## Facts

- Continuum sued Incepts in Texas state court alleging trade secret misappropriation, breach of contract, and breach of confidential relationships arising from Incepts’ alleged wrongful use of Continuum’s software system.
- After an extended evidentiary hearing, the state court entered a temporary injunction largely granting Continuum’s requested relief and required Continuum to post a $200,000 bond to cover damages if the injunction proved wrongful.
- Incepts filed a Chapter 11 petition shortly before trial, triggering an automatic stay; after the stay was lifted, Incepts removed the case to federal district court.
- In federal court, Incepts moved to dissolve the injunction or, alternatively, to increase the bond to $5,000,000.
- The district court increased the bond to $2,000,000, continued the injunction only if Continuum posted the increased bond, and ordered dissolution of the injunction on a date certain if Continuum did not post it.
- Continuum appealed and sought a stay from the Fifth Circuit; the Fifth Circuit entered a stay pending further order while it considered jurisdiction and whether a stay should continue.

## Issues

1. Whether the district court’s order increasing security and ordering dissolution of the injunction by a date certain if the bond was not posted was immediately appealable under 28 U.S.C. § 1292(a)(1).
2. Whether the court of appeals should stay the district court’s bond-increase/conditional-dissolution order pending appeal.
3. What security conditions could protect the enjoined party’s potential damages during the stay while maintaining the injunction pending appellate review.

## Decision

- The Fifth Circuit held it had jurisdiction under 28 U.S.C. § 1292(a)(1) because the order explicitly provided for dissolution of the injunction on a date certain if the increased bond was not filed, making it an appealable interlocutory order dissolving (or setting aside) an injunction.
- The court continued the stay pending appeal to prevent dissolution of the injunction while appellate review proceeded.
- As a condition of the stay, the court permitted Continuum to keep the original $200,000 bond in place but required an undertaking that the bond amount would not limit damages Continuum might owe if the injunction were later found wrongful.

## Legal Principles

- An interlocutory order is appealable under § 1292(a)(1) when it grants, modifies, or dissolves an injunction; an order that conditions continued effectiveness of an injunction on increased security and schedules dissolution if the condition is unmet is treated as an order dissolving an injunction for appealability purposes.
- Even if an order “merely” adjusting an injunction bond may not be independently appealable, explicit dissolution language on a date certain supplies the immediacy needed for § 1292(a)(1) review.
- A stay pending appeal may be conditioned to balance harms by preserving an injunction while requiring security sufficient to protect the enjoined party against damages from a wrongful injunction.
- Security to protect the enjoined party’s potential recovery can be structured through mechanisms beyond a large bond, including an enforceable undertaking that liability for wrongful injunction damages will not be capped by the bond amount.

## Conclusion

The Fifth Circuit exercised § 1292(a)(1) jurisdiction because the district court’s bond order expressly threatened dissolution of the injunction on a date certain, and it continued a stay pending appeal while requiring Continuum to provide an undertaking ensuring that potential wrongful-injunction damages would not be limited by the existing bond.


Continuum Co., Inc. v. Incepts, Inc., 873 F.2d 801 (5th Cir. 1989)