## Facts

- Sprint provided long-distance telephone service and carried long-distance calls routed from local exchange carriers.
- CAT operated as a competitive local exchange carrier that leased lines from other carriers and sold prepaid local telephone service.
- Sprint alleged CAT’s customers placed a large volume of unauthorized, unpaid long-distance calls over Sprint’s network, causing Sprint losses.
- Sprint requested that CAT block customer access to Sprint’s network and/or provide billing information or a billing mechanism so Sprint could collect payment; CAT did not comply.
- Sprint sued in federal district court asserting multiple federal and state claims and sought preliminary injunctive relief.
- The district court granted a preliminary injunction requiring CAT to restrict its customers’ access to Sprint’s long-distance network and required Sprint to post a $250,000 bond under Federal Rule of Civil Procedure 65(c).
- CAT did not submit sworn evidence at the injunction hearing quantifying expected compliance costs, but later asserted that compliance over nearly two years cost far more than the bond amount.
- In later proceedings before a different district judge, the court dissolved the preliminary injunction and increased the bond from $250,000 to $4.95 million to reflect CAT’s asserted past compliance costs.

## Issues

1. Whether a district court may retroactively increase a Rule 65(c) preliminary-injunction bond after dissolving the injunction to cover compliance costs already incurred.
2. Whether an appeal challenging dissolution of a preliminary injunction is moot once the injunction has been dissolved and the case has moved forward on the merits.

## Decision

- The Third Circuit reversed the order increasing the injunction bond to $4.95 million.
- The court held Rule 65(c) does not permit retroactively enlarging an injunction bond after dissolution to cover previously incurred compliance costs.
- The court dismissed as moot Sprint’s appeal challenging the dissolution of the preliminary injunction because no effective appellate relief concerning the preliminary order remained available.

## Legal Principles

- Rule 65(c) requires security for a preliminary injunction in an amount set prospectively when the injunction issues, allocating risk and limiting exposure for the party obtaining the injunction.
- A court may award costs and damages for a wrongful injunction against the bond up to its amount, but it may not retroactively expand the bond after the injunction has been dissolved to cover additional past losses.
- Appeals concerning preliminary injunctive relief may become moot when the preliminary injunction has been dissolved and the litigation has progressed such that appellate review cannot provide effective relief regarding the interim order.

## Conclusion

The Third Circuit held that a district court cannot retroactively increase a preliminary-injunction bond under Rule 65(c) after dissolving the injunction to cover past compliance costs, and it dismissed as moot the appeal challenging dissolution of the preliminary injunction once the case had moved beyond the preliminary-relief stage.


Sprint Commc’ns Co. L.P. v. CAT Commc’ns Int’l, Inc., 335 F.3d 235 (3d Cir. 2003)