Failure to Address Security

Rule 65(c) permits a court to issue a preliminary injunction or temporary restraining order “only if” the movant gives security in an amount the court considers proper.¹ The preceding sections assumed a judge who decides the question: the judge sets a figure or, in a recognized circumstance, excuses security and says why. Suppose the judge does neither. The order issues, and a motion to set a bond sits unanswered, or nobody raises the subject at all. The rule does not say what that silence costs, and the courts have given three answers. The Tenth Circuit holds the order unenforceable and unappealable. Other courts leave the order standing and enforce it through contempt. The Third Circuit, with most courts, reverses when the order exposes the restrained party to monetary loss. Under all three, the trial court is expected to decide whether security is needed and to make that decision where a reviewing court can see it.

The Tenth Circuit: A Missing Ruling Leaves No Enforceable Order

Coquina Oil Corp. v. Transwestern Pipeline Co. gives silence its gravest consequence. Coquina Oil, Flag-Redfern Oil, and Yates Petroleum had won a preliminary injunction that mandatorily barred Transwestern from purchasing certain gas. At oral argument, counsel agreed that the trial court had not set a bond and had not ruled on Transwestern’s motion to set one, a motion that remained pending until the appeal was decided.² The Tenth Circuit held that this hiatus left an unenforceable injunction and no appealable interlocutory order, meaning no order entered while the case is pending that the court of appeals may review. Without such an order the court lacked jurisdiction, and it dismissed the appeal.³

The court rested on the text of the rule. Because no injunction may issue “except upon the giving of security by the applicant,” the trial judge’s consideration of a bond is a necessary ingredient of an enforceable order, and the plain language permits no other analysis.⁴ What the court demanded, though, was consideration, not a bond in every case. It read its earlier Continental decision to imply that a trial court complies with Rule 65(c) by at least considering whether the circumstances justify the unusual practice of leaving the enjoined party bereft of security. Until the trial court has done that, it has not completed the task Rule 65 assigns.⁵

The appellees asked the Tenth Circuit to avoid dismissal by presuming that the trial court had decided a bond was unnecessary. The court refused. A decision to waive a Rule 65(c) bond is reviewed for abuse of discretion, and that review cannot proceed without specific findings.⁶ A presumed waiver would therefore ask the appellate court to approve a decision that nobody made, and it would leave the restrained party, whose possible losses the bond exists to cover, with no assurance that anyone had weighed them.

Security Is Not Jurisdictional

Other courts do not read a missing ruling as a loss of power. Posting of a bond is ordinarily not a jurisdictional prerequisite to the validity of a preliminary injunction, and the First Circuit’s decision in Aoude v. Mobil Oil Corp. is cited for that proposition.⁸ In Popular Bank of Florida v. Banco Popular de Puerto Rico, a defendant argued that it could not be held in contempt, meaning punished for disobeying a court order, because the court had never ruled on security under Rule 65(c) and so had issued no enforceable order. The court disagreed and held that the order could be enforced through contempt.⁹

The two decisions meet the same silence and diverge on what it does to the order. In Coquina the missing ruling left nothing to enforce and nothing to appeal. In Popular Bank it gave the defendant no excuse to disobey. A restrained party that wants security can do what Transwestern did and move to set a bond, instead of treating the order as void.¹⁰

Treating security as non-jurisdictional does not excuse the trial court from deciding the question. The Sixth Circuit requires only that the district court expressly address whether a bond is required, and it leaves the decision whether to require one in the particular case to the trial judge’s discretion.¹¹ Most courts likewise require the judge to decide the propriety of a bond and do not permit a demand for one to be ignored.¹² On this view the silence is a flaw in how the court performed its duty, and the remedy lies in review and correction while the order continues to bind.

Reversal Where Loss Is Possible

The Third Circuit asks what the order does to the restrained party. Its settled rule is that, unless the defendant faces no risk of monetary loss, a district court’s failure to require a successful applicant to post a bond is reversible error.¹⁴ Its decisions excuse a bond only when complying with the injunction “raises no risk of monetary harm to the defendant.”¹⁵

One case shows how narrow that exception is. The district court had excused a bond on a determination that compliance posed no risk of harm to the defendants. The injunction barred the overseas transfer of every last dime of the defendants’ deposits in United States accounts without prior notice 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. The Third Circuit held the no-risk determination clearly erroneous.¹⁶

That case and Coquina raise different questions. The Coquina trial court decided nothing. The Third Circuit’s trial court did decide, and it was reversed because its decision could not stand on the facts. A court in the Third Circuit must therefore do more than mention security: the excuse it gives has to survive review of what the order does to the restrained party. Some courts go further and call the requirement mandatory. The Seventh Circuit leaves the trial court discretion only over the amount of the bond, and the Fifth Circuit treats a failure to require security as grounds for reversing the injunction.¹⁷ Most courts, in short, require the judge to decide the propriety of a bond and treat the refusal of one as reversible error unless no monetary loss is at risk.¹⁸

Reversal is also a different remedy from the Tenth Circuit’s dismissal. A court that reverses has reached the order and treated it as a decision containing a mistake, which places this line closer to the non-jurisdictional view than to Coquina.

A Decision on the Record

The three approaches differ in what they do to an order issued without a decision on security, but they agree on what the trial court should have done. The Tenth Circuit asks for consideration supported by specific findings, the Sixth Circuit asks that the court expressly address the question, and the Third Circuit asks that any excuse rest on facts showing no monetary risk.²⁰ A movant protects an order by obtaining a ruling that sets an amount or finds on the record that none is needed. A restrained party protects its position by moving to set a bond and pressing for the ruling.

Exam Analysis Steps

Because the circuits attach different consequences to the same silence, an answer on this issue should first establish what the trial court actually did and then apply the consequence the governing approach assigns. The steps are these:

Determine whether the trial court set a bond, ruled on a motion to set one, or stated a reason for requiring none, since each shows that it made a decision.
If the court never addressed security, identify the governing approach. The Tenth Circuit treats the order as unenforceable and not appealable, while courts treating security as non-jurisdictional leave the order operative and enforceable through contempt.
If the court excused security for a stated reason, check whether the record contains specific findings that support it, because a waiver is reviewed for abuse of discretion and that review cannot proceed without findings.
Ask whether complying with the order could cost the restrained party money, because in the Third Circuit and most other courts a missing bond is reversible error whenever such a risk exists.
Conclude that the safe course is for the trial court to address security expressly and record its reason, which satisfies every approach.

The first step carries the most weight, because a recorded decision, even one that sets a modest sum or excuses security, answers the objection behind the Tenth Circuit’s rule. The fourth step explains why a recorded excuse can still fail: a stated reason that the order’s effects contradict does not survive review in the Third Circuit.