912 F.3d 1054
7th Cir.2019Background
- Capital Premium financed insurance premiums; BankDirect agreed to buy Capital Premium's loans and pay it to service them, with an option to purchase Capital Premium after ~5 years under contracts beginning Dec. 2010.
- The contract allowed extension notices before Jan. 4, 2016, but contained a firm terminal ("drop-dead") date of June 1, 2018.
- BankDirect exercised the purchase option in Nov. 2015; Capital Premium refused to close the sale, and BankDirect treated that refusal as a default and took protective actions.
- Capital Premium sought and obtained a preliminary injunction from the district court ordering BankDirect to continue purchasing loans and not to interfere with accounts; the district court’s relief was issued in an opinion but not as a standalone, clear Rule 65(d) injunction and did not set a terminal date.
- The district court also failed to require a Rule 65(c) bond; a successor judge later required a $7.5 million bond but repeatedly extended time to post it; Capital Premium posted the bond in Nov. 2018 while the appeal was pending.
- The Seventh Circuit found the district injunction ambiguous and lacking a clear terminal date, held the injunction should have ended by June 1, 2018, vacated the injunction, and remanded for damages and breach determinations.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the district court entered a valid preliminary injunction under Fed. R. Civ. P. 65(d) | Capital Premium: the opinion’s language sufficed to enjoin BankDirect from terminating servicing and seizing funds | BankDirect: the opinion was not a proper injunction under Rule 65(d) and was ambiguous | Court: the district court’s opinion lacked the required Rule 65(d) specificity and should be treated as an injunction that omitted a terminal date, so it is vacated and remanded |
| Whether the injunction needed a bond under Rule 65(c) | Capital Premium: did not post bond or argued inability to post | BankDirect: asked for substantial bond (at least $7.5M) because injunction would cause large monthly losses | Court: district courts must require security under Rule 65(c); the appellate opinion noted the bond issue and that one was eventually posted, but remanded to address damages for injunction past June 1, 2018 |
| Effect of contract’s June 1, 2018 terminal date on continuation of obligations | Capital Premium: refusal to sell does not allow BankDirect to escape obligations; may have argued the injunction should continue until resolution | BankDirect: contract’s drop-dead date limits any ongoing obligations; injunction cannot extend beyond June 1, 2018 | Court: June 1, 2018 is the controlling terminal date; injunction could not extend past it and must be vacated for the period after that date; remand to calculate damages for that overreach |
| Appellate jurisdiction given Rule 65(d) defect in district court’s opinion | BankDirect: appealed under 28 U.S.C. § 1292(a)(1) | Capital Premium: Rule 65(d) defect might defeat interlocutory appeal | Court: appellate jurisdiction exists; vacatur and remand appropriate to correct Rule 65(d) and related issues rather than dismiss for lack of jurisdiction |
Key Cases Cited
- Gunn v. University Committee to End the War, 399 U.S. 383 (1970) (statement in opinion is not a substitute for a Rule 65(d) injunction)
- Coyne-Delany Co. v. Capital Development Board, 717 F.2d 385 (7th Cir.) (bond requirement protects parties wrongfully enjoined)
- United States v. Associated Air Transport, Inc., 256 F.2d 857 (5th Cir.) (Rule 65(c) bond discussion)
- Burgess v. Ryan, 996 F.2d 180 (7th Cir.) (distinguishing appeals under §1253 and §1292(a)(1))
- Gerstein v. Coe, 417 U.S. 279 (1974) (procedural route when direct Supreme Court review is inappropriate)
- Original Great American Chocolate Chip Cookie Co. v. River Valley Cookies, Ltd., 970 F.2d 273 (7th Cir.) (appellate treatment of Rule 65(d) defects)
- Bates v. Johnson, 901 F.2d 1424 (7th Cir.) (no appeal when district declaration is ineffectual)
- Schmidt v. Lessard, 414 U.S. 473 (1974) (Rule 65(d) defects can require reversal and remand)