Court Opinion

ID: 4699066
Source: CourtListenerOpinion
Date Created: 2021-06-28 15:05:08.593235+00
Date Added: 2024-06-11T08:06:00.508822
License: Public Domain

IN THE SUPREME COURT OF THE STATE OF DELAWARE

CONCERNED CITIZENS OF THE                    §
ESTATES OF FAIRWAY VILLAGE,                  §
JULIUS H. SOLOMON, PEGGY                     §        No. 332, 2020
A. SOLOMON, EDWARD D. LEARY,                 §
KENNETH P. SMITH, DENISE M.                  §        Court Below – Court of Chancery
SMITH, TERRY L. THORNES, AND                 §        of the State of Delaware
CARMELA M. THORNES                           §
                                             §
               Plaintiffs Below,             §        C.A. No. 2017-0924-JRS
               Appellants,                   §
                                             §
              v.                             §
                                             §
FAIRWAY CAP, LLC, AND FAIRWAY                §
VILLAGE CONSTRUCTION, INC.,                  §
                                             §
              Defendants Below,              §
              Appellees.                     §

                              Submitted: April 7, 2021
                               Decided: June 25, 2021

Before SEITZ, Chief Justice; TRAYNOR and MONTGOMERY-REEVES, Justices.

Upon appeal from the Court of Chancery. AFFIRMED IN PART AND REVERSED IN
PART.

Richard E. Berl, Jr., Esquire (argued), HUDSON, JONES, JAYWORK & FISHER, LLC,
Lewes, Delaware; for Appellants Concerned Citizens of the Estates of Fairway Village,
Julius H. Solomon, Peggy A. Solomon, Edward D. Leary, Kenneth P. Smith, Denise M.
Smith, Terry L. Thornes, and Carmela M. Thornes.

Jeffrey M. Weiner, Esquire (argued), LAW OFFICES OF JEFFERY M. WEINER, P.A.,
Wilmington, Delaware; Timothy Jay Houseal, Esquire and William E. Gamgort, Esquire
(argued), YOUNG CONAWAY STARGATT & TAYLOR, LLP; for Appellees Fairway
Cap, LLC and Fairway Village Construction, Inc.

                                         1
MONTGOMERY-REEVES, Justice:

       This appeal asks the Court to decide two issues. First, whether the Court of Chancery

erred by holding that a planned residential community’s governing documents allowed a

developer to build rental properties in the community. Second, whether the Court of

Chancery erred by awarding damages for a wrongful injunction after releasing the bond

posted with the court. Having reviewed the parties’ briefs and record on appeal, and after

oral argument, this Court affirms the Court of Chancery’s judgment regarding the breach of

contract claim and reverses the Court of Chancery’s judgment awarding damages for a

wrongful injunction. This Court denies as moot the request for judicial notice.

I.     BACKGROUND

       A.     The Developer Decides to Build a Rental Community at Fairway Village

       Appellant, Concerned Citizens of the Estates of Fairway Village, is an unincorporated

association composed of people who own property in Fairway Village (the “Community”),

a planned residential community located in Ocean View, Delaware.1 Appellants Julius H.

Solomon, Peggy A. Solomon, Edward D. Leary, Kenneth P. Smith, Denise M. Smith, Terry

L. Thornes, and Carmela M. Thornes (collectively, the “Homeowners”) own properties in

the Community and are members of Concerned Citizens of the Estates of Fairway Village.2

1
  Concerned Citizens v. Fairway Cap., LLC, 2019 WL 1058096, at *1 (Del. Ch. Mar. 6, 2019)
(hereafter, “Mem. Op., at _”).
2
  Id. at *2.
                                             2
        Appellee Fairway Cap, LLC is a Delaware limited liability company that serves as

the Community’s current developer.3 At the outset, the Community’s developers expected

to sell 166 single-family homes and 166 townhouse condominiums to the public, creating a

residential community of homeowners. Demand for the townhomes, however, was weaker

than the developers expected.4

        In the winter of 2016, Fairway Cap, LLC hired a real estate consultant to assess the

market for townhomes in the Community.5 The consultant recommended converting the

unsold townhome lots into a rental community. Fairway Cap, LLC accepted the advice,

secured funding, and began working on the rental properties. Appellee Fairway Village

Construction, Inc. is an entity involved in the construction.6

        The Homeowners discovered the plan after seeing an advertisement for “The Reserve

at Fairway Village,” a forthcoming rental community. The Homeowners raised various

objections to the rental community, including that the proposed units did not conform with

existing dwellings and would lower property values. The Town of Ocean View and Fairway

Cap, LLC rejected all the objections, concluding that the planned construction complied with

the housing code and was allowed under the Community’s governing documents.7

3
  Id.
4
  Id. at *2-3.
5
  Id. at *3.
6
  Id. at *2.
7
  Id. at *3-4.
                                               3
       B.     The Homeowners Sue to Block Construction of the Rental Properties

       On December 28, 2017, Concerned Citizens of the Estates of Fairway Village and the

Homeowners (collectively, the “Concerned Citizens”) filed a complaint in the Court of

Chancery challenging the actions of Fairway Cap, LLC and Fairway Village Construction,

Inc. (collectively, “Fairway Cap”) related to constructing the rental properties. The

complaint alleged three counts, including a breach of contract claim under the Community’s

governing documents.8 A few weeks later, another developer involved in the Community,

36 Builders, Inc. (“Insight”),9 filed a similar lawsuit challenging Fairway Cap’s plan.10

       On January 25, 2018, the Concerned Citizens filed a motion for a preliminary

injunction that would bar Fairway Cap from “developing, building, and leasing” rental units

in the Community or constructing townhomes “that differ materially” from existing

dwellings.11 Insight had already requested a similar injunction.12 On March 20, 2018, the

Court of Chancery, in an oral ruling, granted-in-part the motions for injunctive relief in the

Concerned Citizens and Insight litigations. The court made clear that “[t]he injunction [was]

conditioned upon the plaintiffs posting a bond pursuant to Rule 65(c).”13

8
  Id. at *8.
9
  The developer 36 Builders, Inc. trades under the name Insight Homes. Mem. Op., at *3.
10
   Concerned Citizens v. Fairway Cap., LLC, 2018 WL 2364167, at *1 (Del. Ch. May 23, 2018).
11
   See Mem. Op., at *8.
12
   See Concerned Citizens, 2018 WL 2364167, at *1.
13
   App. to Opening Br. 58 (hereafter, “A_”) at 14:10-11.
                                              4
       On April 6, 2018, the Court of Chancery issued a written order regarding the

preliminary injunction.14 The injunction prohibited Fairway Cap from building or leasing

new units that would be part of the rental community. The court’s order provided that

“Plaintiffs,” meaning the Concerned Citizens and Insight, “shall jointly post an injunction

bond in the amount of . . . $354,858 pursuant to Court of Chancery Rule 65(c), to be allocated

among the Plaintiffs as they deem appropriate.”15 The order did not require that the plaintiffs

post a bond by a set date.16 After mediation failed, Fairway Cap moved to lift the preliminary

injunction on the basis that no bond was posted.17 In response, the court entered an order

providing that the injunction would be lifted if the plaintiffs failed to post the bond by

June 4, 2018.18

       On May 23, 2018, the Court of Chancery granted a motion to consolidate the

Concerned Citizens litigation with the Insight litigation.19 Approximately two weeks later, a

preliminary injunction bond was posted in the amount set by the Court of Chancery.20 The

bond stated,

               The Guarantee Company of North America USA, a corporation
               as a surety, in consideration of the premises, and of the issuance
               of the Preliminary Injunction, does undertake in the sum of

14
   A693-94.
15
   A694.
16
   See id.
17
   See Concerned Citizens, C.A. No. 2017-0924-JRS, at 3 (Del. Ch. May 31, 2018) (ORDER)
(Docket Item (“D.I.”) 69).
18
   Id.
19
   See Concerned Citizens, 2018 WL 2364167, at *1.
20
   Concerned Citizens, C.A. No. 2017-0924-JRS, at 2 (Del. Ch. June 5, 2018) (BOND) (D.I. 74).
                                               5
              $354,858, and agrees that Plaintiffs will pay to the Defendants
              such damages, not exceeding the sum of $354,858, if
              Defendants prove that they incurred damages and the Court
              concludes that Defendants were wrongfully enjoined.21

Although the bond refers to “Plaintiffs,” only Insight signed the bond. 22

       In July 2018, Fairway Cap reached a confidential settlement with Insight,23 but the

settlement did not resolve the dispute between Fairway Cap and the Concerned Citizens.

Nonetheless, on July 13, 2018, Insight filed a motion to withdraw and terminate the

injunction bond.24 The motion stated that Insight “posted the Bond,” and “none of the

Concerned Citizens posted any security in support of the Bond.”25 The motion took “no

position on whether the withdrawal of the Bond . . . should affect the injunction approved by

the [Court of Chancery’s] Injunction Order, or whether the Court [of Chancery] should

require security to be posted by the Concerned Citizens.”26

       On July 14, 2018, the Concerned Citizens filed a letter “request[ing] that the Court

[of Chancery] accept a nominal $1,000.00 cash bond . . . to continue the injunction.”27 They

argued that only a nominal bond was required because “the bond amount set by the court

was based on Defendants’ claims for lost rental income” and “the brief time between

21
   Id. at 2.
22
   Id.
23
   See A697-98, at ¶¶ 7, 9.
24
   A695-99.
25
   A697, at ¶ 6.
26
   A698, at ¶ 10.
27
   Concerned Citizens, C.A. No. 2017-0924-JRS (Del. Ch. July 14, 2018) (Letter from Richard E.
Berl, Jr., Esquire, D.I. 90).
                                              6
[July 14] and [the] August 1 [trial date] does not justify a significant bond.”28 They also

challenged whether Fairway Cap had lost as much rental income as anticipated.29

       Approximately one week later, Fairway Cap filed a letter “oppos[ing] the Concerned

Citizens Plaintiffs’ . . . request to reduce the Injunction Bond ordered by the Court to a

nominal $1,000.00 cash bond.”30 The letter focused on defending the full bond amount.

Nonetheless, a footnote stated:

                      Defendants do not object to the withdrawal of the Bond.
              In the event the Concerned Citizens Plaintiffs do not post a
              comparable replacement bond, Defendants submit that the
              Preliminary Injunction should be lifted immediately.
              Defendants reserve their right to pursue damages incurred
              during the period in which the Preliminary Injunction remained
              in effect from the Concerned Citizens Plaintiffs.31

       On July 23, 2018, the Concerned Citizens filed a reply, which focused on rebutting

Fairway Cap’s claim of damages resulting from the injunction.32 The reply also informed

the court that the Concerned Citizens had an arrangement with Insight with respect to the

security for the bond but argued that the settlement negated that arrangement and that the

original bond was no longer justified.33

28
   Id.
29
   Id.
30
   A701.
31
   A703, at n.1.
32
   Concerned Citizens, C.A. No. 2017-0924-JRS (Del. Ch. July 23, 2018) (Letter from Richard E.
Berl, Jr., Esquire, D.I. 97).
33
   Id.
                                              7
       On August 14, 2018, Insight filed a letter reminding the court of the pending motion

to terminate the injunction bond. Among other things, the letter “note[d] that . . . Defendants

do not oppose the withdrawal of the preliminary injunction bond as requested by the Bond

Withdrawal Motion.”34 A few hours later, the Court of Chancery issued an order granting

the motion to withdraw and terminate the injunction bond.35 The court’s order did not

address the parties’ arguments regarding a replacement bond:

              1.     Insight’s Motion shall be and hereby is GRANTED;

              2.     The Injunction Bond posted by Insight on June 4, 2018,
              in this action . . . shall be deemed withdrawn by Insight and
              terminated and shall be of no further effect for the purposes of
              this consolidated Civil Action; and

              3.      Insight is authorized to advise the Guaranty Company of
              North America USA, as Surety on the Injunction Bond, or its
              agents, that the Injunction Bond is terminated and of no further
              effect.36

       Prior to trial, no further actions were taken related to the preliminary injunction or the

injunction bond. The Court of Chancery did not alter its previous rulings requiring the

posting of a bond in the sum of $354,858. The Concerned Citizens did not post a

replacement bond. And Fairway Cap did not move to lift the injunction.37

34
   Concerned Citizens, C.A. No. 2017-0924-JRS (Del. Ch. August 14, 2018) (Letter from Joseph C.
Schoell, Esquire, D.I. 103).
35
   A707-09.
36
   Id.
37
   See generally Opening Br. Ex. C, at 4:6-7:4.
                                               8
       The Court of Chancery held a one-day trial in August 2018.38 On March 6, 2019, the

court issued its post-trial memorandum opinion.39 The opinion denied the Concerned

Citizens’ sole surviving claim for relief, holding that “[b]ecause I find that the Defendants’

plan to build, own and lease townhome condominiums to residential tenants does not breach

the Fairway Village governing documents, I must conclude that [the] Plaintiffs have failed

to prove a breach of contract.”40

       C.     The Court of Chancery Awards Damages for a Wrongful Injunction

       On August 16, 2019, the Court of Chancery held a hearing regarding whether Fairway

Cap could seek damages under Court of Chancery Rule 65 for damages caused by the

preliminary injunction.41    The court held that Fairway Cap could seek damages for a

wrongful injunction. The court determined that the injunction was wrongful because

Fairway Cap always had the power to build the rental community.42 The court also held that

its failure to require a replacement bond did not bar recovery, explaining:

                     Initially, when the injunction was entered on behalf of the
              Concerned Citizens plaintiffs and [Insight], I required a
              bond. . . .

                      [Insight] then settled with the defendants last summer.
              And because [Insight] had posted the entirety of the secured
              bond, they asked to be released from it. No other party opposed
              that relief, and for good reason. It just didn’t make any sense to

38
   Mem. Op., at *8.
39
   Id. at *1.
40
   Id. at *14.
41
   See Opening Br. Ex. C.
42
   Id. at 3:23-4:5.
                                              9
                   keep [Insight] on the bond when they were no longer going to
                   be in the case.

                         . . . [T]he defendants asked that the bond be imposed
                   upon the Concerned Citizens plaintiffs in the full amount. The
                   Concerned Citizens plaintiffs opposed that request . . . .

                            Contrary to the Concerned Citizens plaintiffs’ position in
                   the papers before the Court now, the defendants did ask that if
                   the bond was not going to be reimposed . . .[,] the Court should
                   withdraw the preliminary injunction. Because it appeared at the
                   time . . . that the case was nearing its conclusion . . ., and because
                   I determined that the Concerned Citizens homeowners should
                   not be forced at that time to post security for a sizeable bond, I
                   declined to require that they do so.

                          . . . [T]here was no determination made that the
                   defendants would suffer no harm or damages from a wrongful
                   injunction, and no intent to prevent defendants from seeking to
                   recover such damages in the event it was determined they had
                   been wrongfully enjoined.

                          ....

                          The question then is whether the Court’s decision to
                   relieve the Concerned Citizens plaintiffs of the requirement to
                   post security for a more than $300,000 bond . . . prevent[s] the
                   defendants . . . from seeking to recover their damages from the
                   wrongfully imposed injunction. The answer to that is no.

                          ....

                           . . . [W]hen the trial court exercises its discretion not to
                   impose a bond—not because it has determined there will be no
                   harm from a wrongful injunction but because of some other
                   consideration, such as timing or harm to nonentity plaintiffs—
                   the fact that no bond issues does not bar recovery or set a ceiling
                   of zero on that recovery. 43

43
     Id. at 4:6-7:4.
                                                    10
       On January 23, 2020, the Court of Chancery held a post-trial evidentiary hearing

regarding damages for the wrongful injunction. Afterwards, the Court of Chancery received

several rounds of post-trial briefing and held hearings on legal issues related to damages for

the injunction.44

       On September 11, 2020, the Court of Chancery issued an order awarding Fairway

Cap $113,197.00 in damages.45 It appears that all of these damages accrued after the court

terminated the Injunction Bond.46 The order reaffirmed the court’s prior determination that

the “Plaintiffs’ sole remaining claim against [the] Defendants, Breach of Contract . . ., fails

and judgment is entered against the Plaintiffs . . . .”47

II.    STANDARD OF REVIEW

       This court reviews questions of law de novo, including whether the Community’s

governing documents prohibited Fairway Cap from building a rental community48 and

whether Fairway Cap can seek damages for a wrongful injunction despite the absence of an

injunction bond posted with the court.49

44
   See Opening Br. Ex. D.
45
   Id. at ¶ 4.
46
   Concerned Citizens, C.A. No. 2017-0924-JRS (Del. Ch. Mar. 5, 2020) (Defs.’ Post-Hr’g Br. in
Support of their Post-Trial Mot. for an Award of Costs and or Consequential Damages, D.I. 192
(seeking damages for rental income lost after August 2018)).
47
   See Opening Br. Ex. D, at ¶ 2.
48
   See, e.g., GMG Cap. Invs., LLC v. Athenian Venture P’rs I, 36 A.3d 776, 779 (Del. 2012) (“We
review questions of contract interpretation de novo.” (quoting Paul v. Deloitte & Touche, LLP,
974 A.2d 140, 145 (Del. 2009))).
49
   BlackRock Credit Allocation Income Tr. v. Saba Cap. Master Fund, Ltd., 224 A.3d 964, 975
(Del. 2020) (“This Court reviews a grant of injunctive relief for an abuse of discretion. Embedded

                                                11
III.   ANALYSIS

       The Concerned Citizens raise two issues on appeal. First, the Concerned Citizens

argue that the Court of Chancery made various errors in rejecting the breach of contract

claim.50 This Court affirms the Court of Chancery’s judgment regarding the breach of

contract claim on the basis of and for the well-stated reasons in the memorandum opinion

dated March 6, 2019.51

       Second, the Concerned Citizens argue that the Court of Chancery erred by awarding

damages to Fairway Cap for a wrongfully issued injunction in the absence of an injunction

bond.52 Under Rule 65(c), the Court of Chancery must impose a bond when granting a

preliminary injunction:

               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 bond requirement serves two purposes. First, “it assures the enjoined party that

it may readily collect damages from the funds posted or the surety provided in the event that

legal conclusions, however, are reviewed de novo.” (citations omitted)); Emerald P’rs v. Berlin,
726 A.2d 1215, 1224 (Del. 1999) (“We next address the claim that the Court of Chancery erred in
ruling that the defendants had been ‘wrongfully enjoined’ and were thus entitled to be compensated
from the proceeds of the appeal bond posted by [the plaintiff] for [the defendants’] costs and
damages. We consider that claim involving the formulation and application of legal principles de
novo.” (citing Gilbert v. El Paso Co., 575 A.2d 1131, 1142 (Del. 1990))).
50
   See Opening Br. 4-5, 12-39.
51
   Because the Court affirms on the basis of the Court of Chancery’s opinion, Fairway Cap’s motion
for judicial notice is denied as moot.
52
   Opening Br. 40-46.
                                               12
it was wrongfully enjoined, without further litigation and without possible insolvency of the

assured.”53 Second, “it provides the plaintiff with notice of the maximum extent of its

liability, since the amount of the bond ‘is the limit of the damages the defendant can obtain

for a wrongful injunction, . . . provided the plaintiff was acting in good faith.’”54 This

limitation on damages is sometimes referred to as the “Injunction Bond Rule.”55

       In this case, the Court of Chancery followed Rule 65(c) and ordered the Concerned

Citizens and Insight to post an injunction bond in the amount of $354,858.56 That order did

not provide a deadline, but Fairway Cap moved to lift the injunction after the Concerned

Citizens and Insight failed to post the secured bond.57 In response, the court entered an order

stating that if the bond was not posted by June 4, 2018, the preliminary injunction would be

lifted without further action from the court or the parties.58 Insight posted an injunction bond

in the amount of $354,858.59 Nothing in the record before us suggests that the Concerned

Citizens took any action regarding the injunction bond; the parties and the court seem to

agree that the Concerned Citizens never posted any form of injunction bond.

53
    See, e.g., Sprint Commc’ns Co. v. CAT Commc’ns Intern., Inc., 335 F.3d 235, 240 n.5
(3d Cir. 2003) (quoting Continuum Co., Inc. v. Incepts, Inc., 873 F.2d 801, 803 (5th Cir. 1989)).
54
    Id.; see also Guzzetta v. Serv. Corps. of Westover Hills, 7 A.3d 467, 470 (Del. 2010) (“The
security, usually a bond, fixes the maximum amount that an enjoined party may recover.” (citing
Coyne–Delany Co., 717 F.2d at 393 (7th Cir. 1983)).
55
   See, e.g., Emerald P’rs, 712 A.2d at 1010-11.
56
   A693-94.
57
   Concerned Citizens, C.A. No. 2017-0924-JRS, at 3 (Del. Ch. May 31, 2018) (ORDER) (D.I. 69).
58
   Id. at 4.
59
   Concerned Citizens, C.A. No. 2017-0924-JRS, at 2 (Del. Ch. June 5, 2018) (BOND) (D.I. 74).
                                               13
       In July 2018, Insight and Fairway Cap reached a settlement.60 After the settlement,

Insight filed a motion to withdraw and terminate the injunction bond.61 Neither Fairway Cap

nor the Concerned Citizens opposed this request.62 Nonetheless, both Fairway Cap and the

Concerned Citizens recognized that a replacement bond was needed to extend the

preliminary injunction.63 The Concerned Citizens asked the court to keep the preliminary

injunction in place and impose a nominal bond.64 Fairway Cap responded and asked the

court to leave the original bond requirement in place or to lift the injunction.65

       On August 14, 2018, the Court of Chancery “terminated” the existing injunction

bond; that order did not address the parties’ arguments regarding the replacement bond.66

Fairway Cap seems to contend that the court’s failure to address Fairway Cap’s and the

Concerned Citizens’ arguments regarding the replacement bond converted the secured bond

into an unsecured bond.        Relying on federal opinions such as Atomic Oil Co. of

Oklahoma, Inc v. Bardahl Oil Co.67 and Factors, Etc., Inc. v. Pro Arts,68 Fairway argues that,

when a trial court exercises its discretion to “not require security as a condition for a

60
   See A697-98, at ¶¶ 7, 9.
61
   A695-99.
62
   See A701-06.
63
   See A702, at 3 n.1; Concerned Citizens, C.A. No. 2017-0924-JRS (Del. Ch. July 14, 2018) (Letter
from Richard E. Berl, Jr, Esquire, D.I. 90).
64
    Concerned Citizens, C.A. No. 2017-0924-JRS, at 1 (Del. Ch. July 14, 2018) (Letter from
Richard E. Berl, Jr, Esquire, D.I. 90).
65
   A702-03.
66
   A707-09.
67
   419 F.2d 1097 (10th Cir. 1969).
68
   562 F. Supp. 304 (S.D.N.Y. 1983).
                                               14
preliminary injunction,” the lack of security “d[oes] not bar the enjoined from later seeking

damages.”69 But the Court of Chancery did not issue an order converting the secured bond

into an unsecured bond or granting a preliminary injunction without security.70 The docket

reflects that the court terminated the injunction bond without altering the original

requirement that the plaintiffs post $354,858 in security to support the injunction.71 Whether

damages would have been recoverable had the court converted a secured bond into an

unsecured bond, or had the court issued a preliminary injunction without security, is therefore

irrelevant. 72

        Thus, the question on appeal is whether Fairway Cap could recover damages for a

wrongful injunction even though the court terminated the existing bond without specifically

addressing the parties’ arguments regarding the replacement bond. The Concerned Citizens

argue that no damages are recoverable because the Injunction Bond Rule limits recovery to

the “actual value” of the bond posted with the court, which was zero after the court released

69
   Answering Br. 45.
70
   Oral Argument at 38:22-39:59 (April 7, 2021), https://livestream.com/accounts/5969852/events/
960026/videos/219660793/player.
71
   See A707-09; A694.
72
    The federal court opinions in Atomic Oil and Factors are inapposite for another reason.
419 F.2d at 1097; 562 F. Supp. at 304. In both cases the trial court discharged a bond supporting a
preliminary injunction after concluding that the plaintiff was entitled to permanent relief. And in
both cases, the appellate court reversed that determination on the merits, thereby reversing the basis
upon which the trial court released the bond. See Atomic Oil, 419 F.2d at 1098-1100; Factors,
562 F. Supp. at 305-06. Here, Fairway Cap does not argue that the Court of Chancery erred by
releasing the bond Insight posted. To the contrary, Fairway Cap supported that order as part of a
settlement. A703, n.1. Thus, the federal authorities do not address the question before this Court.
                                                 15
the bond Insight posted.73 Fairway Cap argues that the Injunction Bond Rule does not limit

recovery because the Concerned Citizens had notice that requesting an injunction exposed

them to liability of up to $354,858, an amount larger than the $113,197 in damages the court

awarded for the wrongful injunction.74 Fairway Cap also argues that it did not waive the

right to seek damages for a wrongful injunction, and that it is bad policy to use the Injunction

Bond Rule to prevent a wrongfully-enjoined party from recovering damages when the court

determined at the outset that a wrongful injunction would cause harm.75

       This appeal does not turn on our interpretation of the Injunction Bond Rule. This

appeal turns on whether Fairway Cap could recover damages after failing to seek

enforcement of a court order. The court’s order releasing the bond Insight posted did not

disturb the requirement that the Concerned Citizens post a $354,858 bond to support the

injunction.76 This gave the Concerned Citizens an option to either post the full bond amount

and extend the preliminary injunction, or not post the full bond amount and allow the court

to lift the injunction. The Concerned Citizens had never posted a bond in this case and

decided to not post any bond in August of 2018. It is worth noting here that Fairway Cap

had acknowledged to the court that the Concerned Citizens were free to decide not to post

73
   Opening Br. 42, 40-46.
74
   See Answering Br. 40-47; Opening Br. Ex. D, at ¶ 4 (awarding Fairway Cap $113,197.00 in
damages).
75
   Answering Br. 42-45.
76
   A707-09.
                                              16
the required bond but that, as a consequence, the injunction should be lifted.77 Thus, when

the Concerned Citizens made that decision, the opportunity passed to Fairway Cap to move

to lift the injunction. Fairway Cap had demonstrated the ability to file such a motion in this

litigation.78 But in August of 2018, Fairway Cap did not file a motion to enforce the bond

requirement or to life the injuction.

        That inaction proved costly. Fairway Cap’s failure to enforce its rights meant that it

remained enjoined but could not recover damages for a wrongful injunction.79 This result

might seem unfair, but Fairway Cap has only itself to blame for failing to move to lift the

injunction after the Concerned Citizens did not post a replacement bond. It is not

unreasonable to ask an enjoined party to inform the court if the plaintiff fails to post an

injunction bond. To the contrary, our legal system often places the burden on injured parties

77
   Concerned Citizens, C.A. No. 2017-0924-JRS (Del. Ch. July 19, 2018) (Letter from Timothy Jay
Houseal, D.I 95) (“Defendants are satisfied to rely upon the $354,858.00 Bond amount previously
ordered by the Court. If the Concerned Citizens Plaintiffs decide not to post the required Bond, then
the Preliminary Injunction should be lifted.”).
78
    See Concerned Citizens, C.A. No. 2017-0924-JRS, at 3 (Del. Ch. May 31, 2018) (ORDER)
(D.I. 69).
79
    See generally Cagan v. Mut. Beneficial Life Ins. Co., 28 F.3d 654, 656 (7th Cir. 1994) (The
enjoined party “contends that it is entitled to damages for the time during which it was [enjoined] . .
. . But the district court did not require [the party seeking an injunction] to post an injunction bond,
and in all but exceptional cases the lack of an injunction bond means the unavailability of damages
for wrongful injunction. Ours is not an exceptional case. [The enjoined party] did not remind the
district court of the need for a bond under Fed. R. Civ. P. 65(c), did not ask us to stay the injunction,
and to this day has not attempted to quantify the damages from the delay.” (citations omitted)).
                                                  17
to inform the court that they have been injured.80 Otherwise, there would be no satisfactory

mechanism to alert the court when a party violates a court order.

       Accordingly, the Court of Chancery erred by allowing Fairway Cap to seek damages

for a wrongful injunction.

IV.    CONCLUSION

       For the reasons provided above, the Court AFFIRMS-in-PART and REVERSES-in-

PART the Court of Chancery’s September 21, 2020 order. Fairway Cap’s request for judicial

notice is DENIED as moot.

80
   See, e.g., IAC/InterActiveCorp v. O’Brien, 26 A.3d 174, 177 (Del. 2011) (“[E]quity aids the
vigilant, not those who slumber on their rights.” (quoting Adams v. Jankouskas, 452 A.2d 148, 157
(Del. 1982))).
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