A party who applies for a preliminary injunction is required to post a bond that would cover the harms inflicted on any party who is found to have been wrongfully enjoined or restrained. Yet, the moving-party’s liability frequently covers only a fraction of the actual costs and harms inflicted by the injunction. In addition, courts reject most claims for restitution of benefits gained by the plaintiff on the basis of the wrong preliminary injunction. This Article demonstrates that these practices are only partially justified. It supports the practice of requiring the moving-party to compensate the defendant for only part of the harms inflicted due to the wrong preliminary injunction; but it shows that it is desirable to award the remedy of restitution, which requires the moving-party to disgorge the benefits obtained at the expense of the defendant by the wrong preliminary injunction.
The analysis also calls for a revision of the definition of irreparable harms. It shows that a deadweight-loss suffered by one party is socially irreparable even if this party’s private loss can be cured by a remedy after trial. The available remedies—both when the plaintiff prevails and a preliminary injunction was not issued, and when a wrong preliminary injunction was issued but the defendant prevails—determine only what undeserved-wealth-transfers should be regarded as relevant irreparable social costs.
From a broader perspective, the analysis shows how the remedy of disgorgement of profits can serve to remove improper motives to engage in an overall socially desirable behavior. In the current context, establishing an expansive duty to disgorge profits derived from unsuccessful litigation can mitigate the threat of frivolous suits, without jeopardizing the main instrument available to encourage disputants to turn to the judicial system—the grant of immunity from tortious liability.
- Preliminary injunction,
- irreparable harm,
- unjust enrichment
Available at: http://works.bepress.com/barak_medina/5/