What is a preliminary injunction?

A preliminary injunction is a tool used by litigants to obtain relief from the court prior to the resolution of a case on the merits. They are only appropriate in certain circumstances, where a party may be irreparably harmed if an injunction is not granted while the case is pending. Rule 65 of the Massachusetts Rules of Civil Procedure provides specific requirements governing the issuance of injunctions, including that the party seeking an injunction must establish a likelihood of success on the merits, immediate and irreparable harm, and that the balance of harms weighs in their favor. Those requirements are well-established and well-known by litigators.

The bond requirement can shape a party’s decision to seek a preliminary injunction in the first place and can have a significant impact if an injunction is ultimately granted.

However, there is also another, less cited provision of Rule 65(c), which states that: “Unless the court, for good cause shown, shall otherwise order, no restraining order or preliminary injunction shall issue except upon the giving of security by the applicant, in such sum as the court 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.”

While, on its face, this language provides that, every time a party files a motion for preliminary injunction, courts are required to consider whether a bond should be posted, in our experience, courts rarely impose such obligation. However, we have recently seen courts request briefing on whether a bond should be required, and there may be a trend towards giving due consideration to such question. The bond requirement can shape a party’s decision to seek a preliminary injunction in the first place and can have a significant impact if an injunction is ultimately granted.

The Purpose of the Bond Requirement

The bond requirement in Rule 65(c) serves to protect a party against whom an injunction has issued from suffering uncompensated losses. Because injunctions are often granted early in litigation, before discovery is complete and before the merits of the claim have been fully adjudicated, there is an inherent risk that an injunction could later prove to have been improperly granted. The bond requirement provides a way to mitigate that risk and for the party against whom the injunction was wrongfully issued to be made whole.

Courts exercise broad discretion in deciding whether to require a bond and, if so, in what amount. Although there is limited case law on the issuance of bonds as they relate to preliminary injunctions, the factors courts consider in determining whether to issue a bond in similar circumstances are instructive:

1. Likelihood of damages. The central consideration is whether the party opposing the injunction has shown that it may suffer damages if the injunction later proves wrongful. Courts generally require the damages to be adequately supported beyond mere conclusions.

2. Amount of damages. If damages are determined to be possible, the court assesses the potential magnitude of damages. As with the likelihood of damages, the party opposing the injunction must provide support for the amount of damages claimed. The bond that issues should be commensurate with the amount of damages claimed and supported. Minimal or speculative damages may justify a nominal bond or no bond at all, while substantial damages that are properly supported may warrant a higher bond.

3. Financial hardship. Courts may take into account the movant’s ability to post a bond. Requiring a prohibitively large bond could effectively deny injunctive relief, even where the moving party has shown irreparable harm and likelihood of success on the merits and would otherwise be entitled to an injunction.

4. Balancing of harms. Ultimately, courts seek to balance the equities between the parties. The bond should provide fair protection to the party against whom the injunction issues, without effectively prohibiting the moving party from obtaining an injunction they would otherwise be entitled to.

Impact on Parties

The possibility of having to post a bond in connection with obtaining a preliminary injunction has significant strategic implications for parties considering moving for a preliminary injunction. The moving party must evaluate not only its likelihood of success on the merits and whether they may suffer irreparable harm without an injunction, but also whether it can afford the security that may be required by the court. For parties with limited resources, the prospect of posting a substantial bond may deter them from seeking an injunction altogether.

Even where the moving party is willing to post a bond in order to obtain an injunction, the requirement adds financial risk. If the injunction is later deemed to have been improperly issued, the party against whom the injunction was issued may recover damages against the bond, and the moving party would not be entitled to reclaim that portion of the bond that it posted. Thus, parties must weigh the benefits and drawbacks of seeking a preliminary injunction carefully.

Conversely, for parties against whom an injunction is sought, raising the bond issue can serve as a strategic deterrent. By presenting evidence of potential damages, the party may persuade the court to require a significant bond, thereby discouraging the moving party from seeking an injunction at all or increasing the moving party’s financial stake in the litigation.

If a preliminary injunction issues and the court requires a bond, the moving party must promptly arrange to post the security in the required amount. This can be a logistical hurdle, especially if the bond is substantial and the moving party must secure financing. On the other hand, if the court grants an injunction without requiring a bond, the moving party obtains the full benefit of the injunction without any additional financial burdens. The absence of a bond typically reflects the court’s conclusion that the party against whom the injunction is sought failed to sufficiently prove the likelihood of damages or the amount thereof, or that there was some other equitable consideration that weighed against the issuance of a bond.

Conclusion

Rule 65(c) of the Massachusetts Rules of Civil Procedure reflects a balancing act that involves protecting parties from wrongfully issued injunctions while ensuring that parties are not denied the potential for equitable relief due to financial barriers. Courts exercise considerable discretion in applying the bond requirement, guided by evidence of potential harm and balancing of equities between the parties. For parties seeking a preliminary injunction, the possibility of a bond is a critical factor in deciding whether to pursue an injunction, while for parties opposing such injunctions, raising the issue can be a valuable strategic tool.