Network Intern. L.C. v. Worldcom Technologies, No. CIV. PJM 00-2744.
| Decision Date | 05 March 2001 |
| Docket Number | No. CIV. PJM 00-2744. |
| Citation | 133 F.Supp.2d 713 |
| Parties | NETWORK INTERNATIONAL L.C., Plaintiff, v. WORLDCOM TECHNOLOGIES, INC., Defendant. |
| Court | U.S. District Court — District of Maryland |
Stephen B. Mercer, Sandler & Mercer, Rockville, MD, for Plaintiff.
Keith R. Truffer, Laurel P. Evans, Royston Mueller McLean & Reid, Towson, MD, for Defendant.
The Court considers the extent to which damages are recoverable against a bond posted in connection with the issuance of a temporary restraining order (TRO). The TRO in question was issued by the Circuit Court for Montgomery County and was in effect at the time the case was removed to this Court. The question comes before the Court on Defendant's Motion for Damages Relating to a Temporary Restraining Order. The Court will DEFER a final decision on the motion, but takes this occasion to discuss certain considerations that will ultimately shape its decision.
On September 1, 2000, Network International LC (NI) filed suit against Worldcom, Inc. (Worldcom) in the Circuit Court for Montgomery County. The suit papers were two in number. The first was a "Motion for Temporary Restraining Order, Preliminary and Permanent Injunction," the second an "Equitable Bill for Emergency Ex Parte Temporary Restraining Order." The Motion, consisting of two double-spaced pages, stated in simple conclusory form that NI met the conditions for the issuance of a TRO and preliminary and permanent injunctions and proceeded directly to pray that Worldcom be enjoined from disrupting certain agreed upon telephone service to the properties identified in the Equitable Bill.
The Equitable Bill was slightly more extensive. In it, NI alleged that both it and Worldcom were registered telecommunications carriers governed by tariffs filed with the Federal Communications Commission; that NI was in the business of reselling local and long distance services of telecommunications common carriers such as Worldcom to residential commercial accounts; that in fact a contract to do that existed between NI and Worldcom; and that a dispute existed regarding the terms and conditions of NI's contract and tariff with Worldcom as well as the amounts due from NI for Worldcom's services. Worldcom, NI said, had threatened "the imminent disruption of certain commercial accounts as well as the local and long distance service of NI, on the eve of a long holiday weekend [i.e. Labor Day, 2000]," unless NI would pay Worldcom the sum of $249,000 by 5:00 p.m. on September 1, 2000. NI disputed that it owed that amount and alleged that Worldcom had refused to turn over files necessary for it to confirm the amounts due. Referring to Worldcom's "documented history of overcharging" during the parties' business relationship and NI's intent to file complaint with the FCC in protest, NI asked the Circuit Court to enjoin Worldcom from improperly disrupting its telephone service at six commercial properties in Texas, New York and Michigan. Finally, NI alleged that Worldcom's threatened disruption of NI's telephone service would cause Worldcom no undue hardship if Worldcom were required to provide the service pending resolution of the rate dispute.
Chief Judge DeLawrence Beard of the Circuit Court for Montgomery County signed a temporary restraining order on September 1, 2000, the day NI filed suit. His order was conditioned on NI's posting of a surety bond or a revocable line of credit from a duly licensed federal or state bank in the amount of $100,000. The TRO was given an expiration date of 35 days after service on Worldcom.1 A show cause hearing with regard to the preliminary and permanent injunctions was set for October 5, 2000.
Worldcom, appearing through counsel at the time Judge Beard signed the TRO, received copies of the filings, including the TRO, on the same day they were filed. On September 5, NI posted an irrevocable $100,000 letter of credit from First Union National Bank with the Clerk of the Circuit Court. Pursuant to the TRO, Worldcom continued to provide telephone service to NI's properties. On September 12, Worldcom removed the case to this Court based on the parties' diverse citizenship.2
On October 3, the Court held a telephone conference with counsel relative to the proceeding with this case in the federal forum. Counsel agreed that, with the case removed to the federal court, the duration of the TRO would be controlled by the Federal Rules of Civil Procedure. See Fed.R.Civ.P. 65(b). Accordingly, the TRO expired as of September 22, 2000.3
Worldcom advised the Court, however, that it felt that the TRO had been wrongly issued and indicated its desire to seek damages based on the wrongful issuance. The Court therefore directed NI's counsel to transfer to this Court the letter of credit placed with the Circuit Court and advised Worldcom's counsel to file an appropriate motion seeking damages against the letter of credit. NI filed its letter of credit in this Court the next day. Worldcom thereafter filed its Motion for Damages and NI filed a pleading in opposition. By Order dated November 13, 2000, the Court directed NI to pay $37,241.44 cash into the Registry of Court and otherwise allowed NI's letter of credit to be dissolved. The Court indicated that in due course it would issue an opinion consistent with that Order. It does so at this time.
The law of injunction bonds has been described as "a field within which judicial judgments move untrammeled by fixed principles." Note, Recovery for Wrongful Interlocutory Injunctions Under Rule 65(c), 99 Harv. L.Rev. 828, 844 (citing B. Cardozo, The Nature of the Judicial Process, 128 (1921)).
Among other things, it is not always clear under what circumstances recovery will be allowed, what damages the bonds are meant to cover and at what point in time recovery is allowed. In some cases, it is not clear whether federal or state law applies.
This case presents an opportunity to offer a few clarifications.
A) The first issue the Court considers is which law applies, federal or state, in this case the State of Maryland. The TRO in question was issued by a state court pursuant to state law, after which the case was removed here. Although the parties agree that once the case arrived here Federal Rule of Civil Procedure 65(c) controlled as to the duration of the TRO, it does not necessarily follow that federal law determines the circumstances under which recovery will be permitted, what damages are recoverable under the bond, or the point at which recovery be allowed. Rule 65(c) does not speak to these issues, indicating only that there will be liability "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 or restrained."
Obviously federal law controls TROs issued by a federal court. Missouri, Kansas & Texas Ry. Co. v. Elliot, 184 U.S. 530, 22 S.Ct. 446, 46 L.Ed. 673 (1902). But does it control when a state-established TRO and a state-established security bond are removed to federal court? The Court concludes that it does not, that it is the law of the state — here Maryland — that must be looked to for the answers. See Cohen v. Beneficial Industrial Loan, 337 U.S. 541, 69 S.Ct. 1221, 93 L.Ed. 1528 (1949) (); see also Charles A. Wright, Arthur R. Miller and Mary Kay Kane, Federal Civil Practice and Procedure: Civil Practice Second § 94, p. 470 and cases cited therein ( ) Indeed, it seems only fair to judge the "rightfulness" or "wrongfulness" of a preliminary restraint on the basis of the law of the state court which issued it, rather than on the basis of a possibly different standard established by federal law. Accordingly, the Court looks initially to the law of Maryland.
B) The language of the Maryland Rule pertaining to TROs differs somewhat from that of Fed.R.Civ.P. 65(c). Maryland Rule of Procedure 15-503, entitled "Bond — Temporary Restraining Order and Preliminary Injunction," provides in subsection (a):
Unlike Fed.R.Civ.P. 65(c), there is no mention in M.R.P. 15-503 of "wrongly issued" temporary restraining orders or preliminary injunctions. Under what circumstances, then, will recovery be allowed? What damages can be awarded? At what point in time? Since Maryland law on injunction bonds, as it happens, consists primarily of 19th century cases, it would seem appropriate to compare those cases with other more up-to-date authorities to determine their continuing validity. Accordingly, the Court turns back to the more extensive federal law of injunction bonds for guidance. Having done so, the Court concludes that Maryland law remains essentially in accord with currently prevailing law of the federal courts. See Boyd v. Gullett, 64 F.R.D. 169, 176 (D.Md. 1974) ()
As for the circumstances under which recovery on injunction bonds will be permitted, there appear to be several standards federal courts have recognized. The first might be termed the "error in issuance" standard, whereby a defendant will be deemed wrongfully enjoined, regardless of whether plaintiff prevails on the merits, if the plaintiff...
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