DISTRICT COURT, BOULDER COUNTY, COLORADO
Case No. 96 CVD 694, Division 5
MOTION FOR WAIVER OF SECURITY
OR SETTING OF NOMINAL SECURITY
CLUE COMPUTING, INC., Plaintiff,
NETWORK SOLUTIONS, INC., Defendant.
Pursuant to Rule 65(c) of the Colorado Rules of Civil Procedure, Plaintiffs request that the security required as a prerequisite to the issuance of injunctive relief be waived or fixed in a nominal sum so as to reflect the equities involved in the present matter and to assure the Plaintiffs an effective opportunity to redress their grievances and secure relief from Defendant's acts and omissions. In support of this motion, Plaintiff states the following:
1. Rule 65(c) states that no restraining order or preliminary injunction shall issue except upon the giving of security by the applicant.
2. The purpose of this provision is to enable a restrained or enjoined party to secure indemnification for the costs and pecuniary injury that may accrue during the period in which a wrongfully-issued equitable order remains in effect.
3. The Rule is phrased in mandatory terms, and it would seem that once a court decides to grant equitable relief under Rule 65, it must require security from the moving party.
4. However, the apparent mandatory language of the security requirement is ameliorated by that portion of the first sentence of Rule 65(c) which states that security shall be "in such sum as the court deems proper." As a result of this passage, discretion is permitted a court sitting in equity to set the amount of security required by Rule 65(c). Continental Oil Co. v. Frontier Refining, Co., 338 F.2d 780, 788 (10th Cir. 1964). See City and County of Denver v. Ameritrust Co. Nat. Ass'n, 832 P.2d 1054 (Colo.App. 1992) (cases interpreting similar provisions of Fed.R.Civ.P. are persuasive).
5. Nominal security, or the waiver thereof, has been allowed in cases where impecunious litigants or issues of overriding public concern or important federal rights are involved. Ryan v. Shea, 525 F.2d 268 (10th Cir. 1975) (no security required in an action challenging the termination of public benefits); Kalemba v. Turk, 353 F.Supp. 1101 (N.D. Ohio 1973) (no bond required in light of the importance of federal right of free expression coupled with lack of monetary risk of loss to defendant).
6. The thrust of the argument for a court exercising its discretion under Rule 65(c) in a permissive fashion in both the indigent-Plaintiff and public-interest cases was summarized by the court in Ibass v. Richardson, 338 F.Supp. 478, 491 (S.D.N.Y. 1971) (indigents seeking preliminary injunction are not required to post a bond particularly where to do so would discourage implementation of clear Congressional policy):
Public policy... mandates that parties in fact adversely affected by improper administration of programs ... be strongly encouraged to correct error.... The injunctive standards of probability of success at trial, irreparable injury, and balance of equities provide protection against frivolous actions.
8. Public policy implications of this case are significant. Moreover, for a small business like Plaintiff, any significant bond requirement would effectively foreclose the ability to litigate these important issues.
9. In the instant case, the threatened injury to Plaintiff is significant as it impacts Plaintiff's ability to conduct its business. On the other hand, there is a significant imbalance of economic resources between the parties favoring Defendant. Moreover, Defendant will not suffer any damages from the granting of the requested relief. For these reasons, this Court would have no way of determining a reasonable bond level. Therefore, Plaintiff requests that this Court waive security for the issuance of injunctive relief, or, in the alternative, set such bond at a nominal sum.
___________________________________ Dated: 12 June, 1996
Philip L. Dubois, #10769
Philip L. Dubois, P.C.
Lawyer for Plaintiff Clue Computing, Inc.
Boulder, CO 80304-4106