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I had always thought that you need to post a bond in order to obtain an injunction, both in federal and state court. It turns out that I was wrong.
The federal rule seems to require a bond. It says:
(c) Security. The court may issue a preliminary injunction or a temporary restraining order only if the movant gives 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. The United States, its officers, and its agencies are not required to give security.
The state rule is even stronger on the apparent need for security. it says:
(c) Security. - No restraining order or preliminary injunction shall issue except upon the giving of security by the applicant, in such sum as the judge 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. No such security shall be required of the State of North Carolina or of any county or municipality thereof, or any officer or agency thereof acting in an official capacity, but damages may be awarded against such party in accord with this rule. In suits between spouses relating to support, alimony, custody of children, separation, divorce from bed and board, and absolute divorce no such security shall be required of the plaintiff spouse as a condition precedent to the issuing of a temporary restraining order or preliminary injunction enjoining the defendant spouse from interfering with, threatening, or in any way molesting the plaintiff spouse during pendency of the suit, until further order of the court, but damages may be awarded against such party in accord with this rule.
Given the seeming clarity of those Rules, I was surprised to learn, from Judge Bledsoe's opinion earlier this month in Bolier & Co., LLC v. Decca Furniture (USA), Inc., 2015 NCBC 52 that a federal judge or a state judge is free to issue an injunction without any requirement for a bond [an enhanced version of this opinion is available to lexis.com subscribers] [Lexis Advance version].
The Bolier case had been designated to the Business Court in 2012. It was then removed to federal court, where Judge Vorhees (of the W.D.N.C.) entered a preliminary injunction without any requirement for a bond against the Plaintiff. The case was remanded back to the Business Court in September 2014.
The Plaintiff argued to the Business Court that the federal injunction should be dissolved because it did not require a bond. Judge Bledsoe rejected that argument, holding:
[t]he law is clear that a federal district court has broad discretion to set a bond amount as the court sees fit and may waive a security requirement altogether as Judge Vorhees did here. Pashby v. Delia, 709 F.3d 307, 332 (4th Cir. 2013)(citation omitted) [lexis.com] [Lexis Advance]; see also Aoude v. Mobil Oil Corp., 862 F.2d 890, 896 (1st Cir. 1988)("posting of a bond is not a jurisdictional prerequisite to the validity of a preliminary injunction") [lexis.com] [Lexis Advance]; Clarkson Co, v. Shaheen, 544 F.2d 624, 632 (2nd Cir. 1976)("[B]ecause, under Fed. R. Civ. P. 65, the amount of any bond to be given upon the issuance of a preliminary injunction rests within the sound discretion of the trial court, the district court may dispense with the filing of a bond." (citations omitted) [lexis.com] [Lexis Advance].
Op. ¶39. Moreover, the Court said that North Carolina law is to the same effect. The NC Court of Appeals has held that:
'[t]he trial court has power not only to set the amount of security but to dispense with any security requirement whatsoever where the restraint will do the [party] no material damage, and where the applicant for equitable relief has considerable assets and is able to respond in damages if [the party] does suffer damages by reason of a wrongful injunction.
Op. ¶39 (quoting Stevens v. Henry, 121 N.C. App. 150, 154, 464 S.E.2d 704, 707 (1995)(alterations and quotations omitted) (quoting Keith v. Day, 60 N.C. App. 559, 562, 299 S.E.2d 296, 298(1983)).
The North Carolina Court of Appeals, in an acknowledgement of the Rule's apparently mandatory language, said in a 1983 decision that it " is more subtle than one would expect from words so apparently unambiguous." It went on, in Keith v. Day, to hold that the "... as the court deems proper" language of the rule means that there are some instances when it is proper for no security to be required of a party seeking injunctive relief." 60 N.C. App. at 562, 299 S.E.2d at 299.
I wouldn't read Judge Bledsoe's Opinion to say that the party obtaining an injunction in the Business Court is unlikely to have to post a bond. A bond of at least some amount is going to be appropriate in most cases.
Read other articles on the North Carolina Business Litigation Report, a blog for lawyers focusing on issues of North Carolina business law and the day-to-day practice of business litigation in North Carolina courts.
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