Can the Delaware Court of Chancery award damages to a defendant who was improperly enjoined by an order that dispensed with the need for a bond because of the parties’ prior contractual waiver that a bond be required? In DG BF v. Ray, C.A. No. 2020-0459-MTZ, 2022 WL 2299281 (Del. Ch. June 27, 2022), Vice Chancellor Morgan Zurn concluded that the Court of Chancery lacked subject matter jurisdiction to award damages for an improvidently entered injunction in the absence of a bond or other security.

The plaintiffs brought this action against the defendants claiming that the defendants had fraudulently induced them to invest in the defendant company and had denied them certain rights under the company’s operating agreement in connection with a prospective financing round. The complaint included a request to enjoin the financing round. The vice chancellor granted a temporary restraining order that enjoined the closing but not the shopping of the financing round pending a final decision on what the operating agreement permitted. Applying Court of Chancery Rule 65(c), the vice chancellor determined an appropriate bond for the TRO would be $100,000. However, the parties were unable to agree on a form of order or the type of bond, and sought additional guidance from the court.