In the 

United States Court of Appeals 

For the Seventh Circuit ____________________

No. 18‐1054

BANKDIRECT CAPITAL FINANCE, LLC,

Plaintiff, Counterdefendant‐Appellant,

and

TEXAS CAPITAL BANK, N.A.,

Counterdefendant‐Appellant,

v.

CAPITAL PREMIUM FINANCING, INC.,

Defendant, Counterplaintiff‐Appellee.

____________________

Appeal from the United States District Court for the

Northern District of Illinois, Eastern Division.

No. 15 C 10340 — John Z. Lee, Judge.

____________________

ARGUED OCTOBER 31, 2018 — DECIDED JANUARY 9, 2019

____________________

Before FLAUM, EASTERBROOK, and BRENNAN, Circuit

Judges.

EASTERBROOK, Circuit Judge. BankDirect Capital Finance

and Capital Premium Financing both participate in the mar‐

ket for loans to finance insurance premiums. Insurers want
2 No. 18‐1054

to be paid up front for the full policy period, but many busi‐

nesses prefer to pay by the month. A premium‐financing

loan makes both things possible. The client makes a down

payment toward the annual premium and borrows the rest.

It repays the loan monthly.

In 2010 Capital Premium, having exhausted the line of

credit that financed its operations, approached its competitor

BankDirect with a request for operating capital. BankDirect

was willing to purchase the loans that Capital Premium

made—and to pay Capital Premium to service those loans

while they were outstanding—but with a big condition.

BankDirect demanded, and got, a right to purchase Capital

Premium’s business outright after five years. The contract

went into force in December 2010. (Actually there were four

contracts, but we use the singular for simplicity.) The option

to purchase could be exercised near the fifth anniversary. If

BankDirect elected not to purchase Capital Premium, then

either side could extend the term by notice given before Jan‐

uary 4, 2016; otherwise the purchase‐and‐service deal would

wrap up on January 31, 2016. Any extension could not ex‐

ceed the contract’s drop‐dead date, June 1, 2018, after which

neither side would have any obligation to the other.

BankDirect exercised the purchase option in November

2015, but Capital Premium refused to honor it. BankDirect

filed this suit under the diversity jurisdiction, seeking to en‐

force the option to purchase. It treated Capital Premium’s

rejection of the purchase as a default, which entitled it to

take measures for self‐protection. This led Capital Premium

to file a counterclaim. It demanded an injunction that would

require BankDirect to continue purchasing the loans and

paying it to service them.
No. 18‐1054 3

BankDirect continued dealing with Capital Premium

through May 1, 2017, when it seized several of Capital Pre‐

mium’s accounts and stated that it would no longer buy any

loans from Capital Premium. This led Capital Premium to

renew its request for an injunction. For its part, BankDirect

withdrew its request for specific performance of the pur‐

chase. (It believes that the parties’ relations have so soured

that an acquisition would fail commercially.) BankDirect

agreed to maintain the status quo until the court ruled.

Judge Gottschall concluded that Capital Premium is enti‐

tled to a preliminary injunction requiring BankDirect to con‐

tinue business with Capital Premium in the same way it had

been doing earlier. 2017 U.S. Dist. LEXIS 195519 (N.D. Ill.

Nov. 29, 2017). The district court contemplated that the loan‐

purchase‐and‐service arrangement would continue while it

resolved the dispute on the merits.

Unfortunately, several things went wrong.

First, the district court did not address the significance of

the June 2018 terminal date. The judge may have thought

that the suit would be over by then; at all events, she did not

provide for what was to happen on June 1, 2018, if the litiga‐

tion was ongoing.

Second, the language that the judge evidently intended

to serve as the injunction left unresolved not only the effect

of the drop‐dead date but also other disputes. The last para‐

graph of the court’s opinion reads:

For the reasons discussed above, Capital Premium’s motion for a

preliminary injunction is granted. Accordingly, BankDirect is

preliminarily enjoined from terminating Capital Premium as the

servicer of loans that Capital Premium originates; interfering

with Capital Premium’s control of its deposit accounts; interfer‐
4 No. 18‐1054

ing with Capital Premium’s access to its Participation Interest;

retaining the $1,000,000 it seized from Capital Premium’s ac‐

count on May 1, 2017; and seizing any additional funds from

Capital Premium’s accounts, including any portion of the

$5,000,000 that BankDirect has demanded.

2017 U.S. Dist. LEXIS 195519 at *40. Much of the parties’ dis‐

pute on appeal concerns the absence of attention to the con‐

tract’s terminal date and the omission of any order with re‐

spect to BankDirect’s purchase of loans that Capital Premi‐

um originates. Nor did the judge pin down ambiguous

terms such as “interfering”. Maybe the judge meant to grant

whatever relief Capital Premium had requested, but the

opinion does not say this—and Fed. R. Civ. P. 65(d)(1)(C)

forbids incorporating another document (such as a motion)

by reference.

Third, the district court failed to enter an injunction as a

separate document under Fed. R. Civ. P. 65(d)(1)(C). Lan‐

guage in an opinion does not comply with Rule 65(d). See

Gunn v. University Committee to End the War, 399 U.S. 383

(1970). Neither side reminded the district court of the need

to enter an injunction.

Fourth, the district court did not require Capital Premi‐

um to post a bond, despite Rule 65(c), which says (emphasis

added): “The court may issue a preliminary injunction or a

temporary restraining order only if the movant gives security

in an amount that the court considers proper to pay the costs

and damages sustained by any party found to have been

wrongfully enjoined or restrained.”

Although BankDirect missed the significance of Rule

65(d), it was acutely aware of Rule 65(c). Contending that the

injunction would cost it about $500,000 a month, it asked the
No. 18‐1054 5

district court to require Capital Premium to post a substan‐

tial bond—for, in the absence of a bond, a litigant injured by

an injunction later determined to have been improper does

not have a remedy. See, e.g., Coyne‐Delaney Co. v. Capital De‐

velopment Board, 717 F.2d 385, 393–94 (7th Cir. 1983). That is

why Rule 65(c) makes the effectiveness of a preliminary in‐

junction contingent on the bond having been posted. United

States v. Associated Air Transport, Inc., 256 F.2d 857 (5th Cir.

1958); Charles Alan Wright & Arthur R. Miller, 11A Federal

Practice & Procedure §2954 at 319 (3d ed. 2013). A judge might

consider an indemnity of $0 (that is, no bond) “proper”

when the suit is about constitutional principles rather than

commercial transactions, but no one thinks that condition

satisfied here.

The case was transferred to Judge Lee, who found that

BankDirect is entitled to a bond of at least $7.5 million but

insisted that it continue to obey the language of Judge

Gottschall’s opinion in the interim. In response to Capital

Premium’s assertions that it lacked the funds to secure a

bond—the very situation that should have deferred injunc‐

tive relief, lest BankDirect be saddled with losses it could not

recoup—Judge Lee repeatedly extended the time for the

bond’s posting. Finally, in November 2018, while this appeal

was under advisement, Capital Premium posted a bond for

$7.5 million. BankDirect was at last secured. Still, if it is right

that the preliminary injunction is costing it $500,000 a

month, the protection has only a short time left to run.

In addition to asking Judge Lee for the protection of a

bond, BankDirect asked him to specify when the injunction

would end. Judge Lee declined to make an independent de‐

cision on that subject. Instead he tried to divine Judge
6 No. 18‐1054

Gottschall’s intent about the matter—no easy task, as she

had not said one word about it. Concluding that Judge

Gottschall had meant the injunction to last at least as long as

the suit remained pending, Judge Lee denied BankDirect’s

request for a terminal date. Similarly, Judge Lee assumed

that Judge Gottschall must have wanted to compel BankDi‐

rect to go on purchasing loans from Capital Premium, even

though the last paragraph of her opinion does not say that.

Our initial question is whether we have appellate juris‐

diction. In addition to holding that statements in an opinion

are not an injunction, Gunn concludes that the absence of an

injunction satisfying Rule 65(d) prevents a direct appeal

from a three‐judge district court to the Supreme Court under

28 U.S.C. §1253 (1970 ed.). If that’s how §1253 works, maybe

the same is true about §1292(a)(1), which BankDirect in‐

vokes. We requested and have received supplemental mem‐

oranda about that subject.

Burgess v. Ryan, 996 F.2d 180, 183–84 (7th Cir. 1993), ob‐

serves that §1253 and §1292(a)(1) differ in this respect. Gunn

emphasized that appeals from district courts (even three‐

judge district courts) direct to the Supreme Court are sup‐

posed to be rare. The Justices evidently contemplated that

dismissing the appeal under §1253 would allow an appeal to

the court of appeals. Gerstein v. Coe, 417 U.S. 279 (1974);

Gunn, 399 U.S. at 391 (White, J., concurring). How else could

the violation of Rule 65(d) be corrected? See also Original

Great American Chocolate Chip Cookie Co. v. River Valley Cook‐

ies, Ltd., 970 F.2d 273, 276 (7th Cir. 1992).

When a district court does not put an order into writing,

it is so transparently ineffectual that neither side is adversely

affected. That means no appeal, for an empty declaration has
No. 18‐1054 7

no loser, and only a district‐court loser can appeal. See Bates

v. Johnson, 901 F.2d 1424 (7th Cir. 1990). But Judge Gottschall

entered a written order that she expected BankDirect to

obey. Judge Lee shared that view even after being reminded

that Rule 65(c) makes the injunction’s effectiveness depend

on a bond. It would pile injury on injury to tell BankDirect

that it not only was unprotected by a bond for a year but also

could not even obtain appellate review of an order that the

district court sees as a long‐term injunction. See Schmidt v.

Lessard, 414 U.S. 473 (1974) (reversing an injunction that vio‐

lated the requirement in Rule 65(d)(1)(B) that every order

“state its terms specifically”; this implies that at least some

violations of Rule 65(d) do not defeat appellate jurisdiction).

We do not need to say anything about the merits, or more

about Rule 65(c) and (d), because this injunction (as we now

call the last paragraph of Judge Gottschall’s opinion) should

have contained a terminal date: June 1, 2018. As that date has

passed, all we need do is vacate the injunction and remand

so that the district court can decide whether either side has

broken a promise, and if so what damages are available.

Some language in the district court’s opinion suggests

that Judge Gottschall saw the initial end date of January 31,

2016, as material only if BankDirect declined to exercise its

purchase option. If Capital Premium became a subsidiary of

BankDirect, all of the contract’s deadlines would be mean‐

ingless. Judge Gottschall observed that BankDirect had exer‐

cised its option, which meant, she concluded, that the ab‐

sence of a renewal notice before January 4, 2016, did not

cause the purchase‐and‐service obligations to end on Janu‐

ary 31, 2016. If this is right, perhaps the same is true about
8 No. 18‐1054

June 1, 2018: that date loses significance if BankDirect buys

the business.

The problem with this line of argument is that BankDi‐

rect has not bought Capital Premium’s business. It tried to,

but Capital Premium refused to execute that transaction.

(Whether Capital Premium was privileged to make that de‐

cision, or instead acted wrongfully, is for the district court to

consider on remand.) Because the sale did not close, the par‐

ties remain in an arms’‐length business transaction to which

the dates are as important as if BankDirect had never tried to

exercise its option. And the most important date is June 1,

2018. If the terminal date is extended past January 31, 2016,

the “extended commitment date and new maturity date

shall in any such case not be later than June 1, 2018”. So if

BankDirect’s unsuccessful effort to buy Capital Premium’s

business is treated as extending the deal’s initial date past

January 31, 2016, this clause sets a limit.

No sensible commercial party wants to be trapped in a

long‐term relation. That’s why contracts such as this include

drop‐dead dates. Yet Capital Premium maintains that

BankDirect could not get out by exercising the option to buy

the business—and, precisely because Capital Premium re‐

fused to honor its commitment to sell, BankDirect can’t get

out any other way, ever. The carefully drafted language of

this contract dispels any suggestion that BankDirect was in‐

different to the risks of being locked into a money‐losing re‐

lation, of indefinite duration, with a firm that it does not

trust. This contract means what it says.

The injunction is vacated, and the case is remanded with

instructions to award BankDirect damages for time the in‐

junction has extended past June 1, 2018, and to determine
No. 18‐1054 9

whether either side owes damages to the other for breach of

contract. The mandate will issue today, so that the injunction

terminates immediately.