## Facts

- A federal decree concerning prison conditions required replacement of plumbing fixtures at an Illinois prison.
- The Capital Development Board (CDB), an Illinois agency, oversaw the project; a contractor used Coyne-Delany flush valves, which allegedly malfunctioned even after redesign.
- For a later phase, CDB specified a competitor’s product in the bid specifications.
- Coyne-Delany sued under 42 U.S.C. § 1983 and obtained a temporary restraining order barring CDB from opening bids; the court required a $5,000 injunction bond, not the $50,000 CDB sought.
- The district court then entered a preliminary injunction without increasing the bond.
- The preliminary injunction was later reversed on appeal, based on the absence of any protectable property interest in being considered for or specified in public contracting.
- After the injunction was lifted, CDB rebid the work and claimed the delay caused higher contract costs (a $56,000 increase between the earlier low bid and the later low bid).
- CDB sought damages against Coyne-Delany and the surety (Hanover Insurance) under the injunction bond; the district court awarded no damages.

## Issues

1. Whether a party wrongfully enjoined is entitled, as a default rule, to recover proven damages up to the amount of the Rule 65(c) injunction bond.
2. Whether a district court has equitable discretion to deny or reduce bond damages, and what standard limits that discretion.
3. Whether, and under what circumstances, damages may be recovered beyond the bond amount.

## Decision

- The Seventh Circuit reversed the denial of damages and remanded.
- A wrongfully enjoined party is prima facie entitled to recover provable damages up to the bond amount.
- A district court may deny or reduce recovery only in extraordinary circumstances supported by specific findings.
- The district court abused its discretion by denying all damages without adequate reasons despite evidence of injury.
- Recovery beyond the bond is not routine and generally requires an independent legal basis; the bond ordinarily caps recovery for wrongful injunction injury.

## Legal Principles

- Federal Rule of Civil Procedure 65(c) makes the injunction bond a risk-allocation device: the movant bears the expected cost of erroneously issued preliminary relief.
- Once an injunction is determined wrongful, the presumption favors awarding damages up to the bond for losses proved to have been caused by the injunction.
- Equitable discretion to withhold or limit bond damages is narrow; denial requires identified, record-supported extraordinary circumstances (not an unexplained refusal).
- On remand, the court must assess causation and the amount of loss attributable to the injunction’s delay, then apply the bond cap absent another valid basis for additional recovery.

## Conclusion

The court held that wrongful preliminary injunctions ordinarily trigger recovery of proven damages up to the Rule 65(c) bond, and that a district court may refuse such recovery only for extraordinary, specifically supported equitable reasons; because no such reasons were shown, the case was remanded for a reasoned damages determination.


Coyne-Delany Co. v. Capital Dev. Bd. of the State of Ill., 717 F.2d 385 (7th Cir. 1983)