This article is an excerpt from The Art of Tendering: A Global Due Diligence Guide, which is available for purchase.
In its April 2015 decision in Teleguam Holdings, LLC v. Territory of Guam, the Supreme Court of Guam upheld the requirement of a bid protest bond to maintain an injunction against a challenged contract award, while also upholding the subsequent forfeiture of that protest bond when the complainant lost its action. The case dealt with a dispute over a bidding process for the purchase of telephone instruments and services. The complainant argued that the applicable statutory bid protest rules provided for an automatic stay of a challenged contract award and argued that the lower court erred in finding that a protest bond was required to maintain that injunction. However, while the Supreme Court agreed that the complainant was entitled to a temporary injunction against the contract award under the relevant statutory rules, it also agreed with the lower court’s finding that the Guam Rules of Civil Procedure (GRCP) required the posting of a bond to maintain the aforementioned stay:
To secure a restraining order or injunction, GRCP 65(c) requires an applicant to post a bond:
Security. No restraining order or preliminary injunctions 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. No such security shall be required of the Government of Guam or of an officer or agency thereof, or of a party in a domestic relations case or in a case involving the cessation of abuse. Guam R. Civ. P. 65(c). Much like the extensive discretion to grant or deny an injunction, the trial court “is afforded wide discretion in setting the amount of the bond” required for that injunction. Conn. Gen. Life Ins. Co. v. New Images of Beverly Hills, [2003] USCA9 131; 321 F.3d 878, 882 (9th Cir. 2003). The court may even exercise its discretion to set the bond amount to “zero if there is no evidence the party will suffer damages from the injunction.” Id. Accordingly, the trial court clearly has discretion to require a protestant to post a bond when that protestant requests relief under GRCP 65.
The Supreme Court also upheld the lower court’s ruling, which resulted in the complainant forfeiting its protest bond after losing the injunction hearing. As the Supreme Court concluded, there was a rebuttable presumption “that the wrongfully enjoined party is entitled to recover damages up to the amount of the bond to ‘discourag[e] parties from requesting injunctions based on tenuous legal grounds.’” In other words, requiring a protest bond as a condition for maintaining a stop-award injunction, and ordering the forfeiture of that bond when a complainant loses its challenge, serves as a deterrent against frivolous claims that could unduly impede government operations.
