Opinion ID: 217162
Heading Depth: 2
Heading Rank: 2

Heading: InterDigital's Motion to Recover

Text: As previously noted, the district court denied InterDigital's motion to recover fees and expenses allegedly caused by the injunction. However, the court's order does not provide us with a sufficiently clear explanation of its reasoning to permit meaningful review. For example, we are not clear what the court meant when it observed that the Defendants have failed to convert attorneys' fees incurred because of the injunction into damages. We are also uncertain of the basis for the court's conclusion that Defendants have failed to show that their attorneys' fees were proximately caused by the injunction. Neither party seems to dispute that InterDigital was wrongfully enjoined. See Guzman v. Local 32B-32J, Serv. Emps. Int'l Union, 72 F.3d 260, 263 (2d Cir.1995) ([A] party has been wrongfully enjoined [if it has been] ordered to do something it had a right to refrain from doing or to cease doing something it had a right to continue doing.); Blumenthal, 910 F.2d at 1054 (The focus of the `wrongfulness' inquiry is whether, in hindsight in light of the ultimate decision on the merits after a full hearing, the injunction should not have issued in the first instance.). Thus, the central dispute is whether the attorneys' fees and other legal expenses sought by InterDigital were proximately caused by the injunction. Nokia contends that attorneys' fees and legal expenses, whether expended in the defense of the injunction motion or in a collateral proceeding, are not recoverable. [2] It is true that under the American Rule a prevailing party is generally not entitled to collect attorneys' fees from the losing party. See Travelers Cas. & Sur. Co. of Am. v. Pac. Gas & Elec. Co., 549 U.S. 443, 448, 127 S.Ct. 1199, 167 L.Ed.2d 178 (2007); see also Bliven v. Hunt, 579 F.3d 204, 212 (2d Cir.2009) ([T]he general `American Rule' is that the prevailing party in federal court litigation is not entitled to recover legal fees incurred in the conduct of that litigation. . . . (emphasis added)). This rule appears to be rooted in early efforts by Congress to prevent losing litigants [from] being unfairly saddled with exorbitant fees for the victor's attorneys. Alyeska Pipeline Serv. Co. v. Wilderness Soc'y, 421 U.S. 240, 251, 95 S.Ct. 1612, 44 L.Ed.2d 141 (1975). Consistent with this general rule against fee-shifting, it has long been established that a prevailing party may not generally collect as damages against an injunction bond attorneys' fees expended in litigating the injunction. See Tullock v. Mulvane, 184 U.S. 497, 509-14, 22 S.Ct. 372, 46 L.Ed. 657 (1902); Salvage Process Corp. v. Acme Tank Cleaning Process Corp., 104 F.2d 105, 107 (2d Cir.1939); see also Matek v. Murat, 862 F.2d 720, 734 (9th Cir.1988) (Attorney's fees are not recoverable as damages in an action on an injunction bond.), abrogated on other grounds by Koch v. Hankins, 928 F.2d 1471 (9th Cir.1991); Fireman's Fund Ins. Co. v. S.E.K. Constr. Co., 436 F.2d 1345, 1352 (10th Cir.1971) (Under [Rule 65(c) ] attorneys' fees . . . are not recoverable.). This principle is well established, and we adhere to it. However, this principle does not control here because InterDigital does not seek to recover attorneys' fees or legal expenses that it incurred in litigating the injunction. Instead, it seeks to recover fees and expenses that it incurred in complying with the injunction. Recovery of such costs, incurred in collateral proceedings required by the terms of a wrongful injunction, does not contravene the American Rule or its Rule 65(c) analogue. Nor would permitting recovery under these circumstances risk unfairly saddling losing parties with the prevailing parties' attorneys' fees. Instead, permitting recovery is consistent with the purpose of an injunction bondto cover the costs and damages incurred as a result of complying with a wrongful injunction. Having concluded that wrongfully enjoined parties are entitled to a presumption in favor of recovery, and that the American Rule does not bar recovery here, we remand for the district court to reconsider its denial of InterDigital's motion to recover and to provide further explanation for its conclusion. We note, however, that in light of the presumption and principles we have discussed, we are inclined to think that at least a portion of InterDigital's alleged damages may be recoverable. For example, the causal relationship between the preliminary injunction and the cost incurred by InterDigital to file a motion to stay the ITC proceedings against Nokia seems clearthe stay was an explicit requirement of the preliminary injunction. Specifically, the injunction stated: InterDigital shall file by April 11, 2008 a motion to stay the ITC Proceeding with respect to Nokia. Thus, provided that they are properly substantiated, and absent good reason to deny recovery, we are inclined to think that these costs are recoverable. Whether InterDigital should be able to recover the remaining damages alleged expenses incurred to prepare for arbitration with Nokia and to deconsolidate the ITC proceedings, and duplicative litigation costs allegedly resulting from deconsolidationraises closer questions. As part of its reconsideration on remand, we leave it to the district court to resolve these questions in the first instance.