On September 24, 2019, the Third Circuit Court of Appeals found in favor of the New Jersey Thoroughbred Horsemen’s Association (“NJTHA”) and ruled that the NJTHA is entitled to recover the bond it posted as the result of a temporary restraining order (“TRO”) and subsequent preliminary injunction against the NJTHA in the 2014 case, National Collegiate Athletic Association v. Christie. The issue of recovering posted bond was a matter of first impression in the Third Circuit. The majority opinion, written by the Honorable Marjorie Rendell, concluded “wrongfully enjoined” under Federal Rule of Civil Procedure 65(c) can only be determined after a final judgment on the merits. Moreover, the court found a party is “wrongfully enjoined” when the final judgment concludes that party had a right all along to do what it was enjoined from doing. Also, in accordance with the majority of other circuits, the court found there is a rebuttable presumption that a wrongfully enjoined party is entitled to recover damages up to the bond amount.
In 2014, the New Jersey legislature enacted a law repealing state law provisions that prohibited sports wagering at casinos and horse race tracks. The NJTHA then announced its plan to conduct sports wagering at Monmouth Park. The NCAA and four other professional sports teams (“Appellees”) filed suit and requested a TRO and a preliminary injunction against the NJTHA in the District Court of New Jersey for violating the Professional and Amateur Sports Protection Act of 1992 (“PASPA”). The Appellees posted a $1.7 million bond, which soon increased to an amount of $3.4 million. Following a later victory in the Supreme Court of the United States declaring PASPA unconstitutional in May 2018, the NJTHA filed a motion for judgment on the bond in the District Court. The District Court denied the motion and found the NJTHA was not wrongfully enjoined under Rule 65(c).
The NJTHA appealed, and the Third Circuit reversed and remanded the District Court’s opinion based on two issues: (1) the meaning of “wrongfully enjoined” under Rule 65(c); and (2) whether a district court has discretion to deny bond damages, and if so, whether it was proper in this case.
First, the court joined four other circuit courts in finding a party is wrongfully enjoined when the outcome shows that party had a right all along to do what it was enjoined from doing. The Third Circuit found that PASPA’s constitutionality was “inexorably” intertwined in both cases involving the parties, Christie I and Christie II. Because PASPA was found unconstitutional, it turned out the NJTHA had right to conduct sports wagering all along.
Second, the Third Circuit found there is a rebuttable presumption that a wrongfully enjoined party is entitled to recover provable damages up to the bond amount. Courts are still afforded some discretion when deciding to impose damages, but the Third Circuit refused to adopt the Appellees’ suggested approach of basing the damages calculation on the sole discretion of the court. The majority concluded the District Court erred in failing to apply the presumption in favor of recovery.
Thus, the Third Circuit vacated the District Court’s denial of NJTHA’s motion for judgment on the bond and damages, and remanded to the District Court to determine the amount of damages to be collected.
This precedential opinion not only adds another tier to the lengthy legal sports betting battle, but also provides the Third Circuit with more certainty regarding its interpretation of Rule 65(c).
This post was co-authored by Joe Caputi, law clerk at Duane Morris LLP.