Opinion ID: 858973
Heading Depth: 3
Heading Rank: 2

Heading: Motion for bond

Text: Coventry also appeals the district court’s denial of its motion for bond. A district court abuses its discretion in setting a bond amount when it applies the wrong legal standard, applies the right standard incorrectly, or relies on clearly erroneous factual Nos. 12-5779/5785 Appalachian Reg’l Healthcare, et al. v. Page 11 Coventry Health & Life Ins., et al. findings. USACO Coal Co. v. Carbomin Energy, Inc., 689 F.2d 94, 100 (6th Cir. 1982); Paschal v. Flagstar Bank, 297 F.3d 431, 434 (6th Cir. 2002). A court may issue a preliminary injunction “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.” Fed. R. Civ. P. 65(c). While this language appears to be mandatory, “the rule in our circuit has long been that the district court possesses discretion over whether to require the posting of security.” Moltan Co. v. Eagle-Picher Indus., Inc., 55 F.3d 1171, 1176 (6th Cir. 1995) (citing Roth v. Bank of the Commonwealth, 583 F.2d 527, 539 (6th Cir. 1978)) (emphasis added). A court errs when it “fail[s] to . . . expressly consider[] the question of requiring a bond” when the issue has been raised. Roth, 583 F.2d at 539; accord NACCO Materials Handling Grp., Inc. v. Toyota Materials Handling USA, Inc., 246 F. App’x 929, 953 (6th Cir. 2007). Otherwise, it has “broad discretion in setting the bond amount.” Static Control Components, Inc. v. Lexmark Int’l, Inc., 697 F.3d 387, 400 (6th Cir. 2012). There is little doubt that the district court here considered Coventry’s bond request. Coventry asked the court to require Appalachian to post bond two days after the injunction issued, Appalachian opposed the motion, and the court issued a two-page denial. The court reasoned that, based on the record as well as the evidence and argument presented at the preliminary injunction hearing on June 12, 2012, the Court has previously determined that Coventry will suffer “little, if any” harm as a result of the injunction due to the fact that the preliminary injunction simply requires Coventry to maintain the contractual obligation it voluntarily entered into. Undoubtedly, the court below considered the bond issue. The real issue is whether the court below relied on erroneous factual findings—and so abused its discretion—when it concluded that Coventry was unlikely to suffer harm from the injunction because that order merely memorialized an obligation Coventry had already made. The court was wrong to characterize the injunction in this way, as that order clearly required Coventry Nos. 12-5779/5785 Appalachian Reg’l Healthcare, et al. v. Page 12 Coventry Health & Life Ins., et al. to do more than what it had agreed to voluntarily. Given the circumstances, though, this was not reversible error. The preliminary injunction required Coventry to “maintain the status quo until November 1, 2012, including paying [Appalachian] in-network rates,” which the temporary agreement set at 100% of Kentucky’s Medicaid fee schedule for most services. Absent the injunction, Coventry would pay claims at the in-network rate only until June 30, 2012. After that, Coventry says, it would pay Appalachian as an out-ofnetwork provider at 90% of the fee schedule. The bottom line for Coventry is that the injunction required it to pay more in claims that it otherwise would have from June 30, 2012, to November 1, 2012. We might be inclined to agree with Coventry’s position if it were a practical certainty that Coventry would pay the lower rate during this four-month period. But it is not. Coventry certainly offered to pay the lower rate when it unsuccessfully negotiated with Appalachian over a full agreement. The trouble is that Appalachian never accepted this offer, nor did it have to. To the contrary, Appalachian submitted that without a contract, it should be paid on a quantum meruit basis for the reasonable value of its services. It forecasts that this will be greater than its current contract rates with Coventry, which do not cover the costs of Appalachian’s services. See, e.g., Cherry v. Augustus, 245 S.W.3d 766, 779 (Ky. App. 2006) (describing quantum meruit as “an equitable doctrine granting one who has rendered services in a quasi-contractual relationship the reasonable value of services rendered” (internal quotation marks omitted)). Indeed, from the start of this litigation, Appalachian has sought a declaration from the court that it was entitled to recover the reasonable value of its services. And though the district court recently ruled that Appalachian is entitled to be compensated for the reasonable value of its services, it has not yet determined what that value might be. Against this backdrop—with Appalachian’s claim to a higher rate than it received under the temporary agreement still undecided, and with Coventry showing Nos. 12-5779/5785 Appalachian Reg’l Healthcare, et al. v. Page 13 Coventry Health & Life Ins., et al. only that the lower rate was a rejected offer—the district court did not rely on clearly erroneous factual findings in denying Coventry’s bond motion. Coventry’s assertion that it would pay less is speculative at best. The content of Coventry’s bond request supports this conclusion. Although no rule formally requires it, a party seeking a security bond regularly estimates the damages it will suffer if it complies with a preliminary injunction. This serves three purposes. It gives the party seeking the injunction a sense of its liability if the injunction is later found to have been unlawful. It provides the court with a basis to set the proper amount (though not necessarily a definitive one). And it furnishes an appellate court with a marker against which to review the district court’s determination (though, again, not necessarily an exclusive one). Here, Coventry could have estimated the costs of complying with the injunction by, for example, totaling up the difference between in-network rates and out-of-network rates for services Appalachian provided to Coventry’s members over a prior four-month period. Instead, the proposed order for bond that Coventry submitted to the district court featured a blank line in place of a dollar amount. Presented with no estimate of Coventry’s potential damages to rebut Appalachian’s argument that it was entitled to more money during this period, the court concluded that “little, if any” harm was shown, and denied the bond motion. Given these circumstances, the district court did not abuse its discretion.