Zenith Radio Corp. v. United States

United States Court of International Trade · Evidence

EvidenceInjunction bondRule 65(c)Equitable discretionRule 65(c)preliminary injunctioninjunction bondwrongfully enjoined

Facts

Zenith sued to challenge a $77 million settlement of antidumping-duty claims relating to Japanese television-set entries, alleging among other things that government officials acted arbitrarily, capriciously, and in bad faith. This court granted Zenith a preliminary injunction and later required Zenith to post a $250,000 bond to indemnify the government if it were ultimately found to have been wrongfully enjoined. The court of appeals later held that this court lacked jurisdiction over Zenith's action, and after certiorari was denied the preliminary injunction was dissolved. The government then sought damages on the bond.

Issue

When a preliminary injunction is later dissolved after the underlying case is dismissed for lack of jurisdiction, must the court award damages on the Rule 65(c) bond to the government as the wrongfully enjoined party? More specifically, does Rule 65(c) make recovery automatic, or may the court deny damages based on equitable considerations?

Rule

Rule 65(c) does not mandate automatic assessment of damages whenever an injunction is dissolved and the enjoined party sustained damages. A trial court retains equitable discretion to decide whether to award damages on an injunction bond, considering factors such as the applicant's good faith, the parties' relative resources, the outcome of the underlying suit, and whether a change in the law after issuance of the injunction makes an award inequitable.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

In Seattle, Nora Patel obtained a preliminary injunction preventing Harborline Health Agency from enforcing a reimbursement directive against her clinic. She posted a $150,000 bond, but the injunction was later dissolved after the court concluded the agency had been wrongfully enjoined and the agency proved it lost money during the delay.

Under the governing rule, what is the strongest statement about the trial court's authority to assess damages on the bond?

Explanation. The majority held that Rule 65(c) does not mandate automatic assessment of damages whenever an injunction is dissolved and the enjoined party sustained damages. The trial court retains equitable discretion to avoid inequitable or oppressive results and may deny damages after weighing justice between the parties. (Derived from Zenith Radio Corp. v. United States (n.d.).)