MEDAFRICA LINE v. AMER. WEST AFRICAN FREIGHT CONF.

• Decision Date: 25 February 1987
• Docket Number: No. 83 Civ. 6660(MEL).,83 Civ. 6660(MEL).
• Citation: 654 F. Supp. 155
• Parties: MEDAFRICA LINE, S.P.A., Plaintiff, v. AMERICAN WEST AFRICAN FREIGHT CONFERENCE and its members, America Africa Line, African Liner Service, Barber West Africa Line, Cameroon Shipping Lines, Companhia Nacional De Navegacao, Delta Steamship Lines, Inc., Elder Dempster Lines, Ltd., Farrell Lines, Inc., Nigeria America Line, Societe Ivorienne De Transport Maritime, Torm West Africa Line, Westwind Africa Line, Compagnie Maritime Zairoise, S.A.R.L., Jeco Shipping Line Int'l, N.V., Afea Line Ltd., Defendants.
• Court: U.S. District Court — Southern District of New York

654 F. Supp. 155

MEDAFRICA LINE, S.P.A., Plaintiff, v. AMERICAN WEST AFRICAN FREIGHT CONFERENCE and its members, America Africa Line, African Liner Service, Barber West Africa Line, Cameroon Shipping Lines, Companhia Nacional De Navegacao, Delta Steamship Lines, Inc., Elder Dempster Lines, Ltd., Farrell Lines, Inc., Nigeria America Line, Societe Ivorienne De Transport Maritime, Torm West Africa Line, Westwind Africa Line, Compagnie Maritime Zairoise, S.A.R.L., Jeco Shipping Line Int'l, N.V., Afea Line Ltd., Defendants.

No. 83 Civ. 6660(MEL).

United States District Court, S.D. New York.

February 25, 1987.

Donovan, Maloof, Walsh & Kennedy, New York City, for plaintiff.

Brauner, Baron, Rosenzweig, Kligler, Sparber, Bauman & Klein, New York City, for defendants; Seymour H. Kligler, of counsel.

Gottesman, Wolgel, Smith & Secunda, New York City, for Ins. Co. of North America; Harold H. Wolgel, of counsel.

LASKER, District Judge.

On March 20, 1984, defendants American West African Freight Conference ("AWAFC") and its members were preliminarily enjoined from collecting a $9,118,301 penalty which AFAWC had assessed against plaintiff Medafrica Line, S.P.A. ("Medafrica") for violations of Federal Maritime Commission ("FMC") regulations. The injunction was to remain in force until (1) the FMC decided the issues raised in Medafrica's FMC administrative complaint and any appeal from that decision was completed; and (2) if arbitration was commenced, until the arbitrator's decision was confirmed. As a condition to the issuance of the injunction, Medafrica posted a $150,000 bond, issued by the Insurance Company of North America ("INA"). On February 18, 1986, the FMC dismissed Medafrica's administrative complaint with prejudice. Since that date, the time periods in which Medafrica could have filed an appeal from the FMC decision or sought arbitration have expired.

The AWAFC now moves (1) to dissolve the preliminary injunction and to dismiss the action and (2) to obtain judgment for $150,000 against INA on the preliminary injunction bond pursuant to Fed.R.Civ.P. 65(c) and 65.1. There is no opposition to the motion to dismiss, but INA, as Medafrica's surety, opposes the motion to collect on the bond. Both motions are granted.

The purpose of a preliminary injunction bond is to provide security "for the payment of such costs and damages as may be incurred or suffered by any party who is found to have been wrongfully enjoined...." Fed.R.Civ.P. 65(c). A party has been "wrongfully enjoined" under Rule 65(c) if it is ultimately found that the enjoined party had at all times the right to do the enjoined act. See Factors Etc., Inc. v. Pro Arts, Inc., 562 F.Supp. 304, 308 (S.D. N.Y.1983); Wainwright Securities Inc. v. Wall St. Transcript, 80 F.R.D. 103, 107 (S.D.N.Y.1978). Hence, in this case, the dissolution of the preliminary injunction and the dismissal of the action establish that AWAFC was "wrongfully enjoined."

However, a defendant who has been wrongfully enjoined is only entitled to recover damages shown to have been proximately caused by the injunction, see Factors Etc., 562 F.Supp. at 308, and the more difficult question here is whether or not AWAFC has suffered $150,000 in damages as a result of the preliminary injunction. INA argues that the injunction did not cause AWAFC any monetary damage, and that the present motion is an impermissible attempt to force INA to pay $150,000 of the nine million dollar penalty assessed against Medafrica. AWAFC answers that the injunction caused AWAFC more than $150,000 in damages because it prevented AWAFC from collecting its assessment against Medafrica...