held that factor irrelevant to the bond because it is “already adequately accounted for in the decision whether to grant preliminary relief at all.”⁵² The reason shows in what the bond secures. By the time the bond question arises, the court has already found success likely, and the bond answers the risk that this finding, made on a short record, proves mistaken. A judge who excused security because the claim looks strong would rely on the very prediction whose possible error the bond covers. The enjoined party's loss from a mistaken order is the same whatever the court thought of the claim, so counting the merits twice would remove the safeguard in the cases where the applicant is most confident.

The strength of the claim has already done its work in persuading the court to grant relief. On the bond question, the scale holds only the competitor's documented exposure against a hardship the company never claimed. The court may still choose the amount, but it chooses by reference to those two things.