In order to cancel a preliminary injunction or temporary restraining order bond, the Principal needs to submit specific evidence to the Surety. The cancellation evidence needs to demonstrate the court has either made the injunction permanent or discontinued the injunction.

If the court has made an injunction permanent, the Principal and its attorneys should submit cancellation evidence such as a signed court order declaring the bond cancelled and releasing the surety from any and all further liability. By declaring an injunction permanent, the court has agreed with the Principal about the injunction’s validity. Upon receiving such evidence, the surety will release collateral (if any) minus any unpaid due premiums.

However, the court may rule in favor of the Obligee. In this case, the court deems the injunction improper and the Principal will have to pay damages up to the amount of the bond penalty. If the Principal obtained his bond from the surety in exchange for collateral, the Surety may release the collateral to the Obligee. In this case, the Surety needs to also see a signed court order cancelling the bond and directing payment of damages to the Obligee.

Many parties choose to settle preliminary injunctions between themselves rather than have a judge decide. In fact, some Principals obtain TRO and preliminary injunction bonds as a settlement tactic. In essence, the bonds demonstrate to the Obligee that the Principal means business and wants to be taken seriously and negotiate their dispute between closed doors. In these cases, the parties agree to a signed Stipulation of Discontinuance.

The stipulation explains the parties’ differences and usually directs one side to pay the other side’s damages in exchange for ceasing to continue the restrained action. The terms of Stipulations can vary greatly, but attorneys should always try to include language explicitly cancelling the bond and releasing the Surety. Stipulations usually include the signatures of the parties involved, the parties’ attorneys, and sometimes a judge. The sides must file the Stipulation with the court.

To read more about injunction bonds, please see our previous blog post on the topic by clicking here. Have a question about an injunction bond? Contact us to see how we can help.