Habitat Education Center v. United States Forest Service

In the
United States Court of Appeals
For the Seventh Circuit
No. 09-2785
HABITAT EDUCATION CENTER, et al.,
Plaintiffs-Appellants,
v.
UNITED STATES FOREST SERVICE, et al.,
Defendants-Appellees.
Appeal from the United States District Court
for the Eastern District of Wisconsin.
No. 08-C-627—Aaron E. Goodstein, Magistrate Judge.
ARGUED APRIL 14, 2010—DECIDED MAY 27, 2010
Before POSNER, RIPPLE, and KANNE, Circuit Judges.
POSNER, Circuit Judge. Habitat Education Center, a
nonprofit enterprise dedicated to promoting environ-
mental quality, sued the forest service to obtain judicial
review of the service’s decision to allow several thousand
acres of a national forest in Wisconsin to be logged. (There
are other parties on both sides of the case, but, with one
exception mentioned later, they can be ignored.) Habitat
asked for and was granted a preliminary injunction

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2 No. 09-2785
against the issuance of the permit to the company that
had been the high bidder for the logging contract. The
judge required Habitat to post a $10,000 injunction
bond, pursuant to Rule 65(c) of the civil rules, which
provides that “the court may issue a preliminary injunc-
tion or a temporary restraining order only if the movant
gives security in an amount that the court considers
proper to pay the costs and damages sustained by any
party found to have been wrongfully enjoined or re-
strained.” There is an exception if the applicant for the
preliminary injunction is a federal agency or officer but
it has no application to this case.
Habitat asked the judge to reconsider the bond order.
It argued that a nonprofit enterprise—at least one
devoted to so great and general a good as the protection
of the environment—should not have to post an injunc-
tion bond. The judge declined to rescind or modify the
order. Neither it nor the judge’s refusal to rescind or
modify it was immediately appealable. True, an order
denying an injunction bond, a supersedeas bond (as secu-
rity for a stay of execution of judgment), or any other
request for security to protect a litigant, is immediately
appealable. E.g., Cohen v. Beneficial Industrial Loan Corp.,
337 U.S. 541, 546 (1949); In re Carlson, 224 F.3d 716,
718 (7th Cir. 2000); Olympia Equipment Leasing Co. v.
Western Union Telegraph Co., 786 F.2d 794, 795-96 (7th Cir.
1986); In re UNR Industries, Inc., 725 F.2d 1111,
1117 (7th Cir. 1984); Atlantic Fertilizer & Chemical Corp. v.
Italmare, S.p.A., 117 F.3d 266 (5th Cir. 1997). Such an order
is a classic “collateral order,” which is to say an order
belonging to “that small class [of orders] which finally

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No. 09-2785 3
determine claims of right separable from, and collateral
to, rights asserted in the action, too important to be
denied review and too independent of the cause itself
to require that appellate consideration be deferred until
the whole case is adjudicated.” Cohen v. Beneficial
Industrial Loan Corp., supra, 337 U.S. at 546.
But orders to post an injunction bond—and that is the
order challenged by this appeal—or other security gener-
ally are not appealable immediately, In re Carlson, supra;
Caribbean Trading & Fidelity Corp. v. Nigerian National
Petroleum Corp., 948 F.2d 111, 114 (2d Cir. 1991); Hitachi
Zosen Clearing, Inc. v. Tek-Matik, Inc., 846 F.2d 27, 28-29
(6th Cir. 1988); Trustees of Hospital Mortgage Group v.
Compania Aseguradora Interamericana S. A. Panama, 672
F.2d 250 (1st Cir. 1982) (per curiam), because they are less
likely to inflict irreparable harm. Swift & Co. Packers v.
Compania Del Caribe, 339 U.S. 684, 689 (1950); In re Carlson,
supra, 224 F.3d at 718. Indeed, “when setting the amount
of security, district courts should err on the high side. If
the district judge had set the bond at $50 million, as
Abbott requested, this would not have entitled Abbott
to that sum; Abbott still would have had to prove its
loss, converting the ‘soft’ numbers to hard ones. An error
in setting the bond too high thus is not serious. (The fee
for a solvent firm such as Mead Johnson or its parent
Bristol-Myers Squibb Co. to post a bond, a standby letter
of credit, or equivalent security is a very small fraction
of the sum involved.) . . . [A]n error in the other direction
produces irreparable injury, because the damages for
an erroneous preliminary injunction cannot exceed
the amount of the bond.” Mead Johnson & Co. v. Abbott

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4 No. 09-2785
Laboratories, 201 F.3d 883, 888 (7th Cir. 2000) (emphasis
in original).
There is however an exception for a case in which the
bond is both higher than necessary and beyond the plain-
tiff’s financial capacity, and thus inflicts irreparable harm
without justification. See Friends of the Earth, Inc. v. Brinegar,
518 F.2d 322 (9th Cir. 1975); Save Our Sonoran, Inc. v.
Flowers, 408 F.3d 1113, 1126 (9th Cir. 2005). In such a
case the bond order meets the criteria for a collateral
order. But not in this case.
Eventually the judge dissolved the preliminary injunc-
tion that he had granted to Habitat, granted the forest
service’s motion for summary judgment, and dismissed
the suit. Habitat appealed the dismissal—it is the
appeal before us—and generally when a final judgment or
other order is appealed, the appellant can challenge
any interlocutory ruling that adversely affects him. In re
Salem, 465 F.3d 767, 773-75 (7th Cir. 2006); Kurowski v.
Krajewski, 848 F.2d 767, 772-73 (7th Cir. 1988); Jacksonville
Port Authority v. Adams, 556 F.2d 52, 57 and n. 15 (D.C. Cir.
1977); 11A Charles Alan Wright, Arthur R. Miller & Mary
Kay Kane, Federal Practice and Procedure § 2962, pp. 433-34
(2d ed. 1995). The order to post an injunction bond (or
refuse to rescind the order) was such a ruling.
Even when an interlocutory order is immediately
appealable, the party adversely affected by it can wait
and challenge it later, on appeal from the final judg-
ment, provided of course that the order hasn’t become
moot in the meantime. Kurowski v. Krajewski, supra, 848
F.2d at 772-73. Far from becoming moot, the order

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No. 09-2785 5
making Habitat post a bond is likely to bite harder than
when it was entered. When the security takes the form of
a surety bond, the initial cost is the surety’s fee. The
bonding company promises to pay any damages for
losses caused by the injunction should the party who got
the injunction and thus caused the loss (in this case,
Habitat) fail to pay the damages—in such a case, indeed,
the injured party can proceed against the surety directly.
Fed. R. Civ. P. 65.1. Habitat didn’t use a surety; it
deposited $10,000 with the court. The cost to Habitat
was thus the time value of that amount. Had the prelimi-
nary injunction not been vacated, that would have been
the only cost to Habitat. But now it faces the possibility
of having to pay damages to the forest service, though
only up to the bond limit of $10,000. Coyne-Delany Co. v.
Capital Development Board, 717 F.2d 385, 390-94 (7th Cir.
1983); Global Naps, Inc. v. Verizon New England, Inc., 489
F.3d 13, 20-21 (1st Cir. 2007); Sprint Communications Co. L.P.
v. CAT Communications Int’l, Inc., 335 F.3d 235, 239-40
(3d Cir. 2003); Nintendo of America, Inc. v. Lewis Galoob
Toys, Inc., 16 F.3d 1032, 1036-37 (9th Cir. 1994); National
Kidney Patients Ass’n v. Sullivan, 958 F.2d 1127, 1134-35
(D.C. Cir. 1992).
It could be argued that unless and until damages are
assessed, Habitat has incurred no loss and therefore lacks
standing to appeal. But it has incurred a loss—a loss of
the use of $10,000. Every day that a sum of money is
wrongfully withheld, its rightful owner loses the time
value of the money. Suppose no damages are ever
assessed against Habitat and so eventually the court
returns the $10,000 that it is holding; there would be no

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6 No. 09-2785
procedural vehicle to enable Habitat to recover the loss
of the time value of its money. Therefore it had standing
to challenge the bond order on appeal from the final
judgment. See Sprint Communications Co. L.P. v. CAT
Communications Int’l, Inc., supra, 335 F.3d at 239.
A genuine oddity about the appeal is that it is from
a judgment—namely the dismissal of the suit—that
the appellant is not challenging, but only from an inter-
locutory order. A cleaner approach would have been
for Habitat to designate its appeal as an appeal from the
bond order. For it became final and therefore appealable
when the suit was dismissed, since at that point the
order was no longer interlocutory. But the oddity of
Habitat’s approach has no jurisdictional significance.
On to the merits of Habitat’s challenge to the bond. The
winning bidder had bid $55,000. The preliminary injunc-
tion, which was entered on January 13, 2009, prevented
the logging from being undertaken for at least a year,
because logging in this forest is done only in winter,
when the ground is hard. The injunction was dissolved
on May 12, 2009, but we are told without contradiction
that the rules of the forest service require that the
project be rebid. An affidavit submitted by the forest
service in the district court stated that the project would
be rebid in “early October 2009,” but as far as we’re able
to determine, as of the date of oral argument (April 14
of this year) it had not yet been rebid.
We are not persuaded by Habitat’s argument that
nonprofit entities, at least those devoted to public goods
of great social value, such as the protection of the en-

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No. 09-2785 7
vironment, should be exempted from having to post
injunction bonds. The argument flies in the face of Rule
65(c), which not only contains no such exception but also
states flatly that “the court may issue a preliminary
injunction or a temporary restraining order only if the
movant gives security in an amount that the court con-
siders proper to pay the costs and damages sustained
by any party found to have been wrongfully enjoined or
restrained.” The language of Rule 65(c) was even more
emphatic before changed in 2007; it read: “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 committee notes to the 2007 revision
make clear that no substantive change was intended—
only clarification, and consistency in style and terminol-
ogy.
In seeming contradiction of the rule, a number of cases
allow a district court to waive the requirement of an
injunction bond. In some of these cases the court is satis-
fied that there’s no danger that the opposing party will
incur any damages from the injunction. There is no
reason to require a bond in such a case—and cessante
ratione legis cessat ipsa lex (when the reason for a law
leaves off, the law leaves off). See, e.g., Connecticut
General Life Ins. Co. v. New Images of Beverly Hills, 321
F.3d 878, 882-83 (9th Cir. 2003); Doctor’s Associates, Inc. v.
Stuart, 85 F.3d 975, 985 (2d Cir. 1996); Hoxworth v. Blinder,
Robinson & Co., 903 F.2d 186, 210 (3d Cir. 1990); 11A Wright

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8 No. 09-2785
et al., supra, § 2954, pp. 292-93. And in another class of
cases a bond that would give the opposing party
absolute security against incurring any loss from the
injunction would exceed the applicant’s ability to pay
and the district court balances (often implicitly) the
relative cost to the opponent of a smaller bond against
the cost to the applicant of having to do without a pre-
liminary injunction that he may need desperately. See,
e.g., Wayne Chemical, Inc. v. Columbus Agency Service Corp.,
567 F.2d 692, 701 (7th Cir. 1977); Temple University v. White,
941 F.2d 201, 220 (3d Cir. 1991); People ex rel. Van De Kamp
v. Tahoe Regional Planning Agency, 766 F.2d 1319, 1325-26
(9th Cir. 1985); City of Atlanta v. Metropolitan Atlanta
Rapid Transit Authority, 636 F.2d 1084, 1094 (5th Cir.
1981). This case fits neither category. The forest service
may lose money as a result of the now-dissolved prelimi-
nary injunction (in fact it’s bound to lose at least a little,
as we’ll see), and Habitat admits that posting the $10,000
bond caused it no hardship, let alone deterred it from
asking for the injunction—it might have been able to buy
a surety bond for as little as $300. See CourtBondNet,
“Bonds for Judicial Proceedings,” www.courtbondnet.com/
judicial.html (visited May 3, 2010). And while Habitat
hasn’t told us what its total assets or revenues are, one of
its coplaintiffs has annual revenues of some $7 million.
Environmental Law & Policy Center, “ELPC Is Financially
Sound and Well-Managed,” elpc.org/elpcs-financial-status
(visited May 3, 2010).
Turning to Habitat’s alternative ground for canceling
or reducing the bond, we ask whether $10,000 is
excessive in relation to the forest service’s likely loss

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No. 09-2785 9
from a logging delay of a year. Money has time value,
as we’ve said. If you part with money, you lose
liquidity (the instant ability to deploy cash) and in addi-
tion incur a risk of never getting your money back. So
you demand compensation for parting with money, and
that compensation normally takes the form of interest at
a specified rate, though other factors besides loss of
liquidity and risk of default may influence the rate, such
as expected inflation. Businesses, individuals, and doubt-
less even federal agencies (considering the staggering
federal budget deficit—$1.4 trillion in 2009 and likely to
be as great or greater this year) value having cash
now rather than a promise, however reliable, of cash later.
Habitat argues that a one-year delay in receiving
$55,000 is costless to the forest service because the
inflation rate was zero (or close to it) in 2009 and is likely
to remain very low this year (remember that we don’t
know whether the forest service has rebid the logging
contract yet). But the inflation rate is not the only
influence on interest rates. The Federal Reserve has
pushed short-term interest rates down very low of late
by flooding banks and other lenders with trillions of
dollars to lend and invest, but has not by doing so elimi-
nated the time value of money. $55,000 would be worth
more today than a year ago only if there were defla-
tion—that is, only if a given number of dollars would
buy more goods and services today than a year ago—
and although inflation has been very mild since the
economic crisis hit, it has not been negative.
Still, Habitat has a point when it says that $10,000 is an
extravagant estimate of the loss in time value from defer-

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10 No. 09-2785
ring the receipt of $55,000 for one year; it implies an annual
interest rate of 18.2 percent ($10,000 ÷ $55,000). But an
injunction bond is intended to secure against possible
as well as certain costs—recall the passage we quoted
from the opinion in Mead Johnson. There is some risk
that the rebidding of the logging contract will not yield
$55,000. Maybe not a big risk; for January 2009 was
near the nadir of the economic crisis; housing construc-
tion was greatly depressed; since then lumber prices
have risen. Tony C. Dreibus, “Lumber Rises to Highest
Price Since 2006 on Economic Outlook,” Bloomberg Business
Week (Apr. 16, 2010), www.businessweek.com/news/2010-
04-16/lum ber-jum ps-to-highest-price-since-2006-on-
outlook-for-demand.html (visited Apr. 27, 2010); Liam
Pleven and Lester Alrich, “High Lumber Prices Threaten
Housing Market,” Wall Street Journal (Feb. 16 2010),
online.wsj.com/article/SB1000142405274870356240457506
7750815490316.html (visited Apr. 27, 2010). But a risk is
a risk; all that we can know with certainty at this time
is that the judge may decide not to award damages. Actu-
ally that’s unlikely, because the bidding process is not
costless, although the forest service reckons the cost of
rebidding the logging contract at a modest $2,350. The
service has already asked the magistrate judge to award
this amount in damages without awaiting the outcome of
the appeal or the determination of the other damages, if
any, inflicted by the injunction bond. He decided to
wait until the appeal was resolved and any additional
damages determined. This delay underscores our earlier
remarks about Habitat’s loss of the time value of its
$10,000, and this is further evidence for the timeliness of

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No. 09-2785 11
its request that we order the money refunded to it forth-
with.
But we won’t do that because we think the bond was
proper. And we especially wish to emphasize our
rejection of the rule proposed by Habitat that nonprofit
entities should be exempt from having to post injunction
bonds, or a slightly narrower rule that would pick and
choose among them on the basis of likely contribution
to the overall public welfare. Preliminary injunctions,
because issued before a full adjudication, often turn out
to have been issued in error, and when that happens the
costs imposed on the party against whom the injunc-
tion ran are costs incurred by an innocent person (at
least innocent in the preliminary-injunction phase of the
litigation). The innocent may be a private firm or a gov-
ernment agency or a hapless individual (or even
another nonprofit), but that doesn’t make it or him or
her unworthy of the law’s protection. The costs of gov-
ernment are borne ultimately by taxpayers (or by
victims of inflation when government finds it infeasible
or politically undesirable to raise revenues by outright
taxation and instead reduces its expenses by paying
them in ever-cheaper money), and the greater the
expenses of the forest service the higher the tax burden
is likely to be. Obviously, dissolving this injunction
bond would not materially affect the budget of the
forest service. But the principle that nonprofit entities
should pay their way, reimbursing the losses incurred
by entities whose operations the nonprofits impede
by obtaining preliminary injunctions later dissolved, is
general. And remember that Habitat’s appeal does not

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12 No. 09-2785
challenge the judge’s dissolution of the preliminary
injunction that he had issued.
Nonprofit entities such as Habitat have the benefit of
exemption from federal income tax, and often from
local property taxes, as well as the indirect tax subsidy
provided to nonprofits by the charitable deduction from
personal income tax. Need the courts grant them an
exemption from Rule 65(c) as well?
And some respect should be paid to the language of
the rule, especially when we consider that a rule of civil
procedure can be amended much more easily than a
statute. The language of Rule 65(c) provides no support
for a blanket exemption of nonprofit entities; and in
this regard notice also the express exemption of the
federal government from having to post a bond, which
suggests—what is anyway obvious—that the framers of
the rules know how to make exceptions to them. And
cause litigation by nonprofits is not a new phenomenon
of which the framers of the rule and of its amendments
would have been unaware.
In deference to the written word, Habitat suggested
that it would not have objected to the district court’s
imposing a nominal bond, say $200—but in response to
some pesky questioning from the bench indicated that
by nominal it meant any amount more than zero and
less than significant, so a bond of $1 would in its view
comply with the statute. Of course the bond would cost
much more to administer than $1; and what would
that expenditure procure? Absolutely nothing.

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No. 09-2785 13
It is true that nominal damages are sometimes awarded,
see, e.g., Carey v. Piphus, 435 U.S. 247, 266-67 (1978) (due
process violation); Columbia Wire Co. v. Kokomo Steel &
Wire Co., 194 F. 108 (7th Cir. 1911) (patent infringement);
Boule v. Hutton, 328 F.3d 84, 94-95 (2d Cir. 2003) (defama-
tion), and often when that happens—because they really
are nominal—the plaintiff doesn’t bother to collect
them. They may be little better than a fossil remnant of
an earlier legal system, when it was thought that to say
such things as that “from my earliest reading, I have
considered it laid up among the very elements of the
common law, that, wherever there is a wrong, there is
a remedy to redress it; and that every injury imports
damage in the nature of it; and, if no other damage
is established, the party injured is entitled to a verdict
for nominal damages,” Webb v. Portland Mfg. Co., 29 F. Cas.
506, 507 (C.C. Me. 1838) (Story, J.), was to say something,
rather than to talk in a circle.
It is true that awarding nominal damages is a way of
communicating an important result in many cases: that
the plaintiff proved a violation of his rights but was
unable to prove damages as a consequence of the viola-
tion. But in lieu of awarding nominal damages (and
puzzling laypersons by doing so), the court could just
say: the plaintiff proved a violation of his rights, but
the violation caused no monetizable injury. We read in a
modern case that “nominal damages can be a practical and
effective remedy, both in constitutional and in other
civil cases, where there is a genuine case or controversy
between the parties but the injury to the plaintiff
is not monetary and there is no basis for compensatory
damages.” Utah Animal Rights Coalition v. Salt Lake City

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14 No. 09-2785
Corp., 371 F.3d 1248, 1264 (10th Cir. 2004) (concurring
opinion). But why is that more “practical and effective”
than just declaring that the plaintiff proved a violation
but could not establish damages?
The award of nominal damages is especially common
in breach of contract cases, see, e.g., Shepard v. State Auto-
mobile Mutual Ins. Co., 463 F.3d 742, 748-49 (7th Cir.
2006); Movitz v. First National Bank, 148 F.3d 760, 765 (7th
Cir. 1998); Hydrite Chemical Co. v. Calumet Lubricants Co.,
47 F.3d 887, 890-91 (7th Cir. 1995); E. Allan Farnsworth,
Contracts § 12.8, p. 757 (4th ed. 2004), where the award
signifies that there was indeed a breach. That determina-
tion may be significant in future dealings between
the parties. Again, the court could just say, as in a
declaratory-judgment proceeding, that the plaintiff had
proved a breach. But however that may be, ordering the
posting of a nominal injunction bond has less to recom-
mend it than awarding nominal damages, because an
order to post a nominal bond has no communicative value.
We note finally that if and when Habitat is ordered to
pay damages based on the injunction bond, that award
will be separately appealable since there is no longer an
appealable judgment to which such an order would be
interlocutory. Orion Sales, Inc. v. Emerson Radio Corp., 148
F.3d 840, 842-43 (7th Cir. 1998); Henco, Inc. v. Brown, 904
F.2d 11, 13 (7th Cir. 1990); see Buddy Systems, Inc. v. Exer-
Genie, Inc., 545 F.2d 1164, 1169 (9th Cir. 1976).
AFFIRMED.
5-27-10

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