United States District Court, D. Kansas
MEMORANDUM AND ORDER
D. Crabtree United States District Judge.
matter is before the court on defendants Erik Harpsoe and
Brian K. Fowles's Motion to Recover Injunction Bond (Doc.
58). Plaintiff Edelman Financial Engines, LLC, has filed a
Memorandum in Opposition (Doc. 62). For reasons explained
below, the court orders an evidentiary hearing on the matter.
And, it defers ruling on the Motion to Recover Injunction
Bond until after the hearing.
filed a lawsuit alleging three state law causes of action,
invoking the court's diversity jurisdiction under 28
U.S.C. § 1332. Doc. 3 (Am. Compl.). After filing the
lawsuit, plaintiff filed a Motion for Temporary Restraining
Order (“TRO”). Doc. 4. The court conducted a
hearing, and based on its diversity jurisdiction, granted
plaintiff's motion. Doc. 14. The court directed plaintiff
to give security in the amount of $100, 000 for the TRO.
Id. at 7. On March 1, 2019, the court held a
conference call and questioned whether complete diversity
existed based on plaintiff's status as a limited
liability company. Doc. 39. After the parties completed
briefing the matter, the court concluded that it lacked
subject matter jurisdiction over the case. Doc. 56 at 21. The
court thus dissolved the TRO and dismissed the Amended
Complaint without prejudice. Id. The court also
ordered the parties to submit briefing addressing whether
defendants should recover on the bond. Id.
Federal Rule of Civil Procedure 65(c), “[t]he court may
issue a . . . temporary restraining order only if the movant
gives security in an amount that the court considers proper
to pay the costs and damages sustained by any party found to
have been wrongfully enjoined or restrained.” And,
“where there is a finding that a defendant was
wrongfully enjoined, there is a presumption of recovery and
the district court's discretion to deny damages is
limited.” Front Range Equine Rescue v.
Vilsack, 844 F.3d 1230, 1234 (10th Cir. 2017).
ask for the full amount of the bond. They argue that because the
court lacked subject matter jurisdiction, they were
wrongfully enjoined from working with certain clients for 134
days until the court dismissed the case and dissolved the
TRO. Doc. 59 at 1. Plaintiff argues that defendants cannot
recover on the bond because they did not have the right to
engage in the conduct enjoined. Doc. 62 at 2-4.
“wrongful injunction or restraint may occur in ways
unrelated to the ultimate merits-as for example where the
procedure leading to a TRO or preliminary injunction is later
found to have violated Rule 65(a) or 65(b).” St.
Mary of the Plains Coll. v. Higher Educ. Loan
Program of Kan., Inc., No. 89-1460-C, 1989 WL
159368, at *3 (D. Kan. Dec. 15, 1989) (quoting Showtime
Mktg., Inc. v. Doe, 95 F.R.D. 355, 357 (N.D. Ill.
the court stated its earlier Memorandum and Order (Doc. 56),
dismissal for lack of subject matter jurisdiction does not
bar potential recovery against the bond. See XO Energy
LLC v. Zhao, No. 4:15-CV-599, 2016 WL 6902418, at *2
(S.D. Tex. Apr. 8, 2016) (concluding the court “did not
have subject matter jurisdiction when the case was filed;
therefore, the preliminary injunction was wrongfully
issued.”); Minn. Power & Light Co. v.
Hockett, 105 F.Supp.2d 939, 942 n.1 (S.D. Ind. 1999)
(“Under . . . federal law, a defendant may recover
damages and costs for wrongful injunction even when the
injunction is vacated for lack of subject matter jurisdiction
and not on the merits of the underlying claims and
defenses.”); Showtime Mktg, Inc., 95 F.R.D. at
357 (accord); see also Atomic Oil Co. of Okla. v. Bardahl
Oil Co., 419 F.2d 1097, 1102 (10th Cir. 1969)
(“And generally, for the purpose of establishing
liability on an injunction bond, a decree dismissing a bill
in equity constitutes a judicial determination that a
temporary injunction should not have been granted.”)
(citation omitted). The court thus concludes that defendants
were wrongfully enjoined. So, defendants may recover on the
bond, to the extent they can prove proximately caused
because the injunction was wrongful does not entitle the
enjoined party to damages absent proof of injuries resulting
from the injunction.” St. Mary of the Plains
Coll., 1989 WL 159368, at *4 (citation omitted).
“The amount of damages must be proven to have been
proximately caused by the injunction and may not be based
upon speculation or conjecture.” Id. (citation
and internal quotations omitted).
argue they are entitled to recover the full $100, 000 bond
because they have identified, disclosed, and detailed the
injuries and recovery amounts proximately caused by the
wrongfully issued TRO. Doc. 59 at 9 (¶ 45). Defendant
Harpsoe asserts by affidavit that he lost $99, 450.57 in net
revenue. Doc. 59-1 at 3 (¶ 17). He provides the formula
he used to calculate his losses and a spreadsheet detailing
each lost client and fee. Id. Defendant Fowles
asserts that he lost $61, 283.67 in net revenue. Doc. 59-2 at
3 (¶ 16). He calculated his losses using the same
formula and provided a spreadsheet detailing his lost
revenue. Doc. 59-2 at 5-6.
argues that defendants' hearsay statements do not provide
a sufficient basis for the court to award damages. Plaintiff
asserts that it is entitled to discovery and an evidentiary
hearing. Doc. 62 at 7. The court agrees. “The existence
and amount of damages in a proceeding under Fed.R.Civ.P. 65.1
is generally not capable of summary resolution of papers,
without an evidentiary hearing.” St. Mary of the
Plains Coll., 1989 WL 159368, at *2 (alteration and
citation omitted). See also Monroe Div., Litton Bus.
Sys., Inc. v. De Bari, 562 F.2d 30, 33 (10th Cir. 1977)
(remanding case to the district court for an evidentiary
hearing because “[d]efendant requested, and was
entitled to, a hearing on his claim of damages arising from
the wrongful ...