916 F. Supp. 2d 501
S.D.N.Y.2013Background
- On May 21, 2012, U.S. D.I.D. obtained a TRO and posted security of $314,672.80 under Rule 65(c).
- The TRO required Windstream to continue providing services; Windstream alleged U.S. D.I.D. was reselling in violation of the contract’s resale prohibition.
- On June 21, 2012, the Court denied the motion for a preliminary injunction and vacated the TRO; U.S. D.I.D. subsequently dismissed the case without prejudice under Rule 41(a)(1)(A)(i).
- Windstream sought recovery of a portion of the posted bond to cover damages from the TRO; the July 13, 2012 Opinion initially found for Windstream but was later reconsidered.
- The Court held that a voluntary dismissal without prejudice can be treated as a final adjudication on the merits for Rule 65(c) purposes, supporting Windstream’s right to bond recovery on different grounds, and awarded Windstream $227,271.92.
- The Court stayed disbursement of funds for fourteen days and ordered checks totaling the bond distribution: Windstream received $227,271.92; U.S. D.I.D. received $87,400.88.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Final adjudication on the merits requirement | D.I.D. argues no final merits decision; dismissal without prejudice cannot trigger bond liability. | Dismissal after TRO can constitute final adjudication for bond purposes in light of voluntary dismissal and mootness. | Voluntary dismissal without prejudice can be a final adjudication for Rule 65(c) purposes. |
| Wrongfulness of the TRO | Wrongfulness should hinge only on a final merits decision; here, merits not decided. | TRO was wrongful due to denial of PI and vacatur, triggering bond liability. | Windstream was wrongfully restrained under Rule 65(c) for purposes of bond recovery. |
| Damages on the injunction bond | Damages must be limited to post-TRO costs; no final merits decision required. | Damages may be awarded for period of TRO based on actual charges Windstream would have billed. | Damages were recoverable and calculated for the TRO period; $227,271.92 awarded. |
| Period and rate for damages | Challenge to Windstream’s rates and the inclusion of USF; rates may be improper. | Use Windstream’s revised calculation reflecting post-TRO rates; USF included per FCC record. | Damages based on revised calculation; USF charges included; no reduction for USF. |
Key Cases Cited
- Blumenthal v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 910 F.2d 1049 (2d Cir. 1990) (wrongfulness depends on ultimate merits ruling)
- Middlewest Motor Freight Bureau v. United States, 433 F.2d 212 (8th Cir. 1970) (voluntary dismissal can moot main suit and trigger bond liability)
- Wainwright Secur., Inc. v. Wall St. Transcript Corp., 80 F.R.D. 103 (S.D.N.Y. 1978) (dismissal with prejudice can bar bond liability; without prejudice different)
- Global NAPs, Inc. v. Verizon New England, Inc., 489 F.3d 13 (1st Cir. 2007) (bond recovery supported by affidavits and billing records)
- Nokia Corp. v. InterDigital, Inc., 645 F.3d 553 (2d Cir. 2011) (bond recovery requires damages be proximately caused by the wrongful injunction)