Sycamore Mgmt. Grp., LLC v. Coosa Cable Co.

• Decision Date: 30 September 2011
• Docket Number: 1091505.
• Citation: 81 So.3d 1224
• Parties: SYCAMORE MANAGEMENT GROUP, LLC, and DirecPath, LLC v. COOSA CABLE COMPANY, INC.
• Court: Alabama Supreme Court

81 So.3d 1224

SYCAMORE MANAGEMENT GROUP, LLC, and DirecPath, LLC

v.COOSA CABLE COMPANY, INC.

1091505.

Supreme Court of Alabama.

Sept. 30, 2011.

Riley W. Roby and Neah L. Mitchell of Balch & Bingham LLP, Montgomery; and Eric B. Langley and Ed R. Haden of Balch & Bingham LLP, Birmingham, for appellants.

Henry I. Frohsin, James F. Barger, Jr., and J. Elliott Walthall of Frohsin & Barger LLC, Birmingham, for appellee.

MAIN, Justice.

Coosa Cable Company, Inc. (“Coosa Cable”), sued Sycamore Management Group, LLC (“Sycamore”), and DirecPath, LLC (“DirecPath”). Coosa Cable sought and obtained both a temporary restraining order (“TRO”) and a preliminary injunction barring DirecPath from providing video-programming services to the tenants of an apartment building owned by Sycamore. As a condition of the TRO, Coosa Cable provided a security bond of $250. As a condition of the preliminary injunction, the trial court required Coosa Cable to provide a security bond of $100,000. After a hearing, the trial court entered a permanent injunction against Sycamore and DirecPath and discharged Coosa Cable's security bond. Sycamore and DirecPath appealed; this Court reversed the trial court's order granting permanent injunctive relief to Coosa Cable. Sycamore Mgmt. Group, LLC v. Coosa Cable Co., 42 So.3d 90 (Ala.2010) ( “ Sycamore I ”). Sycamore and DirecPath then sought to recover costs, damages, and attorney fees caused by the wrongful injunction, but the trial court denied their motion. Sycamore and DirecPath now appeal from the trial court's order denying their motion for damages under the security bond on the preliminary injunction.¹ We reverse and remand.

I. Factual Background and Procedural History

The pertinent facts are set out in this Court's opinion in Sycamore I. “Coosa Cable is an Alabama corporation that holds a franchise to provide telecommunication services to Pell City residents, including cable television, Internet services, and Internet telephone service—including emergency 911. DirecPath is a private cable operator based in Atlanta, Georgia, that provides satellite video programming, Internet services, and digital telephone service to its subscribers. Sycamore is an Alabama limited liability company that owns and manages several apartment complexes or multi-dwelling units, including Maple Village, which is located in Pell City.

“Maple Village was constructed in 2004; EYC Companies (‘EYC’) owned the property and managed the apartment complex after the construction was completed. During the construction phase, Coosa Cable installed, at its own expense, a full cable-distribution plant at the Maple Village complex, including wiring and other equipment. Coosa Cable and EYC never entered into a contract for the provision of cable service to residents of Maple Village, nor did Coosa Cable pay EYC a fee for the privilege of serving the residents of Maple Village. The residents of Maple Village had the option to contract on a month-to-month basis with Coosa Cable for individualized service plans, including cable television, Internet services, and primary telephone service—including 911 service. Coosa Cable dealt directly with its customers at Maple Village; i.e., it billed the customers individually. Coosa Cable's arrangement with the residents at Maple Village was nonexclusive in that the residents there were free to contract with other cable and/or communications providers.

“Sycamore acquired Maple Village from EYC in March 2007. On August 12, 2008, Sycamore entered into a written agreement with DirecPath whereby DirecPath would have the exclusive right to provide video-programming services (and a nonexclusive right to provide Internet and telephone services) to the residents of Maple Village. Debbie Taylor, the owner/manager of Sycamore, testified that Sycamore would receive approximately $700 to $1,100 per month under the agreement. Both Sycamore and DirecPath were aware of Coosa Cable's business relationships with many of the Maple Village residents. At the time, Coosa Cable was providing its services to approximately 100 customers at Maple Village. In a letter dated November 10, 2008, DirecPath informed each of Coosa Cable's customers at Maple Village that, as of December 10, 2008, ‘Coosa Cable [would] no longer service cable television for [them].’ It is undisputed that DirecPath intended to eliminate Coosa Cable's service to Maple Village and to use Coosa Cable's wires to run DirecPath's signal to Coosa Cable's former customers.

“After Coosa Cable was made aware of the letter, it sued both Sycamore and DirecPath, alleging tortious interference with business and contractual relations and seeking injunctive relief to prevent further damage from such interference. Specifically, Coosa Cable pleaded that if DirecPath and Sycamore were permitted to proceed with their plans, Coosa Cable's goodwill and its relationships with its current and future customers would be irreparably harmed. The trial court entered a temporary restraining order and subsequently entered a preliminary injunction, pending a full hearing on the merits.

“On February 24, 2009, following a hearing, the trial court entered a final judgment, granting Coosa Cable's request for permanent injunctive relief based on Sycamore's and DirecPath's tortious interference with Coosa Cable's relations with its customers at Maple Village. Specifically, the trial court ordered that Sycamore and DirecPath were enjoined from (1) ‘[m]aking any false or misleading statements to Coosa Cable's customers or in any way interfering with its customer relationships'; (2) ‘[p]reventing or interfering with Coosa Cable's access to its equipment’; and (3) ‘[i]nterfering with or misappropriating Coosa Cable's personal property in the form of its distribution plant, wiring, and equipment.’ Sycamore and DirecPath appealed.”

42 So.3d at 91–93.

This Court held in Sycamore I:

“Sycamore, by virtue of its ownership of Maple Village and the existing chattel and fixtures, had the ability to contract with DirecPath so long as that contract did not interfere with an existing right. Coosa Cable had no existing right by contract, by statute, or by easement to provide cable service to the residents of Maple Village, and, therefore, Sycamore and DirecPath could not be enjoined from using Sycamore's property. Because Coosa Cable is not entitled to injunctive relief, the judgment of the trial court is reversed, and the cause is remanded for further proceedings consistent with this opinion.”

42 So.3d at 95.

On remand, Sycamore and DirecPath filed a motion for the recovery of wrongful-injunction damages pursuant to Rule 65.1, Ala. R. Civ. P. They requested damages for lost operating profits, depreciation expenses, attorney fees, and costs in an amount not less than the $100,000 bond posted by Coosa Cable as a condition of the preliminary injunction. Sycamore and DirecPath say that they presented evidence to substantiate their claims for damages but that Coosa Cable did not offer any evidence to rebut those claims. Instead, they say, Coosa Cable argued that because the trial court discharged the security bond when it entered the permanent injunction, there is no longer any bond from which Sycamore and DirecPath can recover damages. Coosa Cable also argued that wrongful-injunction damages cannot be recovered after the entry of a permanent injunction.

After a hearing, the trial court entered an order denying Sycamore and DirecPath's motion. The trial court stated:

“Rule 65(c) requires posting of security as a condition for interlocutory injunctive relief. It does not apply to permanent injunctive relief, for which no security is required. See Dobbins v. Getz Exterminators of Alabama, Inc., 382 So.2d 1135 (Ala.[Civ.App.] 1980).

“Here, a bond was properly posted to secure the Court's interlocutory order. After a full hearing on the merits, however, the Court entered a permanent injunction. The temporary injunction was superseded and the bond was expressly discharged and relinquished. No security was required on the permanent injunction and none was posted. It is well-settled that ‘[a] party injured by the issuance of an injunction later determined to be erroneous has no action for damages in the absence of a bond.’ W.R. Grace & Co. v. Local Union 759, Int'l Union of United Rubber, 461 U.S. 757, 770 (U.S.1983). Thus, even if [Sycamore and DirecPath] were wrongly enjoined, they can have no recovery without a bond, and state no claim under the Alabama Rules of Civil Procedure or otherwise.”

II. Standard of Review

On appeal, this Court reviews de novo a trial court's ruling on a question of law. Lucky Jacks Entm't Ctr., LLC v. Jopat Bldg. Corp., 32 So.3d 565, 568 (Ala.2009). Because the issue presented in this case—whether damages can be awarded for a wrongful injunction if the security bond posted to secure the preliminary injunction was discharged when the permanent injunction was issued—is a legal question, we apply a de novo standard of review to the trial court's order denying the motion for damages filed by Sycamore and DirecPath, not the exceeds-its-discretion standard we would employ to review a trial court's order awarding damages for a wrongful injunction.²

III. Analysis

Rule 65(c), Ala. R. Civ. P., states, in pertinent part:

“No restraining order or preliminary injunction shall issue except upon the giving of security by the applicant, in such sum as the court deems proper, for the payment of such costs, damages, and reasonable attorney fees as may be incurred or suffered by any party who is found to have been wrongfully enjoined or restrained....

“The provisions of Rule 65.1 apply to a surety upon a bond or undertaking under this rule.”

In lieu of a traditional security bond, the trial court accepted an instrument filed with the court by Coosa Cable, which stated:

“SURETY BOND

“RECITALS

“1. On January 15, 2009, the Court granted [Coosa Cable's] Request for Preliminary Injunction...