"Temporary restraining orders are not always a sure bet." So said Judge Marjorie Rendell, to several sports leagues, on Sept. 24, 2019, in holding that Monmouth Park is rebuttably presumed to be entitled to recover up to $3.4 million from five sports leagues, and the Commissioner of Baseball, who wrongfully enjoined Monmouth Park from commencing sports betting. National Collegiate Athletic Association v. Governor of N.J., ___ Fed.3d. ___ (3rd Cir. 2019).

This seven-year litigation commenced in 2012 when the New Jersey legislature, pursuant to a constitutional amendment, attempted to legalize sports betting. This attempt was blocked by the National Collegiate Athletic Association (NCAA), the National Football League (NFL), the National Basketball Association (NBA), the National Hockey League (NHL), Major League Baseball (MLB), and the Commissioner of Baseball by obtaining a temporary restraining order, which later became a permanent injunction. However, pursuant to Federal Rule of Civil Procedure 65(c), the leagues were required to post a $3.4 million bond "to pay the costs and damages sustained by any party found to have been wrongfully enjoined or restrained."

After Monmouth Park took two District Court and Third Circuit decisions (including one en banc) to the U.S. Supreme Court, the Park eventually won. The Supreme Court held that the federal Professional and Amateur Sports Protection Act (PASPA), which prohibited states from authorizing sports betting was unconstitutional. (A discussion of this May 14, 2018, thoughtful decision by Justice Alito, based upon the anticommandeering doctrine, can be found in this author's Oct. 19, 2018, N.J.L.J op. ed.)

In reversing the District Court's denial of Monmouth Park's motion for judgment on the leagues' bond, following Justice Alito's decision, Judge Rendell remanded the case, to the District Court, to determine the amount to which Monmouth Park is entitled to as a result of the Third Circuit finding that the Park was wrongfully enjoined.

The leagues had contended that the Park was not wrongfully enjoined because, at the time the restraining order was granted, PASPA, which prohibited New Jersey from legalizing sports betting, was settled law which the District Court properly applied. However, Judge Rendell properly pointed out that Rule 65(c) bases any award of damages on those "found to have been" sustained by the wronged party. The court then decided to "join the other circuits that have explicitly interpreted this term and hold that a party is wrongfully enjoined when it turns out that that party had a right all along to do what it was enjoined from doing."

In this case, Judge Rendell noted that the only basis for enjoining Monmouth Park from commencing sports betting was PASPA, which the Supreme Court subsequently declared unconstitutional. The court then astutely noted that "because a court can only be certain of an enjoined party's rights after a case has been fully litigated, 'wrongfully enjoined' can only be determined after a final judgment on the merits" (in this case, after PASPA was declared unconstitutional). Therefore the court concluded that Monmouth Park "was wrongfully enjoined and should be able to call on the bond."

This, of course, begs the question: What amount can Monmouth Park collect from the leagues—none of the bond, some of the bond, all of the bond, or more than the bond? Judge Rendell's decision appears to contain some clues to the answer to this question.

First clue: Because Rule 65(c) is intended to assure that a wrongfully enjoined party will be able to receive compensation, once the restraining order is found to have been wrongful, payment to the wronged party "seems almost inescapable." Indeed, the court noted that it would be a "rare party" who would not be required to respond in damages.

Second clue: The Court, in rejecting the leagues' argument that awarding damages should be within the court's discretion, adopted the rule that the bond "assures the enjoined party that it may readily collect damages from the funds posted."

Third clue: "A clear majority of our sister circuits have held that there is a rebuttable presumption that a wrongfully enjoined party is entitled to recover provable damages up to the bond amount." It should be noted that, in support of its motion to impose a bond, Monmouth Park had submitted a certification indicating the loss it would sustain per week. Based upon Monmouth Park's evidence, the District Court determined that a bond in the amount of $1.7 million was appropriate for the initial two-week period. When the restraining order was extended for an additional two weeks, the District Court decided to double the bond to $3.4 million. (Although the leagues contended they should not be required to post a bond, they did not contest the amount).

Fourth clue: Monmouth Park has met the five factors to be considered, which entitle a party to the presumption in favor of a recovery of damages:

1. Failure to mitigate damages—the leagues did not claim that Monmouth Park failed to mitigate damages;
2. Reasonableness of the damages sought—the leagues did not claim that the amount of the bond is unreasonable;
3. Outcome of the underlying suit—Monmouth Park won;
4. The parties' resources—not an issue;
5. Change in the law—there was no change in any state law; Monmouth Park simply successfully challenged the constitutionality of the federal PASPA.

Upon remand, it should be noted that Monmouth Park is seeking not only the full amount of the posted bond ($3.4 million) but also interest and damages from the date that District Court granted the permanent injunction. To be entitled to damages, in excess of the bond, Monmouth Park must prove that the leagues, in obtaining the restraining order, acted in bad faith. If bad faith is proven, Monmouth Park will be seeking damages in the amount of $3.4 million for every four-week period from the imposition of the injunction in 2014 through the decision of the Supreme Court declaring PASPA unconstitutional on May 14, 2018.

In order to do so, it is anticipated that Monmouth Park will argue, as it did before the court, in opposition to the application for the restraining order, that the leagues falsely contended that sports betting would harm the league in view of the fact that the leagues "support, participate in, and significantly profit from betting on the outcomes of their games as well as the performances of the players in their games."

According to Dennis A. Drazin, Esq., Chairman and CEO of Monmouth Park, at the hearing on remand, the Park intends to seek discovery to prove the leagues' bad faith by showing that the leagues' actions, pending the litigation, are inconsistent with the leagues' argument, in support of its request for an injunction, that gambling destroys the integrity of sports. Drazin contends that discovery will show that the leagues permitted the owners and leagues to acquire equity positions in fantasy game companies (such as Fanduel and Draft Kings), permitted teams to play in venues that permitted gambling (such as England), held tournaments in Las Vegas, where gambling is permitted, moved the Golden Knights hockey franchise to Las Vegas, and voted to move the Oakland Raiders football team to Las Vegas

The lawyers for the leagues were not able to comment on pending litigation.

Prediction: Without knowing the position of the leagues, based upon the language of Rule 65(c), the rebuttable presumption in favor of recovery on the bond, and the anticipated evidence to be introduced by Monmouth Park at the hearing on remand, it would appear, to this author, that Monmouth Park will recover at least the full amount of the bond ($3.4 million) plus some additional amount established if bad faith can be proven.

Drazin has been the moving force behind this litigation since day one. When asked how he was able, after so many adverse rulings, to continue to fight on, he stated "when you know, in your heart and mind, that you are right about a legal principle, you must be tenacious and never give up, even if it is against all odds."

In view of such tenacity, which eventually resulted in the Supreme Court saying Monmouth Park's position was right all along, the leagues might be well advised not to bet against the Park—again.

However, in view of the history of this litigation, if an amount in excess of the bond is awarded, or if an amount less than the full amount of the bond is awarded, then Judge Rendell's hope that her decision is "the last shoe to drop in a lengthy saga," probably will not come to pass; an additional appeal (and perhaps an additional article in this column) could very well follow.

Stay tuned.

Louis Locascio, a Monmouth County Superior Court judge from 1992 until 2009, is now of counsel with the Red Bank office of Gold, Albanese, Barletti & Locascio, where he heads up their civil and family mediation/arbitration department. He is a certified civil and criminal trial lawyer.