## Facts

- New Jersey enacted a 2014 law partially repealing state prohibitions on sports wagering at casinos and racetracks.
- The New Jersey Thoroughbred Horsemen’s Association, Inc. (NJTHA), operator of Monmouth Park racetrack, announced it would offer sports wagering under the 2014 law.
- Several sports leagues sued and obtained a temporary restraining order (TRO) barring NJTHA from offering sports wagering; the court required the leagues to post security under Federal Rule of Civil Procedure 65(c).
- The TRO was converted into a preliminary injunction, and the leagues later obtained summary judgment on the ground that PASPA preempted New Jersey’s 2014 law.
- The Supreme Court later held PASPA unconstitutional and nonseverable, eliminating the statute as a basis to prohibit state “authorization” of sports wagering.
- After PASPA was invalidated, NJTHA moved to recover damages against the injunction bond, asserting it had been wrongfully enjoined; the district court denied recovery based on then-existing precedent and equitable considerations.

## Issues

1. Whether NJTHA was “wrongfully enjoined or restrained” under Federal Rule of Civil Procedure 65(c) where the injunction’s sole legal basis (PASPA) was later held unconstitutional.
2. Whether “good cause” existed to deny bond recovery because the injunction was consistent with then-binding precedent and sought in good faith.
3. What limits apply to any recovery on the bond (causation and bond cap).

## Decision

- The Third Circuit vacated the order denying NJTHA’s motion to recover on the injunction bond and remanded.
- NJTHA was “wrongfully enjoined” because PASPA was the only basis for the injunction and was later declared unconstitutional, meaning NJTHA had the right to conduct the enjoined activity.
- The court rejected a “change in law” rationale as a bar to bond recovery in these circumstances.
- The court found no “good cause” to deny recovery; NJTHA was entitled to attempt to prove damages proximately caused by the wrongful injunction, up to the bond amount.

## Legal Principles

- Under Rule 65(c), security posted for a TRO or preliminary injunction is intended to compensate a party later found to have been wrongfully enjoined or restrained.
- A party is “wrongfully enjoined” when the injunction ultimately is determined to have restrained conduct the party had a right to undertake.
- Bond recovery generally turns on ultimate success on the merits, not on whether the injunction was reasonable under precedent at the time it issued.
- Courts may deny recovery only upon a showing of “good cause,” and generalized equitable considerations (such as good-faith reliance on existing precedent) do not alone suffice when the enjoined conduct is ultimately determined to be lawful.
- Recoverable damages must be proximately caused by the injunction and are capped at the bond amount.

## Conclusion

The Third Circuit held that, because the injunction against NJTHA rested solely on a federal statute later held unconstitutional, NJTHA was wrongfully enjoined under Rule 65(c) and presumptively entitled to recover provable, injunction-caused damages up to the bond, absent good cause to deny recovery.


Nat’l Collegiate Athletic Ass’n v. Governor of N.J., 939 F.3d 597 (3d Cir. 2019)