The opinion of the court was delivered by: Haight, Senior District Judge:
MEMORANDUM OPINION AND ORDER
In this action based upon a criminal statute prohibiting "fraud and
related activity in connection with computers," 18 U.S.C. § 1030, as
to which § 1030(g) creates a private right of action, defendant moves
the Court for an increase in the amount of the security previously
given by plaintiff pursuant to Rule 65(c), Fed. R. Civ. P., to obtain
a temporary restraining order ("TRO").
The exigencies of time preclude a detailed statement of the facts.
For present purposes it is sufficient to say that on April 26, 2001,
the Court on plaintiffs application signed an ex parte Order to Show
Cause containing a TRO and required plaintiff to furnish security in
the amount of $5,000. At a hearing on April 30, 2001, at which both
parties were represented by counsel, the Court directed that the
amount of security posted by plaintiff be increased to $100,000.
Plaintiff, ostensibly encountering some financial difficulty in
complying, had not yet furnished security in that amount when
defendant brought on the present motion for an order directing
plaintiff to furnish security in an amount greater than $100,000. The
Court conducted an evidentiary hearing on May 7, 8 and 9, 2001, and
heard oral arguments of counsel on May 9 and May 10. This Memorandum
Opinion decides defendant's motion.
Rule 65(c) provides 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 and damages as may be incurred or
suffered by any party who is found to have been
wrongfully enjoined or restrained.
"The purpose of requiring security prior to issuance of an
injunction or a temporary restraining order is to guarantee payment
of costs and damages incurred by a party who is wrongfully enjoined
or restrained." 13 Moore's Federal Practice (3d. ed. 1997)
(hereinafter Moore) at 65-94.1. "The sum posted in a bond is
determinative of the limit that may be recovered by a wrongfully
restrained party; in the absence of proof that the movant sought to
enjoin with malicious intent and without probable cause, recovery by
a party later found to have been wrongfully enjoined will be limited
to that amount." Id. at 65-94. "The risk created by the rule limiting
recovery to the amount of the bond is that an enjoined party may be
unable to obtain adequate redress." Little Tor Auto Center v. Exxon
Company USA, 822 F. Supp. 141, 144 (S.D.N.Y. 1993).
The provision in Rule 65(c) that security shall be given "in such
sum as the court deems proper" indicates that "the district court is
vested with wide discretion in the matter of security," Ferguson v.
Tabah, 288 F.2d 665, 675 (2d Cir. 1961). A district court may
dispense with the posting of security entirely where parties sought
to be enjoined or restrained "have not shown that they will likely
suffer harm absent the posting of a bond," Doctor's Associates Inc.
v. Stuart, 85 F.3d 975, 985 (2d Cir. 1996); Ferguson, 288 F.2d at 675
("it has been held proper for the court to require no bond where
there has been no proof of likelihood of harm"); see also
International Controls Corp. v. Vesco, 490 F.2d 1334, 1356 (2d Cir.
1974) ("the district court may dispense with security where there has
been no proof of likelihood of harm to the party enjoined."); 11 A
Wright-Miller-Kane, Federal Practice and Procedure (2d ed. 1995)
(hereinafter Wright) at 293 ("the court may dispense with security
altogether if he grant of an injunction carries no risk of monetary
loss to the defendant.").
The district court need not order security in respect of asserted
economic damages that are "speculative at best," Inflight Newspapers
Inc. v. Magazines In-Flight LLC, 990 F. Supp. 119, 140 (E.D.N Y
1997); See also CVI/Beta Ventures Inc. v. Custom Optical Frames Inc.,
893 F. Supp. 508, 525 (D.Md. 1995) ("Claims based upon speculation or
conjecture, including claims for a business contemplated but not yet
established, will not support an award of damages on the [Rule 65(c)]
bond."), aff'd., 92 F.3d 1203 (4th Cir. 1996) (table).
Security furnished under Rule 65(c) will not include any damages
"for claims against the party who instituted the action other than
those directly attributable to the improvidently issued injunction."
11A Wright at 292; CVI/Beta, 893 F. Supp. at 525 ("Moreover, damages
claimed under an injunction bond must arise from the operation of the
injunction itself, not from damages caused by the suit independently
of the injunction.").
Applying these principles to the case at bar, defendant Block has
shown neither a likelihood nor a risk of economic harm resulting from
his compliance with the restraints imposed by the first decretal
paragraph of the TRO. The purpose of those restraints is to prevent
Block from interfering with or meddling in Interlink's business
operations and Interlink's relations with its clients. Block's
professed concern that these restraints preclude him from trying to
market the software program he developed to potential users is based
upon a fanciful and overbroad reading of the TRO's language.
Alternatively, Block has made no effort, and has laid no
preparatory plans, to engage in such marketing. Block testified at
the hearing that his business objective for the foreseeable future is
to continue working full time for the Sporn Group, Inc.; and there is
no suggestion in the record that the Sporn Group is interested in
Block's software program. Accordingly the ...