Court Opinion

ID: 9505574
Source: CourtListenerOpinion
Date Created: 2023-08-06 20:06:38.859019+00
Date Added: 2024-06-11T09:04:37.283603
License: Public Domain

BOEHM, Justice,
dissenting.
I respectfully dissent. I do not believe that a suit for wrongful enjoinment implicates the Tort Claims Act. Rather, I would conclude that, under Trial Rule 65(C), a governmental entity seeking a preliminary injunction voluntarily assumes the obligation to pay costs and damages arising from a wrongful injunction. As a result, the claim by a person wrongfully enjoined is not one arising in tort and the Tort Claims Act, which bars only claims "in tort," does not preclude recovery of those costs and damages from a governmental entity. More importantly, the majority's approach does nothing to resolve the tension between the Tort Claims Act and Trial Rule 65(C), and ignores the point that this Trial Rule has been repeatedly enacted by the legislature, both before and after the Tort Claims Act. I also find no support for the majority's conclusion that a governmental entity-or any other party to a lawsuit-acts "wrongfully" under Trial Rule 65(C) only where it acts in "bad faith" or with "malice" in invoking the power of the courts. It seems to me that the majority's rule is inherently self-contradictory. If the Tort Claims Act applies at all to a wrongful injunction, it provides protection to the governmental entity even for acts taken maliciously or in bad faith. Indeed, as explained below, the torts that the Act does immunize-malicious prosecution and abuse of process-have bad faith as an element. Thus, allowing suit only in the event of bad faith or malice, although possibly supportable as a policy matter, is a position incompatible with the Tort Claims Act and, in my view, amounts to rewriting the statute.
All parties agree that the resolution of this case turns on the interplay between the Indiana Tort Claims Act, see Ind.Code, §§ 34-18-3-1 to 25 (1998), and Indiana Rule of Trial Procedure 65(C). Section 1 of the Tort Claims Act declares that the Act "applies only to a claim or suit in tort." 1.C. § 34-18-3-1. The Act goes on to bar suit against governmental entities, including counties, under certain cireumstances and for specific enumerated activities, two of which are "the initiation of a judicial or an administrative proceeding" and "the performance of a discretionary function." Id. § 34-13-8-3(5) & (6). Indiana Trial Rule 65(C), which requires a party seeking a preliminary injunction to post a bond, exempts a "governmental organization" from that requirement but provides that "such governmental organization shall be responsible for costs and damages." Thus, the issue is whether the Tort Claims Act bars a party who is the subject of a wrong*201fully issued preliminary injunction from obtaining costs and damages from a governmental entity notwithstanding the trial rule. If obtaining a preliminary injunction that is ultimately vacated is a tort, then it is necessary to determine whether the statute or the trial rule governs. This was the inquiry of the Court of Appeals. If, however, Rogers' claim is not grounded in tort, the Tort Claims Act does not apply. The issue then becomes whether Trial Rule 65(C) standing alone is a sufficient basis to impose liability on Noble County for Rogers' costs and damages.
A. The Remedy for a "Wrongful" Preliminary Injunction Is Contractual in Nature
Many states, either by statute or by rule of court, provide that a bond must be posted as a prerequisite to obtaining a preliminary injunction. Similarly, Federal Rule of Civil Procedure 65(C) provides for the issuance of security as a precondition to the grant of a preliminary injunction by a federal court. Indiana Trial Rule 65(C), like the trial rules of many other states, is modeled on the federal rule. Essentially, for the privilege of obtaining the expedited and, by definition, "preliminary" relief of a preliminary injunction, the plaintiff offers security in an amount that will adequately compensate the defendant if it is later determined that the interim relief was improperly granted. The enjoined party is a third-party beneficiary of the bond, which is a contract between the issuer and the party seeking the injunction. Accordingly, if recovery is sought on the injunction bond, it is essentially a contract claim. Curtis 1000, Inc. v. Youngblade, 878 F.Supp. 1224, 1277-78 (N.D.Iowa 1995) (citing Note, Recovery for Wrongful Interlocutory Injunctions Under Rule 65(C), 99 Harv.L.Rev. 828, 882-38 (1986); In re Estate of Prichard, 169 Mich.App. 140, 425 N.W.2d 744, 748 (1988).
The federal rule is that a defendant wrongfully enjoined has no cause of action in the absence of a bond. W.R. Grace & Co. v. Local 759, 461 U.S. 757, 770 n. 14, 103 S.Ct. 2177, 76 L.Ed.2d 298 (1983). For the most part, the same has been true under state law as well. Note, Interlocutory Injunctions and the Injunction Bond, 73 Harvy.L.Rev. 333, 348-44 (1959). The view of a claim for wrongful injunction as essentially contractual in nature is consistent with that result. If a party who has obtained an ultimately vacated injunction has committed a tort, the enjoined party would have a claim with or without a bond to secure payment. In addition, in many jurisdictions, and in Indiana until 1976,1 the amount of recovery is generally limited to the amount of the bond. Coyne-Delany Co. v. Capital Dev. Bd., 717 F.2d 385, 393-94 (7th Cir.1983); State v. Zahourek, 935 P.2d 74, 77 (Colo.Ct.App.1996), aff'd, 956 P.2d 556 (Colo.1998) (generally, no recovery is allowed unless the wrongfully enjoined party has a claim for malicious prosecution, restitution, or unjust enrichment). The sum of this appears to be that in the vast majority of jurisdictions recovery by a wrongfully enjoined party is viewed as fulfilling an undertaking by the party seeking _ *202the relief to compensate for a wrongful injunction, not as compensating for a tort.
In Indiana, the law is less clear because our case law, like that of a few other states, allows both an action on the injunetion bond as well as an action for damages beyond the amount of the bond. See generally 42 Am.Jur.2d Injunctions § 346 (2000). This is provided by statute in some jurisdictions. E.g., IMl.Comp.Stat. 110/11-110 (1984). Indiana has permitted recovery beyond the amount of the bond without any statutory basis other than Trial Rule 65(C).. National Sanitary Supply Co. v. Wright, 644 N.E.2d 903, 905 (Ind.Ct. App.1994), trans. denied; Howard D. Johnson Co. v. Parkside Dev. Corp., 169 Ind.App. 379, 389, 348 N.E.2d 656, 663 (1976). And in Indiana, a wrongfully enjoined party may recover actual damages even if no security was demanded. Wright, 644 N.E.2d at 905. The sum of this is that a claim for "wrongful enjoinment" has a long history in Indiana, but has never been explicitly characterized as either a "tort" or a "contract" claim.
B. Governmental Liability for Wrongful Injunctions
Many jurisdictions make special provision for preliminary injunctions by government agencies, but most simply exempt the government from the requirement to post a bond. Governmental entities are exempt under the federal counterpart to Trial Rule 65(C), but there is no provision in the federal rule purporting to impose liability on the government for a wrongful injunction. Many states also require no bond from a governmental entity before it may obtain a preliminary injunction, but make no express provision for liability. See 42 Am.Jur.2d Injunctions § 287 (2000). Indiana is in a distinct minority in its inclusion of express language calling for government liability for a wrongful preliminary injunction.
Some authorities explain the government's exemption as based on a desire to spare the public the cost of posting a bond. E.g., Provident Mgmt. Corp. v. City of Treasure Island, 718 So.2d 738, 740 (Fla.1998). Others state that it is because the government is presumed to be fiscally responsible in the event any loss is incurred. Id.; Howard D. Johnson, 169 Ind.App. at 389, 348 N.E.2d at 663; cf - Juniata Foods, Inc. v. Mifflin County Dev. Auth., 87 Pa.Cmwlth. 127, 486 A.2d 1035, 1037 (1985) ("The bond requirement ... is merely to insure a ready source for payment of damages if due."); Norco Constr., Inc. v. King County, 106 Wash.2d 290, 721 P.2d 511, 513-14 (1986) (government not required to post supersedeas bond because "the State treasury provides an adequate guaranty that the prevailing party will be able to collect the amount of the judgment").
Some states have concluded that the government is required to answer in damages even though it has not posted a bond. This rule is sometimes grounded in a statute or rule, and sometimes not. See Corpus Christi Gas Co. v. City of Corpus Christi, 46 F.2d 962, 968 (5th Cir.1981) (construing Texas statute providing that city "shall be liable in the same manner, and to the same extent, as if the bond, undertaking or security in ordinary cases had been duly given and executed"); Provident Mgmt., 718 So.2d at 740; cf. Norco Constr., 721 P.2d at 514 ("[A] party that is exempt from the bond requirement is in the same position as if it had posted a bond."). Other courts have concluded that in the absence of a bond, a party wrongfully enjoined simply has no recourse against a government entity, consistent with principles of sovereign immunity. Village of Lake in the Hills v. Laidlaw Waste Sys., *203Inc., 160 Ill.App.3d 427, 112 IIl.Dec. 184, 513 N.E.2d 598, 602-03 (1987); Orange County v. Heath, 282 N.C. 292, 192 S.E.2d 308, 310 (1972). This issue has not been decisively determined under federal law. But see SEC v. Unifund SAL, 910 F.2d 1028, 1039-40 (2d Cir.1990) (suggesting that party seeking redress for wrongful injunction against federal entity may be without recourse altogether).
Only North Carolina and Illinois have explicitly discussed the interaction between sovereign immunity and a rule or statute that dispenses with the bond requirement for governmental agencies but explicitly provides for damages to the party wrongfully enjoined. For different reasons, both have concluded that a governmental entity is not liable for damages to the wrongfully enjoined defendant. Illinois by statute allows recovery for wrongful injunction at the hands of a private party whether or not bond has been posted. However, this claim for wrongful en-joinment has been deemed tort-like enough to implicate that state's immunity act if the government is the party seeking . the injunction. Laidlaw, 112 Ill.Dec. 184, 513 N.E.2d at 601. In Laidlaw, the Illinois Court of Appeals concluded that villages were immune from a claim for a wrongful injunction under the state's tort immunity act. In so doing, it opted for a - broader definition of tort, even though it acknowledged that "obtaining a wrongfully issued preliminary injunction is not technically a tort." Id.
I do not believe that reasoning applies under Indiana law. Traditionally, at common law, sovereign immunity was the norm in this state. However, by 1972, this Court had taken the last step in a series of decisions that had largely abrogated common law sovereign immunity. Campbell v. State, 259 Ind. 55, 63, 284 N.E.2d 733, 737-38 (1972) (abrogating sovereign immunity for state); Klepinger v. Board of Comm'rs, 143 Ind.App. 155, 177-78, 239 N.E.2d 160, 173 (1968), trams. denied (abrogating sovereign immunity for counties); Brinkman v. City of Indianapolis, 141 Ind.App. 662, 231 N.E.2d 169 (1967), trans. denied (abrogating sovereign immunity for cities). Accordingly, the Tort Claims Act was enacted in 1974 in the context of an Indiana common law presumption against governmental immunity. Because the Indiana Act is in derogation of the common law, it is to be narrowly construed against a grant of immunity. Mullin v. Municipal City of South Bend, 639 N.E.2d 278, 281 (Ind. 1994). For this reason, I do not agree with the Laidlaw court's conclusion that nontortious activity is immunized by the Tort Claims Act, nor with the majority's unstated conclusion that Noble County has committed a "tort" as understood by the Act.
North Carolina took the view that the enactment of its procedural rule 65(C) did not waive government immunity for torts, apparently assuming that a suit for wrongful injunction is a tort, without saying so explicitly. Heath, 192 S.E.2d at 310. No express reliance was placed on North Carolina's Trial Rule 65(C), which, like Indiana's, specifically provides that no bond is required of a governmental entity, but that the governmental entity is nevertheless responsible for damages arising from wrongful enjoinment. Id. Because I believe that the recovery is essentially contractual in nature, I also find that authority unpersuasive.
C. Noble County Assumed the Liability Provided by Trial Rule 65(C)
In my view, the basis upon which Rogers seeks recovery from Noble County is essentially contractual. There is no written contract between the two, and no bond creating a third party beneficiary relation*204ship. Nonetheless, by pursuing a preliminary injunction under Rule 65(C), Noble County accepted the arrangement imposed by the Rule and bound itself to reimburse Rogers for "costs and damages" if it was subsequently determined that the injuncetion should not have issued. See 1 Samuel Williston & Richard A. Lord, A Treatise on the Low of Contracts § 4:2 (Ath ed.1990) ("[BJroadly speaking, any conduct of one party from which the other may reasonably draw the inference of a promise, is effective in law as such a promise."); Restatement (Second) of Contracts § 19 (1981) ("The manifestation of assent may be made wholly or partly by written or spoken words or by other acts or by failure to act."); see also Grove v. Charbonneau Buick-Pontiac, Inc., 240 NW .2d 853, 856-57 (N.D.1976) (published rules of contest are a valid offer that, if acted upon, create a binding contract); Lucas v. Godfrey, 161 Wis.2d 51, 467 N.W.2d 180, 183-84 (Wis.Ct.App.1991) (same).
Although Rule 65(C) now directly cere-ates the obligation to reimburse for a wrongful injunction, Indiana law has long - required this result. Initially, this was accomplished by the requirement that a bond be posted. Indeed, the requirement that a party seeking an injunction reimburse a defendant who is wrongfully enjoined predates Rule 65(C) by nearly a century. In 1881, the legislature provided the code pleading procedure for obtaining injunctions. 1881 Ind.Acts ch. 88, § 183. This included the requirement that a party seeking an injunction enter into a "written undertaking, with surety ... for the payment of all damages and costs which may acerue by reason of the injunction." Ind. Code Ann. § 383-2107 (Michie 1968). Rule 65(C) became effective as of January 1, 1970, and Section 38-2107 was repealed effective the same day. Thus, Indiana law has long provided by either rule or statute for damages to be recovered by a wrongfully enjoined party.
In 1970, the obligation of private parties to post a bond in order to obtain a preliminary injunction was retained in Trial Rule 65(C). The government was relieved of that obligation and instead the Rule itself provided for compensation to wrongly enjoined parties without the need for a bond. Indiana law has thus preserved and reaffirmed the longstanding rule that a party wrongfully enjoined may recover damages. A trial rule cannot override a statute on a point of substantive law. However, in 1969, Trial Rule 65(C) was adopted by this Court and was also enacted by the General Assembly. See Pub.L. No. 191-1969, § 1, 1969 Ind.Acts 661. It has been reenacted twice since that time, both subsequent to the enactment of the Tort Claims Act in 1974. Ind.Code § 34-5-1-6 (1984); Ind. Code § 34-8-2-2 (1998). - Presumably this belt and suspenders approach was designed to meet precisely the point that some provisions of the trial rules verge or encroach on substantive law. The 1970 changes merely replaced the bond requirement, which plainly directed a contractual obligation of the governmental entity with a simple requirement that the entity reimburse directly. Basic contract principles and the doctrine that statutes are to be construed in harmony if possible lead me to conclude that the action for "wrongful injunction" is not a tort within the meaning of the Tort Claims Act. In my view, if the legislature wishes to change that rule of substantive law, it may do so, but the laws on the books do not provide the immunity Noble County claims.
D. The Policy Considerations Are for the Legislature to Resolve
Noble County urges that considerations of public policy require immunity for a governmental entity from liability for an *205ultimately unsuccessful preliminary injunetion. The State, as amicus curiae, urges that the "as-yet-undefined threat of damage awards against government officials and agencies seeking injunctive relief will hamper enforcement efforts in areas such as environmental protection, health code enforcement, fire and building safety, and workplace safety."
Equally compelling public policy concerns favor allowing the wrongfully enjoined defendant to recover against the government. The requirement of posting bond or alternatively undertaking exposure to damages encourages private parties and the governmental entity alike to be cautious before invoking the extreme remedy of an injunction based on a hastily developed and sometimes incomplete record. Moreover, the "threat of damage awards" is not necessarily "as-yet-undefined." Anticipating Rogers' damages would have been unproblematic. Rogers was living with her family in a house with no roof. It was obvious that she would be required to find another place to live during an adjudication on the merits. That is precisely what happened after the tarpaulin covering her house was ripped away during high winds and brought down a power line. To be sure, taxpayers will shoulder the burden of any damage awards against the government. But the countervailing concern is that denying damages requires a single citizen to bear the loss even if proven correct. Trial Rule 65(C) was adopted by this Court and also enacted by the General Assembly. It resolved this debate in favor of distributing the loss among the taxpayers of the governmental unit rather than letting it fall on a single unfortunate citizen. If the legislature wishes to change that balance, it can do so. Under the current legal regime, however, I believe Rogers is entitled to recover as the Rule provides.
E. A "Wrongful" Preliminary Injuncetion Does Not Require Malice or Bad Faith
"Wrongful" injunction has uniformly been found to mean "erroneous," not "malicious," and the error is by the court, not the party seeking the injunction. The majority concludes that the proper interpretation of "wrongful" under Rule 65(C), as applied to governmental entities, would include only preliminary injunctions sought maliciously or in bad faith. As a preliminary matter, I would note that there is no basis for this conclusion in the plain language of the Rule, which makes no distinction between governmental and private parties in this respect, As the majority notes, a trial rule is subject to standard rules of statutory construction. Noble County v. Rogers, 745 N.E.2d 194, 197 n. 3 (Ind.2001). I see no basis for the proposition that the wrongfulness of an injunction varies depending on the identity of the party seeking the injunction. More importantly, the majority's view of the Rule runs counter to the common and longstanding understanding of the law of preliminary injunctions.
The general rule at common law is that, in the absence of malicious prosecution or abuse of process, a party is not liable in tort for the wrongful issuance of a preliminary injunction. Sneakers v. Cobb County, 265 Ga. 410, 455 S.E.2d 834, 836 (1995); Thayer Co. v. Binnall, 326 Mass. 467, 95 N.E.2d 193, 201 (1950); Mayor of Lansing v. Ku Klux Klan, 222 Mich.App. 637, 564 N.W.2d 177, 180-81 (1997); State ex rel. Douglas v. Ledwith, 204 Neb. 6, 281 N.W.2d 729, 734-35 (1979); Church of Latter Day Saints v. Wallace, 573 P.2d 1285, 1288 (Utah 1978); 42 Am.Jur.2d Injune-tions § 837 (2000). Thus, the prevailing authority on this matter is that a "wrongful" injunction, on the one hand, and "abuse of process" and "malicious prosecu*206tion," on the other, are wholly separate concepts. A frequently stated rationale for this view that no tort arises from a "wrongful" injunction is that any error arising from the incorrect issuance of the preliminary injunction stems from the court, and not from the party seeking the injunction. KKK, 564 N.W.2d at 180-81; Wallace, 573 P.2d at 1288; 42 Am.Jur.2d Injunctions § 337.
The majority's view mistakenly applies "wrongful" to describe not the court's action, but the party seeking the injunction. Under the federal rule, after which our rule is modeled, a party is wrongfully enjoined "when it turns out the party enjoined had the right all zilong to do what it was enjoined from doing." Nintendo of America, Inc. v. Lewis Galoob Toys, 16 F.3d 1032, 1036 (9th Cir.1994). This description in no way suggests that actual wrongful conduct by the party seeking the injunction is required. There is no requirement of malice or bad faith to recover for a wrongful injunction. Rather, consistent with the accepted definition of wrongful, it is a substantial departure from commonly understood preliminary injunction law under Rule 65(C) and its counterparts around the country to conclude that a wrongfully enjoined person is entitled to damages depending on the party's subjective state of mind.
Finally, the majority's solution exacerbates the tension between the Tort Claims Act and the Trial Rule. The majority establishes a rule that attempts to hold the governmental entity in check by making it liable if it should act in bad faith or with malice in seeking a preliminary injunction. That is a tort if committed by a private person, but it is also a tort that the Tort Claims Act immunizes if committed by a governmental entity. Thus, application of the Tort Claims Act does not turn on the subjective state of mind of the governmental entity. Rather, with the exception of a claim for false imprisonment or false arrest, under the Tort Claims Act the governmental entity is immune from suits for malicious prosecution, which include an element of bad faith. E.g., Butt v. McEvoy, 669 N.E.2d 1015, 1018 (Ind.Ct.App.1996). Specifically, this immunity for malicious prosecution extends to the context of the "the initiation of a judicial or administrative proceeding." Id. at 1017 (construing Ind.Code § 34-4-16.5-3(5), which was repealed but not altered in the adoption of Ind.Code § 34-18-3-8(5)), - Clifford v. Marion County Prosecuting Attorney, 654 N.E.2d 805, 809 (Ind.Ct.App.1995) ("In view of the fact that the primary tort which arises from initiating legal proceedings necessarily includes the element of bad faith, the presence of bad faith cannot remove the conduct from the very protection envisioned by the [Tort Claims] Act."). As the Court of Appeals emphasized in Clifford, an activity is authorized under the Tort Claims Act "regardless of whether it was done negligently or done with improper motive." 654 N.E.2d at 810. Ironically, because a suit for malicious prosecution or abuse of process is by all accounts a tort, the very language the majority invokes to describe the non-immune governmental action, ie., malicious or in bad faith, simultaneously invokes the immunity of the Tort Claims Act.
The Tort Claims Act does include language along the lines of the rule established by the majority for two circumstances not relevant here.2 Indiana Code *207section 34-18-3-8(8) provides immunity for "an act or omission performed in good faith and without malice under the apparent authority of a statute which is invalid if the employee would not have been liable had the statute been valid." Indiana Code section 34-18-3-3(20) provides for governmental immunity from errors resulting from the Y2K bug so long as the act or omission did not amount to "gross negligence, willful or wanton misconduct, or intentional misconduct." Thus, where the legislature intended to exempt bad faith actions from immunity, it has said so. There is no such provision in the "judicial proceedings" or "performance of a discretionary function" sections on which Noble County relies.
The Tort Claims Act is substantive law enacted by the legislature. It grants immunity in tort to governmental entities for initiation of judicial proceedings. Rule 65(C) imposes the requirement that the government assume the risk of liability if it chooses to seek a preliminary injunction. I agree that this provision could have been overridden by the legislature if it had chosen to do so. But the Rule and statute as presently written are compatible and do not eneroach upon one another. Both have been repeatedly adopted by the General Assembly. In sum, Noble County agreed to reimburse Rogers when it sought to obtain a preliminary injunction. I would affirm the trial court.
DICKSON, J., concurs.

. The Court of Appeals held, in Howard D. Johnson Co. v. Parkside Development Corp., 169 Ind.App. 379, 389, 348 N.E.2d 656, 663 (1976), that recoverable damages in the wrongful injunction suit are not limited to the amount of posted bond. Prior to this decision, it appears that the rule in Indiana mirrored those of most other states-no recovery was possible without the bond. Consistent with this rule, a defendant who deemed the amount of the bond insufficient to cover potential damages could petition the court to increase the amount of the bond. See, eg., Jones Drilling Corp. v. Rotman, 245 Ind. 10, 13, 195 N.E.2d 857, 859 (1964).

. The majority suggests that Indiana Code section 34-13-3-3(8) might also apply to immunize Noble County's actions in obtaining the preliminary injunction. I disagree. This provision applies to a situation where a statute is subsequently declared unconstitutional. Here, Noble County did not act under the "apparent authority" of any statute that has *207subsequently been called into doubt. It acted wrongly under a valid statute.