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Keywords

contractplaintiffdefendantdamagesliabilityinjunctionappealhearingtrialmotiondue processappellantappellee

contractplaintiffdefendantdamagesliabilityequityinjunctionmotionappellantappelleerestitution

Related Cases

Monroe Division, Litton Business Systems, Inc. v. De Bari, 562 F.2d 30, 24 Fed.R.Serv.2d 216

Facts

Defendant-appellant De Bari was employed by plaintiff-appellee Monroe Division, Litton Business Systems, Inc. as an assistant branch manager until his termination on June 27, 1975. Monroe sued to enforce a non-compete clause in De Bari's employment contract, seeking injunctive relief. The district court issued a preliminary injunction barring De Bari from competing with Monroe and its affiliates without requiring the security mandated by Rule 65(c), F.R.Civ.P. After a trial, the court issued a narrower permanent injunction but denied De Bari's motion for damages from the preliminary injunction without a hearing.

Defendant-appellant De Bari was employed by plaintiff-appellee, Monroe Division, Litton Business Systems, Inc., as assistant branch manager of its Santa Fe, New Mexico, office. His employment was terminated on June 27, 1975. Monroe sued to enforce a provision of the employment contract which prohibited the employee from competing against the employer for one year after contract termination, and sought injunctive relief.

Issue

Whether the defendant's right to recover damages from a wrongful preliminary injunction was precluded by the district court's failure to require security, and whether the defendant was denied due process by not being allowed a hearing on his claim for damages.

1 Monroe argues that, absent a security bond, there is no liability for damages or restitution because of a wrongful injunction unless the circumstances give rise to a claim for malicious prosecution.

Rule

Rule 65(c), F.R.Civ.P. requires that no preliminary injunction shall issue except upon the giving of security by the applicant for the payment of damages that may be suffered by a party wrongfully enjoined.

Rule 65(c), F.R.Civ.P., provides that no 'preliminary injunction shall issue except upon the giving of security by the applicant' for the payment of damages that may be suffered by a party wrongfully enjoined.

Analysis

The court found that the district court's violation of the security requirement did not eliminate the defendant's right to recover damages for the wrongful preliminary injunction. The appellate court emphasized that the security bond is meant to protect the enjoined party and that the applicant cannot avoid liability simply because they have considerable assets. Furthermore, the court noted that the defendant was entitled to a hearing on his claim for damages, as the denial of such a hearing constituted a violation of his due process rights.

The court's denial of defendant's motion to require security was based not on Continental Oil but on the supposed inequity of requiring the applicant to post bond at a time when, if not for the defendant's motion for a continuance, the case would already have been tried on the merits.

Conclusion

The appellate court reversed the district court's decision and remanded the case for further proceedings, emphasizing the need for a hearing on the defendant's claim for damages.

Reversed and remanded for further proceedings in the light of this opinion.

Who won?

Defendant-appellant De Bari prevailed in the appeal because the court recognized his right to a hearing on damages and found that the district court had violated procedural rules and due process.

Defendant was unconstitutionally denied that right.

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