Concept
Setting the Amount
Security
Setting the Amount
Rule 65(c) lets the judge decide how much security is enough: the movant must give security “in an amount that the court considers proper to pay the costs and damages sustained by any party found to have been wrongfully enjoined or restrained.”1 Once a court has decided that some security will be given, three questions remain. What form does it take? How does a judge pick a figure for a loss that has not yet happened? And when must a party who thinks the figure too low say so? The third question matters most, because the bond is generally a cap on what a wrongfully enjoined party can later recover.2
Form of Security
The rule requires only that the movant “gives security.” It names no instrument.3 The usual vehicle is a bond, which one commentary describes as a convenient repository of funds against which the wrongfully enjoined party can collect damages.4 A court may nevertheless dispense with posting a bond when the party seeking relief has assets sufficient to assure its ability to pay damages, as with a solvent corporation.5 The two points fit together. The bond exists to make payment dependable, and where the movant's own assets already do that, they stand where the bond would have stood.
Dispensing with a bond is a discretionary call, and the court must make it on the record. One court of appeals declined to presume that a district court had found a bond unnecessary, explaining that review of a waiver for abuse of discretion “cannot be employed in the absence of specific findings.”6 A court that wants to skip the bond should therefore say so, and say why.
Estimating the Amount
A court that sets security is making a forecast. Rule 65(c) measures the security by the costs and damages that a party later found wrongfully enjoined will have sustained, so the judge is predicting losses from evidence gathered in a hurry while the movant and the restrained party offer estimates that rarely agree.8 An Indiana appellate court, applying Indiana's Trial Rule 65(C), said so plainly. The trial court must fix the amount on a conjectural basis, guided by the divergent estimates the opponents offer and by its own experience and knowledge, and even its most diligent efforts “may ultimately be wide of the mark.”9 The rule leaves that unavoidably inexact estimate to the judge who has heard the evidence, and an appellate court reviews the choice for abuse of discretion, which is easiest to do when the trial court has made specific findings.10
In DeVos v. Cunningham Group, an Alabama court reviewed the adequacy of a $25,000 bond after two doctors had been enjoined. The doctors filed affidavits showing that they had jointly generated monthly revenues of about $288,471 from pathology services, testified that the injunction kept them from providing those services, and asked for an increase. The opposing party offered no evidence.11 The doctors argued that the bond should rise substantially to cover their potential damages and attorney fees, and the court agreed, finding that the estimated compensation the doctors would receive far exceeded the bond.12 The reasoning is close to arithmetic. The bond equaled less than a tenth of one month's revenue, and although revenue is not lost profit, an unrebutted showing on that scale left the figure with no visible connection to the harm it was meant to cover. Because DeVos is a state decision, it shows how a court reasons about adequacy and does not state federal law.
A proper bond has limits at both ends. The authority the Alabama court quoted observed that it “would more likely violate Rule 65(c) to eliminate the bond entirely (or its equivalent, the setting of a nominal bond) than to require a bond in the millions.”13 A nominal figure defeats the compensation that the security is intended to provide.14 The same authority faced the opposite difficulty. It could not imagine any seeker of an injunction posting the $780,000,000 that the intervening defendants claimed as their potential loss, yet it reasoned that such a figure is arguably within the contemplation of Rule 65(c), and that setting it would not be an abuse of discretion if the defendants could prove prospective damages in that amount.15 The controlling variable, then, is the damage the enjoined party can show it may suffer.
A modest figure can be a reasoned exercise of the same discretion. In a suit brought by the State of New Jersey to enforce a law protecting consumers from unfair commercial practices, the court noted that the State was not exempt from the bond requirement but that a large bond was not required, and it fixed the bond at $10,000.16 The court's number moves with the circumstances and the evidence it is given.
Challenging the Amount Early
Because the bond is generally a ceiling on a wrongfully enjoined party's recovery, the time to question its amount is when the court sets it.18 The mechanism is direct. If recovery stops at the bond, every dollar of loss above it falls on the enjoined party, and the only way to raise the ceiling is to ask for more security before the losses pile up. In Static Control Components, Inc. v. Lexmark International, Inc. the Sixth Circuit capped recovery at the quarter million dollars set by the bond, which illustrates the rule that the cap holds even if the losses far exceed the bond.19 The surety's liability is always limited, which is a further reason the stated figure matters.20
The enjoined party may therefore ask for a higher bond to protect its interests during the interim period of the order, and the court has discretion to grant the request.21 The request need not wait for the first hearing. In DeVos the doctors, already under the injunction, argued that their losses were mounting and far exceeded the $25,000 bond, and they asked the court to raise it.22
The ceiling has exceptions. A bond may be left open, without a limit on recovery, and an open bond operates like security given with no limitation. Some cases also allow recovery above a bond cap where the order was secured by fraud or malice, and the excess then comes from the wrongful party rather than the surety.23 A later section develops these exceptions. The Indiana court rejected the ceiling under its own rule. Because the amount is fixed by estimate, it reasoned, no one except the surety should be bound by it, so a defendant whose damages exceed the security may recover the excess from the plaintiff.24 That is a state court's departure from the generally followed view, so an answer should state the ceiling first and treat the Indiana approach as the exception.