author: MAIN, Justice. MURDOCK, Justice

text:
    SYCAMORE MANAGEMENT GROUP, LLC, and DirecPath, LLC v. COOSA CABLE COMPANY, INC.
    1091505.
    Supreme Court of Alabama.
    Sept. 30, 2011.

      Riley W. Roby and Neah L. Mitchell of Balch & Bingham LLP, Montgomery; and Eric B. Langley and Ed R. Haden of Balch & Bingham LLP, Birmingham, for appellants.
    Henry I Frohsin, James F. Barger, Jr., and J. Elliott Walthall of Frohsin & Bar-ger LLC, Birmingham, for appellee.
   MAIN, Justice.

Coosa Cable Company, Inc. (“Coosa Cable”), sued Sycamore Management Group, LLC (“Sycamore”), and DirecPath, LLC (“DirecPath”). Coosa Cable sought and obtained both a temporary restraining order (“TRO”) and a preliminary injunction barring DirecPath from providing video-programming services to the tenants of an apartment building owned by Sycamore. As a condition of the TRO, Coosa Cable provided a security bond of $250. As a condition of the preliminary injunction, the trial court required Coosa Cable to provide a security bond of $100,000. After a hearing, the trial court entered a permanent injunction against Sycamore and Direc-Path and discharged Coosa Cable’s security bond. Sycamore and DirecPath appealed; this Court reversed the trial court’s order granting permanent injunctive relief to Coosa Cable. Sycamore Mgmt. Group, LLC v. Coosa Cable Co., 42 So.3d 90 (Ala. 2010) (“Sycamore I ”). Sycamore and DirecPath then sought to recover costs, damages, and attorney fees caused by the wrongful injunction, but the trial court denied their motion. Sycamore and Direc-Path now appeal from the trial court’s order denying their motion for damages under the security bond on the preliminary injunction. We reverse and remand.

I. Factual Background and Procedural History

The pertinent facts are set out in this Court’s opinion in Sycamore I.

“Coosa Cable is an Alabama corporation that holds a franchise to provide telecommunication services to Pell City residents, including cable television, Internet services, and Internet telephone service — including emergency 911. DirecPath is a private cable operator based in Atlanta, Georgia, that provides satellite video programming, Internet services, and digital telephone service to its subscribers. Sycamore is an Alabama limited liability company that owns and manages several apartment complexes or multi-dwelling units, including Maple Village, which is located in Pell City. .
“Maple Village was constructed in 2004; EYC Companies (‘EYC’) owned the property and managed the apartment complex after the construction was completed. During the construction phase, Coosa Cable installed, at its own expense, a full cable-distribution plant at the Maple Village complex, including wiring and other equipment. Coosa Cable and EYC never entered into a contract for the provision of cable service to residents of Maple Village, nor did Coo-sa Cable pay EYC a fee for the privilege of serving the residents of Maple Village. The residents of Maple Village had the option to contract on a month-to-month basis with Coosa Cable for individualized service plans, including cable television, Internet services, and primary telephone service — including 911 service. Coosa Cable dealt directly with its customers at Maple Village; i.e., it billed the customers individually. Coosa Cable’s arrangement with the residents at Maple Village was nonexclusive in that the residents there were free to contract with other cable and/or communications providers.
“Sycamore acquired Maple Village from EYC in March 2007. On August 12, 2008, Sycamore entered into a written agreement with DirecPath whereby DirecPath would have the exclusive right to provide video-programming services (and a nonexclusive right to provide Internet and telephone services) to the residents of Maple Village. Debbie Taylor, the owner/manager of Sycamore, testified that Sycamore would receive approximately $700 to $1,100 per month under the agreement. Both Sycamore and DirecPath were aware of Coosa Cable’s business relationships with many of the Maple Village residents. At the time, Coosa Cable was providing its services to approximately 100 customers at Maple Village. In a letter dated November 10, 2008, DirecPath informed each of Coosa Cable’s customers at Maple Village that, as of December 10, 2008, ‘Coosa Cable [would] no longer service cable television for [them].’ It is undisputed that DirecPath intended to eliminate Coosa Cable’s service to Maple Village and to use Coosa Cable’s wires to run DireePath’s signal to Coosa Cable’s former customers.
“After Coosa Cable was made aware of the letter, it sued both Sycamore and DirecPath, alleging tortious interference with business and contractual relations and seeking injunctive relief to prevent further damage from such interference. Specifically, Coosa Cable pleaded that if DirecPath and Sycamore were permitted to proceed with their plans, Coosa Cable’s goodwill and its relationships with its current and future customers would be irreparably harmed. The trial court entered a temporary restraining order and subsequently entered a preliminary injunction, pending a full hearing on the merits.
“On February 24, 2009, following a hearing, the trial court entered a final judgment, granting Coosa Cable’s request for permanent injunctive relief based on Sycamore’s and DirecPath’s tortious interference with Coosa Cable’s relations with its customers at Maple Village. Specifically, the trial court ordered that Sycamore and DirecPath were enjoined from (1) ‘[mjaking any false or misleading statements to Coosa Cable’s customers or in any way interfering with its customer relationships’; (2) ‘[preventing or interfering with Coo-sa Cable’s access to its equipment’; and (3) ‘[interfering with or misappropriating Coosa Cable’s personal property in the form of its distribution plant, wiring, and equipment.’ Sycamore and Direc-Path appealed.”

42 So.3d at 91-93.

This Court held in Sycamore I:

“Sycamore, by virtue of its ownership of Maple Village and the existing chattel and fixtures, had the ability to contract with DirecPath so long as that contract did not interfere with an existing right. Coosa Cable had no existing right by contract, by statute, or by easement to provide cable service to the residents of Maple Village, and, therefore, Sycamore and DirecPath could not be enjoined from using Sycamore’s property. Because Coosa Cable is not entitled to injunctive relief, the judgment of the trial court is reversed, and the cause is remanded for further proceedings consistent with this opinion.”

42 So.3d at 95.

On remand, Sycamore and DirecPath filed a motion for the recovery of wrongful-injunction damages pursuant to Rule 65.1, Ala. R. Civ. P. They requested damages for lost operating profits, depreciation expenses, attorney fees, and costs in an amount not less than the $100,000 bond posted by Coosa Cable as a condition of the preliminary injunction. Sycamore and DirecPath say that they presented evidence to substantiate their claims for damages but that Coosa Cable did not offer any evidence to rebut those claims. Instead, they say, Coosa Cable argued that because the trial court discharged the security bond when it entered the permanent injunction, there is no longer any bond from which Sycamore and DirecPath can recover damages. Coosa Cable also argued that wrongful-injunction damages cannot be recovered after the entry of a permanent injunction.

After a hearing, the trial court entered an order denying Sycamore and Direc-Path’s motion. The trial court stated:

“Rule 65(c) requires posting of security as a condition for interlocutory in-junctive relief. It does not apply to permanent injunctive relief, for which no security is required. See Dobbins v. Getz Exterminators of Alabama, Inc., 382 So.2d 1135 (Ala.[Civ.App.j 1980).
“Here, a bond was properly posted to secure the Court’s interlocutory order. After a full hearing on the merits, however, the Court entered a permanent injunction. The temporary injunction was superseded and the bond was expressly discharged and relinquished. No security was required on the permanent injunction and none was posted. It is well-settled that ‘[a] party injured by the issuance of an injunction later determined to be erroneous has no action for damages in the absence of a bond.’ W.R. Grace & Go. v. Local Union 759, Int’l Union of United Rubber, 461 U.S. 757, 770 (U.S.1983). Thus, even if [Sycamore and DirecPath] were wrongly enjoined, they can have no recovery without a bond, and state no claim under the Alabama Rules of Civil Procedure or otherwise.”

II. Standard of Review

On appeal, this Court reviews de novo a trial court’s ruling on a question of law. Lucky Jacks Entm’t Ctr., LLC v. Jopat Bldg. Corp., 32 So.3d 565, 568 (Ala.2009). Because the issue presented in this case — whether damages can be awarded for a wrongful injunction if the security-bond posted to secure the preliminary injunction was discharged when the permanent injunction was issued — is a legal question, we apply a de novo standard of review to the trial court’s order denying the motion for damages filed by Sycamore and DirecPath, not the exceeds-its-discretion standard we would employ to review a trial court’s order awarding damages for a wrongful injunction.

III. Analysis

Rule 65(c), Ala. R. Civ. P., states, in pertinent part:

“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, damages, and reasonable attorney fees as may be incurred or suffered by any party who is found to have been wrongfully enjoined or restrained....
“The provisions of Rule 65.1 apply to a surety upon a bond or undertaking under this rule.”

In lieu of a traditional security bond, the trial court accepted an instrument filed with the court by Coosa Cable, which stated:

“SURETY BOND “RECITALS
“1. On January 15, 2009, the Court granted [Coosa Cable’s] Request for Preliminary Injunction and issued an order (the ‘Order’) against [Sycamore and DirecPath].
“2. The Court issued the Order on the condition that [Coosa Cable] file a One Hundred Thousand and No/100 Dollar ($100,000.00) bond as security.
“3. Coosa Cable Company, Inc., as Surety, hereby acknowledges that it is bound to pay the sum of $100,000.00, as evidenced by good and sufficient funds held in the Surety’s Money Market Account No. 18012195, at Metro Bank, Pell City, Alabama, for any damages incurred as a result of the Order if it is determined that [Sycamore and Direc-Path] were wrongly enjoined or restrained.
“Dated this 28th day of January, 2009. “For Coosa Cable Company, Inc.:
/s/ Jeff Smith “JEFF SMITH “Surety”

The motion for damages filed by Sycamore and DirecPath is expressly allowed by Rule 65.1, which states:

“Whenever these rules require or permit the giving of security by a party, and security is given in the form of a bond or stipulation or other undertaking with one or more sureties, each surety submits to the jurisdiction of the court and irrevocably appoints the clerk of the court as the surety’s agent upon whom any papers affecting the surety’s liability on the bond or undertaking may be served. The surety’s liability may be enforced on motion without the necessity of an independent action. The motion and such notice of the motion as the court prescribes may be served on the clerk of the court, who shall forthwith mail copies to the sureties if their addresses are known.”

In Ex parte Waterjet Systems, Inc., 758 So.2d 505, 511-12 (Ala.1999), this Court defined the standards for the recovery of damages under a security bond:

“We hold that a party does not have to prove bad faith to recover damages on a bond posted as a condition to obtaining an injunction.... Consistent with the language of Rule 65(c), we hold that in order to recover damages on a Rule 65(c) bond the party seeking recovery need only establish that he or she was wrongfully enjoined or restrained.
“Once a party establishes that he or she was wrongfully enjoined or restrained, that party has a right to recover damages and can recover those damages that are ‘the actual, natural and proximate result of the [wrongful] injunction.’ Alabama Cablevision v. League, 416 So.2d 483, 435 (Ala.Civ.App. 1982). These damages include compensation for injury, including attorney fees, incurred as the result of the injunction. However, the bond is not to be used to pay other damages that ‘the court may decree to be paid on the merits of the case.’ Myrick v. Finance Am. Credit Corp., 404 So.2d 700, 704-05 (Ala.Civ.App.1981) (citations omitted.) The party can either use the motion procedure provided in Rule 65.1, Ala. R. Civ. P., or proceed under the party’s right to an independent action for recovery on the bond. See [Talladega Little League, Inc. v.] Anderson, [577 So.2d 1293 (Ala.1991) ]. If the party establishes that it was wrongfully enjoined and suffered damage and incurred costs or attorney fees as a proximate result of the wrongful injunction, the trial court must award compensation for the party’s damage, costs, and attorney fees.
“Although Rule 65(c) has contained the phrase ‘wrongfully enjoined or restrained’ since its adoption, this Court has not before now had the opportunity to define that phrase. Federal courts have construed the same phrase in Rule 65(c), Fed.R.Civ.P., to mean that a party is wrongfully enjoined ‘when it turns out the party enjoined had the right all along to do what it was enjoined from doing.’ Nintendo of America, Inc. v. Lewis Galoob Toys, Inc., 16 F.3d 1032, 1036 (9th Cir.1994), cert. denied, 513 U.S. 822, 115 S.Ct. 85, 130 L.Ed.2d 37 (1994); see, also, Blumenthal v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 910 F.2d 1049, 1054 (2d Cir.1990) (‘A party has been “wrongfully enjoined” under Fed.R.Civ.P. 65(c) if it is ultimately found that the enjoined party had at all times the right to do the enjoined act.’)....
“We agree with this definition of the phrase “wrongfully enjoined or restrained.’ It is a simple definition that provides clear guidance for a trial court. Furthermore, this definition requires that the trial court base the liability on the bond on the merits of the plaintiffs claim and not on some procedural defect .... ”

Sycamore and DirecPath first argue that the trial court erred in denying their motion for damages because this Court in Sycamore I reversed the trial court’s judgment in its entirety, including, they argue, that portion of the judgment discharging Coosa Cable from the security bond. Therefore, they argue, they were entitled to pursue an action seeking recovery from Coosa Cable’s security bond even after the bond was released by the trial court. Coo-sa Cable argues that Sycamore and Direc-Path cannot recover on the security bond because, it says, it was discharged when the trial court entered the permanent injunction. Coosa Cable also argues that Sycamore and DirecPath have waived their argument concerning the security bond because they did not specifically raise the discharge of the bond in their appeal in Sycamore I. Because they did not argue that issue in that appeal, Coosa Cable argues, Sycamore and DirecPath cannot recover damages based on a wrongful injunction. Sycamore and DirecPath contend, however, that because this Court’s opinion reversed the entire judgment, it was not necessary for them to specifically argue on appeal that the security bond should not have been discharged.

Sycamore and DirecPath rely on Bonner v. Lyons, Pipes & Cook, P.C., 26 So.3d 1115 (Ala.2009), in which this Court affirmed a judgment as a matter of law entered in favor of legal-service providers in a malpractice action. Bonner owned a corporation, C.O.W., Inc., that had entered into a franchise agreement with Keelboat Concepts, Inc., under the terms of which C.O.W. had the option to renew the franchise agreement at the end of the initial term so long as it provided Keelboat with a timely written notice of its intent to renew and paid 50% of the then current initial franchise fee at the time of renewal. When C.O.W. failed to provide either the notice of renewal or the franchise fee due, Keelboat sued C.O.W., seeking a declaration that the franchise agreement had been terminated. After a bench trial, the trial court rejected all Keelboat’s arguments and declared that the franchise agreement had not been terminated. Keelboat appealed to the Court of Civil Appeals, which affirmed the trial court’s judgment, without an opinion. Keelboat Concepts, Inc. v. C.O.W., Inc. (No. 2030174, October 8, 2004), 921 So.2d 477 (Ala.Civ.App.2004) (table). Keelboat then petitioned this Court for a writ of certiorari; this Court granted the writ only as to the issue concerning the timeliness of the renewal notice. This Court concluded that C.O.W. did not timely renew the franchise agreement, and it reversed the judgment of the Court of Civil Appeals. Ex parte Keelboat Concepts, Inc., 938 So.2d 922 (Ala.2005). The Court of Civil Appeals then entered an order reversing the judgment of the trial court and remanded the case for further proceedings consistent with this Court’s opinion. Keelboat Concepts, Inc. v. C.O.W., Inc., 938 So.2d 932 (Ala.Civ.App.2006).

Bonner and C.O.W. then brought the legal-malpractice action against the legal-service providers, alleging that the legal-service providers had negligently failed to renew the franchise agreement because they sent the notice of the intention to renew to Keelboat after the deadline for such notice had expired. The case proceeded to a jury trial, but after Bonner and C.O.W. had rested their case, the legal-service providers moved for a judgment as a matter of law (“JML”), and the trial court granted their motion. Bonner and C.O.W. appealed, and the legal-service providers cross-appealed. C.O.W. argued that because the trial court ruled in its favor in Keelboat’s declaratory-judgment action, it would have been legally entitled to renew the franchise agreement even though it failed to pay the franchise fee. Bonner and C.O.W. maintained that the only basis for this Court’s reversal of the trial court’s judgment in favor of C.O.W. was this Court’s holding that the late notice of renewal was ineffective. C.O.W. argued that the doctrine of collateral es-toppel barred the legal-service providers from relitigating both issues because, C.O.W. argued, they were resolved in Ex parte Keelboat Concepts. This Court rejected that argument in Bonner.

“When this Court decided Ex parte Keelboat Concepts, it reversed the judgment of the Court of Civil Appeals and remanded the case in its entirety. Although this Court had granted certiorari review only as to one of the issues the Court of Civil Appeals had decided in favor of C.O.W. and Bonner, and although it was only on the basis of that issue that this Court reversed the judgment of the Court of Civil Appeals, that reversal necessarily reversed the entire judgment of the Court of Civil Appeals. When, in compliance with this Court’s remand order, the Court of Civil Appeals in turn reversed the trial court’s judgment, it necessarily reversed the trial court’s judgment in its entirety.
“In Van Schaack v. AmSouth Bank, N.A., 586 So.2d 192 (Ala.1991), a lower court’s judgment had been reversed, and this Court rejected a subsequent attempt by a party to rely upon a holding in the lower court’s judgment that was not the reason for the reversal. As this Court explained, ‘well-settled in the law of Alabama is the principle that a judgment is a legal entity — a single unit— the reversal of which annuls it in its entirety and vacates all rulings that are contained within it’ 586 So.2d at 195 (quoting Ex parte Riley, 464 So.2d 92, 93-94 (Ala.1985)) (emphasis omitted).
“Thus, C.O.W. has not met its burden, as the party seeking the benefit of the doctrine of collateral estoppel, to demonstrate the existence of a final judgment adjudicating any issue other than that the notice of renewal was invalid because it was untimely. Thus, the doctrine of collateral estoppel does not prevent the legal-service providers from re-litigating issues decided by the trial court in the Keelboat declaratory-judgment action before its original judgment was reversed on another issue.”

26 So.3d at 1121 (emphasis added).

Sycamore and DirecPath also rely on State of Alabama ex rel. Siegelman v. EPA, 925 F.2d 385, 388 (11th Cir.1991), and Piambino v. Bailey, 757 F.2d 1112, 1142-43 (11th Cir.1985). In Piambino, the United States Court of Appeals for the Eleventh Circuit discussed two cases addressing the plaintiffs liability under a security bond after the defendant proved it had been wrongfully enjoined. In Buddy Systems, Inc. v. Exer-Genie, Inc., 545 F.2d 1164 (9th Cir.1976), the trial court entered a preliminary injunction against Buddy Systems and required Exer-Genie to post a $100,000 bond. After trial, the court entered a permanent injunction against Buddy Systems and discharged Exer-Genie’s bond. The United States Court of Appeals for the Ninth Circuit reversed the trial court’s judgment on appeal. Buddy Systems then filed an action to recover damages for the wrongful injunction; the trial court awarded it $35,000. The Ninth Circuit Court of Appeals reversed the damages award and held that the trial court did not have jurisdiction in an action on a bond that had been previously discharged. The Ninth Circuit Court of Appeals rejected Buddy Systems’ argument that the bond discharge was implicitly reversed when the Court of Appeals reversed the judgment entering the permanent injunction and criticized Buddy Systems for not raising the alleged wrongful bond discharge on the initial appeal. The Ninth Circuit Court of Appeals disagreed with the reasoning in a case decided previously by the United States Court of Appeals for the Tenth Circuit — Atomic Oil Co. of Oklahoma v. Bardahl Oil Co., 419 F.2d 1097 (10th Cir.1969). The defendants in Atomic Oil also sought to recover damages for wrongful injunction. The trial court had entered a preliminary injunction in favor of Atomic Oil and required it to post a $50,000 bond. After a trial, the court granted a permanent injunction, discharged the $50,000 bond, and ordered Atomic Oil to post a $25,000 bond. The Tenth Circuit Court of Appeals reversed the trial court’s judgment on the ground that the injunction was based on a clearly erroneous finding. Bardahl then sought recovery of damages under the bonds; the trial court entered a judgment in its favor for $75,000. Atomic Oil argued on appeal that recovery on the $50,000 bond was precluded because the trial court had discharged it, but the Tenth Circuit Court of Appeals affirmed the trial court’s judgment, stating that the court’s order discharging the bond did not negate Bar-dahl’s recovery of damages. The Tenth Circuit Court of Appeals also concluded that its judgment in the first appeal necessarily determined that the preliminary injunction had been improperly granted and therefore activated both security bonds.

In Piambino, the Court of Appeals for the Eleventh Circuit endorsed the Tenth Circuit rule.

“We have not had the occasion to decide whether a party who receives the proceeds of a cash injunction bond dissolved pending appeal must redeposit them when the injunction is vacated as improvidently granted. Other circuits have decided this question, however, holding that a prematurely dissolved bond must be redeposited. The Tenth Circuit’s rationale is persuasive. In Atomic Oil Co. of Oklahoma v. Bardahl Oil Co., 419 F.2d 1097 (10th Cir.1969), ... a case, like the one here, involving the dissolution of an injunction bond pending appeal, the court noted the absolute nature of Rule 65(c)’s bond requirement: before a court may issue a preliminary injunction, a bond must be posted. This requirement, the court found, was intended by Congress to protect enjoined parties from the losses that result from improvidently granted injunctions. The court observed that, if it did not mandate the reposting of the bond, trial judges might pay mere lip service to both the letter and spirit of Rule 65(c). Id. at 1101. See also Northeast Airlines, Inc. v. Nationwide Charters & Conventions, Inc., 413 F.2d 335, 338 (1st Cir.1969); but see Buddy Sys., Inc. v. Exer-Genie, Inc., 545 F.2d 1164 (9th Cir.1976)....
“The consequences that can flow from the premature dissolution of a Rule 65(c) bond are evident in the instant case. Unless the bond, here, is reposted, Syl-va, as Compliance Officer for the California Judgment, will lose a vital remedy, the recovery of damages against the bond, the law affords a party who has been wrongfully enjoined.”

757 F.2d at 1142-43. The Court of Appeals for the Eleventh Circuit followed Piambino in Siegelman, holding that if an injunction has been erroneously issued, “ ‘a prevailing defendant is entitled to damages on the injunction bond unless there is a good reason for not requiring the plaintiff to pay in the particular case.’ ” 925 F.2d at 390 (quoting with approval Coyne-Delany Co. v. Capital Dev. Bd. of Illinois, 717 F.2d 385, 391 (7th Cir.1983)). See also Milan Exp., Inc. v. Averitt Exp., Inc., 208 F.3d 975, 979-80 (11th Cir.2000) (“[Pjarties aggrieved by a wrongfully issued injunction may sue to recover on an injunction bond under [28 U.S.C.] Section 1352.”). The majority of the federal appellate courts follow the principle that a trial court can award damages to a party that has been wrongfully enjoined, although they disagree as to whether the party wrongfully enjoined is entitled to recover only substantiated damages or the trial court has discretion in determining the damages award. See, e.g., Northeast Airlines, Inc. v. Nationwide Charters & Conventions, Inc., 413 F.2d 335 (1st Cir.1969); Nokia Corp. v. InterDigital, Inc., 645 F.3d 553 (2d Cir.2011); Instant Air Freight Co. v. C.F. Air Freight, Inc., 882 F.2d 797 (3d Cir.1989); Division No. 1, Detroit, Bhd. of Locomotive Eng’rs v. Consolidated Rail Corp., 844 F.2d 1218 (6th Cir.1988); Coyne-Delany, 717 F.2d at 391; Atomic Oil, 419 F.2d at 1101 (10th Cir.1969); and Piambino, 757 F.2d at 1142-43 (11th Cir.1985). But see Buddy Sys., 545 F.2d at 1169.

Sycamore and DirecPath direct us to a New York case, Factors Etc., Inc. v. Pro Arts, Inc., 562 F.Supp. 304 (S.D.N.Y.1983), in which the United States District Court for the Southern District of New York, citing Atomic Oil, concluded that the defendants were entitled to damages as a result of a wrongful injunction after a permanent injunction was reversed on appeal, despite the facts that the trial court had discharged the bond when it entered the permanent injunction and that the defendants did not raise the bond discharge in their appeal.

The Factors court relied on Arkadelphia Milling Co. v. St. Louis Southwestern Ry., 249 U.S. 134, 39 S.Ct. 237, 63 L.Ed. 517 (1919).

“In Arkadelphia ..., the Supreme Court discussed the power of the enjoining court to award damages for wrongful injunction under a bond that it had discharged. The Court posited, but found it unnecessary to decide[,] the question whether reversal of the main provisions of a final decree that has the effect of discharging a bond is an implicit reversal of the discharge. [249 U.S.] at 143-44. The Court concluded that because the lower court had explicitly retained jurisdiction for the purpose of making further orders as might be necessary, and the Supreme Court’s earlier mandate permitted further proceedings, defendants’ failure to appeal from the enjoining court’s action in discharging the bonds did not prevent an assessment of damages under the bonds. Id. at 144.
“Thus, regardless of whether the Second Circuit’s mandate reversed the discharge of the bond — and arguably it did, since it reversed the entire judgment without distinguishing among its provisions — Arkadelphia provides support for the conclusion that this Court may properly award damages. This Court entered the permanent injunction and discharged the bond in an Interlocutory Judgment entered August 27, 1980. In that judgment this Court, like the court in Arkadelphia, retained jurisdiction for the purpose of making any further orders necessary and proper in this action. Although the Second Circuit’s mandate did not expressly authorize further proceedings — authorization that was, admittedly, significant to the Court in Arka-delphia — neither did it expressly limit or foreclose them. Entry of summary judgment dismissing plaintiffs’ complaint and consideration of the issue of damages are appropriate in light of the Second Circuit’s mandate. Accordingly, this Court concludes that its earlier discharge of the bond, and defendants’failure specifically to appeal that discharge, does not preclude an award of damages.”

562 F.Supp. at 307-08 (final emphasis added; footnotes omitted). The Factors court concluded that even though the plaintiffs had acted in good faith in seeking the injunction allowing them to have an exclusive license to sell certain merchandise, they had enjoyed the benefit of that exclusive license because of an injunction to which they ultimately were found not to be entitled. The defendants prevailed in the case, and, therefore, the court said they were entitled to recover damages for the wrongful injunction. However, the court said, they would be entitled only to those damages proven to have been proximately caused by the injunction.

Sycamore and DirecPath contend that the trial court’s reliance on W.R. Grace & Co. v. Local Union 759, International Union of United Rubber, Cork, Linoleum & Plastic Workers of America, 461 U.S. 757, 103 S.Ct. 2177, 76 L.Ed.2d 298 (1983), was misplaced. The trial court’s order quoted the following statement from W.R. Grace: “A party injured by the issuance of an injunction later determined to be erroneous has no action for damages in the absence of a bond.” 461 U.S. at 770, 103 S.Ct. 2177. This statement is inapposite because W.R. Grace did not involve an injunction bond or a Rule 65.1 motion. There is no mention in the case of the issuance of an injunction of any kind, and it did not address recovery of damages for a wrongful injunction. The Supreme Court stated that the sole issue before it in W.R. Grace was whether a labor arbitration award should be enforced, and the decision is grounded upon the absence of any bond whatsoever. Although no damages for a wrongful injunction would be allowed if no bond had been posted, Coosa Cable posted a bond in this case, thus distinguishing it from W.R. Grace.

Finally, Sycamore and DirecPath argue that the trial court’s reliance on Dobbins v. Getz Exterminators of Alabama, Inc., 382 So.2d 1135 (Ala.Civ.App.1980), is also misplaced. In Dobbins, the Court of Civil Appeals held only that no bond was required before the trial court entered a permanent injunction. That holding does not mean that a defendant cannot recover damages for a wrongful injunction when a preliminary injunction has merged into a permanent injunction and that injunction is subsequently reversed on appeal. See Siegelman, 925 F.2d at 388; Piambino, 757 F.2d at 1142-43; Atomic Oil, 419 F.2d at 1100; and Factors, 562 F.Supp. at 307-OS.

Coosa Cable argues in response that a security bond is issued when a preliminary injunction is entered and secures that injunction pending a hearing on the merits. Here, it argues, the preliminary-injunction order was limited to the period between its entry and the conclusion of the hearing on the merits, and, Coosa Cable asserts, its security bond “expressly limited Coosa Cable’s obligation to damages caused ‘as a result of [the Preliminary Injunction Order.’ ” Coosa Cable’s brief, at pp. 13-14. Coosa Cable omits the remainder of its bond instrument, however, which acknowledges that it is bound to pay $100,000 “for any damages incurred as a result of the Order if it is determined that the Defendants were wrongfully enjoined or restrained.” (Emphasis added.) Coosa Cable then continues:

“A surety bond is merely the voluntary submission of a party to potential liability as a condition for the entry of an interlocutory injunction. See Talladega Little League, Inc. v. Anderson, 577 So.2d 1293, 1296 (Ala.1991) (‘the bond is the contract of the parties executing it, [and] the [rule] prescribes its terms and conditions, and the right of action arises immediately upon its breach’) (quoting Miller v. Wood, 257 Ala. 594, 595, 60 So.2d 353, 354 (1952)). Liability under the bond attaches only in accordance with the terms agreed upon. Id.”

Coosa Cable’s brief, at p. 14. Coosa Cable says that it freely chose to post security when the trial court entered the preliminary injunction, but it maintains that its liability for damages was limited to potential damage caused by the preliminary injunction and that its liability was extinguished when the trial court entered the permanent injunction.

Coosa Cable also argues that “[a] trial victor is not required to secure the appeal of the trial loser.” Coosa Cable’s brief, at p. 18. It concludes:

“No case cited by Sycamore and Direc-Path, from any jurisdiction, holds otherwise. Absolutely no law, rule, judicial decision, or legal principle supports Sycamore and DirecPath’s claim for damages of attorneys’ fees accrued while they pursued their appeal.”

Coosa Cable’s brief, at pp. 18-19. Certainly an appellee is not required to “secure” appellate proceedings for an appellant. We address in this case only the principle that a party who has been wrongfully enjoined is entitled to seek damages for harm suffered because of an injunction that was entered in error.

We agree with Coosa Cable that its security bond was a contract whereby, pursuant to the express language of the contract, it agreed to pay Sycamore and DirecPath the “costs, damages, and reasonable attorney fees” required by Rule 65(c) if it was determined that the preliminary injunction was wrongful. We disagree, however, that Coosa Cable’s liability or its contract was extinguished upon the entry of the permanent injunction. Sycamore and DirecPath have conceded that the costs, damages, and reasonable attorney fees it can recover from Coosa Cable are limited to the period during which the bond was in force, i.e., from the entry of the preliminary injunction until the entry of the permanent injunction, and also that such recoverable damages are limited to the amount of the surety bond. It is the trial court’s province to determine the exact amount of the costs, damages, and attorney fees that Coosa Cable is obligated to pay Sycamore and DirecPath as a result of the wrongful injunction.

As the parties have pointed out, no Alabama case addresses the precise question presented by this case, but Sycamore and DirecPath have relied on persuasive authorities from this Court and from several federal courts, including cases from the United States Court of Appeals for the Eleventh Circuit. “Federal cases construing the Federal Rules of Civil Procedure are persuasive authority in construing the Alabama Rules of Civil Procedure, which were patterned after the Federal Rules of Civil Procedure.” Hilb, Rogal & Hamilton Co. v. Beiersdoerfer, 989 So.2d 1045, 1056 n. 3 (Ala.2007). We find the reasoning of those cases compelling, and we conclude that, when a party provides the security bond required by Rule 65(c) upon the entry of a preliminary injunction and that injunction is determined to be wrongful, the party wrongfully enjoined is entitled to seek an award of damages caused by the wrongful injunction up to the amount of the bond for the period the bond was in force. We further conclude that such a damages award is not barred by the failure of the party enjoined to specifically appeal the discharge of the security bond and that a security bond that has been discharged upon the entry of a permanent injunction is reinstated if that permanent injunction is later determined to have been wrongful.

We hold that after this Court held in Sycamore I that Sycamore and DirecPath had been wrongfully enjoined, they were entitled to seek an award from Coosa Cable of the damages caused by the wrongful injunction. Sycamore and DirecPath may pursue those damages despite the discharge of the security bond by the trial court when the permanent injunction was entered and the lack of argument on appeal from Sycamore and DirecPath in Sycamore I that the security bond should not have been discharged. Under the terms of the security bond posted by Coosa Cable, it is obligated to pay Sycamore and DirecPath their costs, damages, and reasonable attorney fees from the entry of the preliminary injunction through the entry of the permanent injunction in an amount to be determined by the trial court, but not to exceed $100,000, the amount of the bond. Because Sycamore and DirecPath are entitled to an award of damages caused by the wrongful injunction, the trial court erred when it denied Sycamore and DirecPath’s motion for damages filed pursuant to Rule 65.1.

IV. Conclusion

Because the trial court erred in denying Sycamore and DirecPath damages for the wrongful injunction, we reverse the trial court’s order denying their motion seeking those damages, and we remand the cause for further proceedings consistent with this opinion.

REVERSED AND REMANDED.

MALONE, C.J., and WOODALL, STUART, BOLIN, PARKER, SHAW, and WISE, JJ., concur.

MURDOCK, J., dissents.

MURDOCK, Justice

(dissenting).

It would be hard to dispute that the holding of our Court today yields a scheme that, at best, must be considered awkward: A defendant who persuades an appellate court to reverse a permanent injunction will be able to recover “damages” incurred during the relatively brief period at the outset of the litigation during which a preliminary injunction may have been in place (a period sometimes lasting only a few weeks), but will not be able to recover damages for the often much longer period (often extending for many months (11 months in this case)) between the entry of a permanent injunction and the reversal of that injunction on appeal. This, notwithstanding the fact that the nature of the restraint on the defendant’s liberty was exactly the same during both periods. Allowing a defendant to recover no damages for the relatively longer, latter period, but allowing the defendant to “leap-frog” back in time and claim damages for only the relatively shorter period at the outset of the litigation, is a scheme that, I submit, is more than awkward; it is arbitrary and discordant. That the scheme adopted by our Court today could be characterized in either manner suggests that it is not the scheme intended by the drafters of our procedural rules.

More fundamentally, today’s holding fails to reflect the precise nature of the policy reason underlying the requirement that some form of collateral security be posted as a prerequisite to the issuance of a preliminary injunction.

As a general rule, the law presumes that an order or a judgment entered by a trial court is the right course. As a general rule, therefore, the law allows the prevailing party to act upon an order or a judgment without providing some form of collateral “insurance” or “security” to “insure” that the order or judgment is the right course. The only “insurance” or “security” afforded by our system for the purpose of insuring the correctness of a trial court’s ruling is the “security” afforded by the fact that the order or judgment has been entered only after the trial court has conducted a full due-process hearing.

What is it then about a trial court’s judgment granting preliminary injunctive relief that makes it different — that requires a preliminary restraint to be accompanied by collateral security to protect against the risk that it was wrongfully entered? It is this: Because the full measure of due process normally available from a trial court has not yet been provided as “security” to protect the defendant against a wrongful restraint, the law insists upon a substitute, i.e., a bond. This “substitute” security, however, is only temporary. Once the full measure of due process available from a trial court is provided, the need for the substitute security is ended and the bond automatically extinguishes. At that juncture, the parties are, in effect, restored to the same position they would have been in had it been possible to conduct the due-process hearing before the preliminary injunction was issued. As this Court explained in Miller v. Wood, 257 Ala. 594, 595, 60 So.2d 353, 354 (1952): “[T]he bond is required as a protection against the abuse of [the] extraordinary process [of interlocutory injunctive relief]”; it protects a defendant’s interests “pending a hearing on the merits.” (Emphasis added.)

Today’s holding necessarily is predicated on the notion that the purpose of a preliminary-injunction bond is simply to protect against the risk that a preliminary restraint will at any point be determined to have been the wrong course, even if that determination is one made in an appeal after the trial court has conducted a full evidentiary hearing and decided to continue the restraint in the form of a permanent injunction. This notion fails to embrace the exact nature of the peculiar risk “insured” against by the bond. If that risk was simply the risk that the preliminary injunction might ultimately be reversed on appeal, our rules logically should not stop with requiring a bond for preliminary injunctions; the rules logically would extend the requirement for a bond to permanent injunctions as well. The reason our rules require the posting of a bond as a prerequisite to the issuance of a preliminary injunction is to insure not just against the risk that the defendant has been wrongfully restrained, but to insure against the peculiar risk that is attendant to the imposition of such a restraint without the benefit of the full measure of due process normally available from a trial court. Once the “security” of a full evi-dentiary hearing has been afforded and the trial court reaffirms its decision as to the restraint at issue, the peculiar risk attendant to the fact that the restraint has been imposed without the benefit of a.full hearing is removed. The hearing, itself, and the resulting order of the trial court ratifies the restraint imposed upon the defendant up to that point. It affords the defendant all the “security” — or due process — to which the defendant is entitled at the trial-court level to assure that the restraint has been proper.

Finally, the issue before us can be viewed from a more mechanical perspective. It is well established that a preliminary injunction is merged by operation of law into a permanent injunction. See, e.g., Smith v. Illinois Bell Tel. Co., 270 U.S. 587, 46 S.Ct. 408, 70 L.Ed. 747 (1926); Peterson v. Brotherhood of Locomotive Firemen & Enginemen, 268 F.2d 567 (7th Cir.1959); and Securities & Exch. Comm’n v. Okin, 137 F.2d 862 (2d Cir.1943). An appeal of the permanent injunction presents to the appellate court only the question of the propriety of the permanent injunction. See generally Smith v. Illinois Bell Tel. Co., 270 U.S. at 588-89, 46 S.Ct. 408 (dismissing the appeal regarding the merits of a preliminary injunction that had been merged into a permanent injunction); Securities & Exch. Comm’n v. Okin, 137 F.2d at 863 (to same effect).

With the extinguishment of the preliminary injunction by virtue of its merger into the permanent injunction comes the concomitant extinguishment of the bond securing it. I see nothing in the text of the applicable statutes or rules that authorizes this or any court to revive such a bond once it has been extinguished.

The only appellate court case — either state or federal — I have found that is postured similarly to the present case is Buddy Systems, Inc. v. Exer-Genie, Inc., 545 F.2d 1164 (9th Cir.1976). As in the present case, the trial court in Buddy Systems entered a preliminary injunction and subsequently entered a permanent injunction. As in the present case, the defendant appealed the final judgment of the trial court entering the permanent injunction. The appellate court, as in the present case, reversed the permanent injunction. Despite that reversal, the United States Court of Appeals for the Ninth Circuit held that the defendant was not entitled to recover any damages incurred during the period the preliminary-injunction bond was in place because that bond had been extinguished and no longer existed at the time of the appellate court ruling:

“The exoneration [of the bond] was not implicitly reversed by the reversal of the permanent injunction on direct appeal. We recognize that such a reversal provides a basis for finding the preliminary injunction to have been wrongfully issued. Houghton v. Meyer, 208 U.S. 149, 28 S.Ct. 234, 52 L.Ed. 432 (1908). However, wrongful issuance is merely one element of a cause of action on an injunction bond. The bond is still needed....”

545 F.2d at 1169 n. 10 (emphasis added; some citations omitted).

The United States Supreme Court quoted Buddy Systems with approval when it stated as follows in W.R. Grace & Co. v. Local Union 759, International Union of the United Rubber, Cork, Linoleum & Plastic Workers of America, 461 U.S. 757, 103 S.Ct. 2177, 76 L.Ed.2d 298 (1983):

“A party injured by the issuance of an injunction later determined to be erroneous has no action for damages in the absence of a bond. Russell v. Farley, 105 U.S. 433, 437 (1882); Buddy Systems, Inc. v. Exer-Genie, Inc., 545 F.2d 1164, 1167-1168 (C.A.9 1976), cert. denied, 431 U.S. 903 (1977).”

461 U.S. at 770 n. 14 (emphasis added). See also Cedar-Al Prods., Inc. v. Chamberlain, 49 Wash.App. 763, 767, 748 P.2d 235, 237 (1987) (quoting with approval the above-quoted language from Buddy Systems, expressly “adopting] the reasoning of the court in Buddy Systems,” and adding that “[a]ny other decision ... would be grossly unfair to the surety who furnishes a bond and who is no longer a party to the case”).

We are pointed to no decision of any appellate court that, on its facts, fairly can be said to stand for the proposition that an eventual appellate court reversal of a permanent injunction serves to revive a preliminary-injunction bond previously extinguished by virtue of the merger of the preliminary injunction into a permanent injunction entered after a full evidentiary hearing. Among the cases discussed in the briefs before us is the decision of the United States Court of Appeals for the Eleventh Circuit in Piambino v. Bailey, 757 F.2d 1112 (11th Cir.1985). Piambino, however, did not entail a permanent injunction that operated to extinguish a preliminary-injunction and the bond securing it, but instead involved an appeal of the preliminary injunction itself. Similarly, in Alabama v. United States Environmental Protection Agency, 925 F.2d 385 (11th Cir.1991), the appeal was of both a preliminary injunction and a permanent injunction, and the preliminary-injunction bond had been expressly “preserved” by the trial court under the terms of the permanent injunction it had entered.

For its part, Atomic Oil Co. of Oklahoma v. Bardahl Oil Co., 419 F.2d 1097 (10th Cir.1969), may be limited to the factual circumstance of a preliminary injunction entered by the trial court as to 30 states, where the trial court later denied permanent injunctive relief as to 27 of those states. Thus, as to those 27 states, the trial court did not enter a permanent injunction into which its previously issued preliminary injunction merged; instead, as to those states the trial court itself found the preliminary injunction to have been wrongful. Although the appellate court did uphold an award of damages sought by the three states as to which the trial court had entered a permanent injunction, the trial court had required the issuance of a separate bond in relation to its entry of a permanent injunction as to those states.

Finally, in Ex parte Waterjet Systems, Inc., 758 So.2d 505 (Ala.1999), there was no permanent injunction issued by the trial court and, accordingly, this Court did not consider whether an appellate reversal of a permanent injunction operates to revive a preliminary-injunction bond that previously had been extinguished by the merger of the preliminary injunction into a permanent injunction.

Placing substantial reliance upon the opinion of this Court in Bonner v. Lyons, Pipes & Cook, P.C., 26 So.3d 1115 (Ala. 2009), the main opinion takes the position that the reversal of the judgment granting permanent injunctive relief operates as a reversal of that judgment in its entirety. The main opinion reasons that this principle applies in this case to the particular language in the trial court’s final judgment by which the trial court expressly ordered the extinguishment of the preliminary-injunction bond. The extinguishment of the bond, however, was not dependent upon this language in the trial court’s final judgment. Regardless of whether this or any trial court might include language in its order awarding permanent injunctive relief expressly providing that the preliminary-injunction bond be deemed extinguished, such extinguishment typically occurs automatically. It does so — typically and in this particular case — as a function of the limited nature and purpose of the procedural scheme requiring the bond in the first place, as well as the terms of the bond itself read and interpreted in the context of that scheme. See Miller v. Wood, 257 Ala. at 595, 60 So.2d at 354 (“The bond is the contract of the parties executing it, [and] the [rule] prescribes its terms and conditions.... ”).

Based on the foregoing, I respectfully dissent.

      . Sycamore and DirecPath do not seek any recovery of damages pursuant to the bond securing the TRO. In their motion to recover damages for the wrongful injunction, they "request recovery in an amount not less than the $100,000.00 Surety Bond posted by Coosa Cable.” Motion, at p. 5. In their reply brief on appeal, Sycamore and DirecPath state:
      "The issue is whether Sycamore and Direc-Path can recover on the $100,000 bond that was posted by Coosa Cable at the preliminary injunction stage of this proceeding by virtue of this Court’s reversal of the trial court’s order discharging the bond.” Reply brief, at p. 1.

      . See Ex parte Waterjet Sys., Inc., 758 So.2d 505, 510 (Ala.1999) ("On appeal, a trial court’s award of ‘costs, damages, and ... attorney fees’ pursuant to a security bond will not be disturbed absent an abuse of discretion.” (quoting Marshall Durbin & Co. v. Jasper Utils. Bd., 437 So.2d 1014, 1027 (Ala.1983))).

      . This Court also affirmed the JML as to Bonner’s claims against the legal-service providers because Bonner submitted no argument to the Court challenging the dismissal of his claims based on his lack of standing. 26 So.3d at 1120.

      . To the contrary, the law typically requires a losing party wishing to stay a judgment to provide collateral security in the form of a bond to insure that the stay of the trial court’s judgment is the right course.

      . For that matter, the Waterjet Court had no occasion to, and did not, consider whether an appellate court's reversal of a permanent injunction means that a precursor preliminary injunction was "wrongfully” entered for purposes of recovery on a preliminary-injunction bond.


source: Caselaw Access Project

author: MALONE, Chief Justice.

license: Public Domain

text:
    ALABAMA PSYCHIATRIC SERVICES, P.C. v. 412 SOUTH COURT STREET, LLC.
    1100023.
    Supreme Court of Alabama.
    Sept. 30, 2011.

      Stephen B. Griffin, Hoover, for appellant.
    Kevin D. Heard and Adam C. Dauro of Heard Ary, LLC, Huntsville, for appellee.
   MALONE, Chief Justice.

Alabama Psychiatric Services, P.C. (“APS”), appeals from a summary judgment entered by the Lauderdale Circuit Court in favor of 412 South Court Street, LLC (“Court Street”). We reverse and remand.

Facts

The evidence in the record, either undisputed or viewed in the light most favorable to APS, is substantially as follows. In May 2005, SRS Group, LLC, which was owned by Eugene Sak, acquired a building at 412 South Court Street in Florence (“the building”). Subsequently, Sak began substantial renovations to the building, including gutting and rebuilding the interior of the structure.

The building had two entrances. The main entrance to the building was in the rear of the building, adjacent to a parking lot that was used by employees and clients of the tenants of the building. In addition, the building had an entrance in front, but the front entrance was difficult to access from the parking lot. The route from the parking lot to the front entrance required one to walk around one side of the building across property belonging to a gas station and then to jump from a retaining wall. Alternatively, one could walk around the other side of the building from the parking lot to the front entrance, across property belonging to a hotel, along a route that several witnesses described as unsafe and “dangerous.” Sak testified that he personally used the entrance in the rear of the building because “the parking lot is oriented to that area ... so it would make common sense to use that as an entrance.”

In May 2006, Sak entered into negotiations with Make Believe, LLC, to lease space in the building for use as a gym and exercise facility. They reached an agreement pursuant to which Make Believe would lease the first and second floors of the building, including the first and second floors of an addition that would subsequently be built onto the main entrance in the rear of the building. According to Sak, he and Make Believe negotiated Make Believe’s entire lease for all this space at one time, before Make Believe took occupancy. Make Believe took occupancy of the first and second floors of the building in December 2006, and by January 2007 it had begun operating a gym known as the Metro Athletic Club or “the MAC.” According to Sak, in January 2007, all of Make Believe’s rental space was physically completed except for that portion of Make Believe’s leased space that would be located in the addition.

In May 2006, while he was negotiating with Make Believe, Sak entered into discussions with APS about leasing office space in the building. Sak knew that APS would be leasing the space to provide psychiatric and mental-health-counseling services to patients.

During the negotiations with Sak for the space APS was considering leasing, Doyle Stewart, APS’s chief financial officer, and other officers and employees of APS asked Sak for information about the other tenants in the building, including the MAC. Stewart thought it unusual that a gym would be operating in a professional building. According to Stewart, in answer to his inquiries about the MAC, Sak portrayed the MAC as a small, expensive gym with “not a significant membership load.” During the ongoing negotiations between APS and Sak, the entrance to the MAC was located directly behind the elevators in what was then the main entrance area of the building. According to Stewart, he noted at that time that the entrance to the MAC and the gym facility itself were located so that they “would not cause a problem for anybody that wanted to go into the upper floors of the building. It was kind of off to itself.”

During his deposition, Stewart testified that, during the course of the lease negotiations, he “spent a lot of time” explaining to Sak that “a lot of [APS’s patients] are VIP-type people ... leaders in the community that come in for psychiatric services, and we have to keep their business, basically, confidential ... and private to the best extent that we can.” Stewart and other representatives of APS informed Sak that APS’s clients were psychiatric patients and that those clients would need to be able to enter the building and pass through the common areas with sufficient privacy that their destination at APS’s offices was not readily obvious to bystanders.

Stewart knew that Sak was planning to build an addition to the building at the main entrance. During the negotiations, Stewart inquired as to Sak’s plans for the addition. In response to those inquiries and to the inquiries of other APS personnel, Sak represented that the addition would include an atrium with a sitting area and a fountain accessible by a walled-in hallway. Sak represented to APS that the walled-in hallway would lead from the door of the main entrance to the building elevators, which could be used to access the various tenant spaces on the several floors of the building. Sak represented that the enclosed hallway would contain a directory or directions to the various tenant spaces in the building. At no point in response to APS’s repeated inquiries did Sak represent that Make Believe would be leasing space in the addition for use as a gym or that, when the addition was finished, APS’s patients would have to walk through Make Believe’s gym to access the elevators to reach APS’s offices.

During the negotiations, Mary Brown, an office manager for APS, told Sak that she was concerned about having a discreet entrance for APS’s clients and about potential noise from a gym facility in the building and that there would not be sufficient parking for APS patients and staff because of the use of the parking lot by members of the gym. Sak assured Brown that the noise problem would be solved with extra insulation, that parking would be sufficient for both the gym members and APS, that he would assign APS 30 of the 120 available parking spaces if necessary, and that, when construction of the addition was complete, the gym would have its own separate entrance. Sak also assured Brown that the addition would house an atrium or other common areas and that the entrance to the building in the addition would lead into an enclosed common hallway that led to the building elevators.

Stewart and Brown both believed Sak’s representations that the addition would include a main entrance into an enclosed hallway that led to the building elevators, and they both thought that this would provide a sufficiently discreet entrance for APS’s clients. They both were involved in the lease negotiations between APS and Sak, and they testified that, had APS known that the entrance to the addition would be into an open gymnasium through which APS’s clients would have to walk to reach the elevators, they would not have signed a lease agreement for the property because such an entrance would not be sufficiently discreet or adequate for psychiatric patients who had to access the elevators to get to APS’s office space on the third floor.

On October 19, 2006, APS entered into a lease agreement with SRS Group, LLC, pursuant to which APS agreed to lease office space on the third floor of the building. After October 19, 2006, Stewart, Brown, and APS continued to ask Sak for specifics about the plans for the addition. Sak continued to represent that the addition would include a walled hallway from the main entrance to the elevators with space for common use on either side and that APS would be satisfied with the main entrance after the addition was complete.

Sometime in 2007, the building was sold to Court Street, of which Sak was a member. On May 31, 2007, Court Street and APS executed a five-year lease agreement for the third floor of the building. The May 31, 2007, lease agreement stated that it “st[ood] as an amendment to and replacement of’ the October 19, 2006, lease agreement that named SRS Group as landlord.

Although the renovation construction was not yet complete, Sak asked APS if it would be willing to move into its office space early so that he would be able to obtain financing to complete the renovations. APS complied and took possession of the leased space in June 2007. Construction on the addition started in August 2007. From time to time during construction, Sak represented to APS that he was changing the details of his plans for the addition or that the plans were not complete or definite. However, in response to repeated inquiries from APS, he always represented that the addition would consist of an enclosed hallway leading from the main entrance of the building to the elevators, with some type of common area off to the side of the enclosed hallway. Sak also continued to represent that the new entrance would be adequate and appropriate for use by APS’s clients.

In September or October 2007, the new addition was completed. Make Believe moved into the new addition pursuant to its lease and began operating a Gold’s Gym franchise in the space. The Gold’s Gym facility was not a small, exclusive gym for professionals. It had many more customers than the MAC, and the customers made more noise and used more parking spaces than had the MAC’S members. As a result, the clients of APS had difficulty finding available parking spaces. The noise from the gym interfered with APS’s business. For example, noise and vibrations caused by activities in the gym would regularly cause coffee cups to shake in APS’s office space. At one point, an APS patient thought she was having a psychotic episode and that she was hearing noises that did not exist, but APS professionals, with some difficulty, were able to reassure her that she was not having a psychotic episode and that she was in fact hearing actual noises that were coming from the gym.

It was not until the addition was complete and Make Believe began operating a Gold’s Gym franchise in it that APS discovered that Make Believe would occupy the addition and that APS’s clients entering the building at the main entrance would have to traverse an open walkway through the Gold’s Gym facility to access the elevators to APS’s offices. The addition did not have an enclosed hallway. The main entrance to the building through the addition appeared from the outside to be nothing more than an entrance to the Gold’s Gym facility. Clients of APS had difficulty finding their way to APS’s office because they did not recognize the Gold’s Gym entrance as a common entrance to the building. Further, because the addition did not contain an enclosed hallway, once patients of APS entered the building they had to walk through the Gold’s Gym facility along an open walkway to the elevators. On either side of the walkway, members of Gold’s Gym were exercising and using tanning beds. Members of Gold’s Gym who were exercising at various places throughout the new addition could easily view APS’s clients as they walked to the elevators. One witness described the walkway through the addition from the entrance to the elevators as follows:

“There may be some railings in there [along the walkway from the main entrance to the elevator], but everything is wide open. I mean, you can see. You know, you can see everything going on in the gym. As a matter of fact, the gym people lookfed] at you when you walked in. I noticed that, which is kind of uncomfortable, but you know, they are there doing their bikes and stuff, facing the — path to the elevator.
“There really is, I mean, the whole thing is the gym. I mean, everything. The left side, everything over there is on the gym. The right, everything is on the gym. The receptionist’s desk [for Gold’s Gym] is right there when you walk in the door. I mean, the whole thing is the gym.”

Further, employees of Gold’s Gym would sometimes stop APS’s clients in front of people in the gym and demand to know where they were going. The APS patients would inform them that they were in the building for an appointment at APS, and the gym staff would then direct them to the elevators. APS, through Sak, asked the Gold’s Gym employees to stop accosting visitors to the building and demanding to know where they were going, and to simply direct persons who were not clientele of Gold’s Gym to the elevator. Stewart testified that the manager of Gold’s Gym responded that he could not “staff the front to be a reception area” for everyone entering the building, and the manager complained to APS that he “was tired of [APS’s] crazy patients walking through his gym.”

APS presented evidence indicating that its patients were embarrassed and humiliated because they had to walk through the gym, where they could possibly be seen by family, friends, and coworkers; that many patients refused to come back to the building after having to walk through the gym to reach APS’s offices; and that new patients refused to make appointments when they learned that the office was in a building occupied by Gold’s Gym and that they would have to walk through the gym to reach APS’s offices.

When asked in a deposition whether APS’s clients could have used the front entrance to the building, Stewart explained that there were no available parking spaces from which the front entrance was accessible. Stewart stated that that he could not ask psychiatric patients to “jump off a retaining wall” or walk through a dangerous alley as would be required to access the front entrance from the parking area in the rear of the building. Stewart testified that the front entrance was occasionally locked or under construction. Stewart stated:

“You know, psychiatric patients run from very mild to very, very sick. And, you know, they have all kinds of things, become paranoid about stuff and things, and having them walking around an alley [to access the front entrance from the parking lot] is not — not—will not work. That is just not going to work, and, as a matter of fact, it’s inappropriate for anybody to have to walk down an alley to get to the front door of a Class A office building.”

On January 22, 2008, APS sent Sak a letter stating:

“Be advised that [APS] has determined that you are currently in default of your obligation to [APS] as set forth in our Lease executed May 31, 2007. Accordingly, pursuant to paragraph 18.1 of the lease, i.e., Notice of Landlord’s Default, [ ] this letter is written notice of our intent to terminate the Lease. The reasons for our actions include, but are not necessarily limited to, your failure to provide unimpeded confidential access to the office space; your authorization, facilitation or operation of a business which operates as a nuisance to our leased space; and your failure to provide adequate on site parking for our personnel and patients. For these reasons, your acts and/or omissions constitute a breach of your covenant not to interfere in our quiet enjoyment of the leased property. Accordingly, we request that you undertake all obligations required by you as set forth in the Lease agreement.”

On February 5, 2008, APS entered into a lease agreement for office space in another building. On February 11, 2008, counsel for Court Street sent a letter to counsel for APS denying that Court Street was in breach of the lease agreement. On March 24, 2008, counsel for Court Street sent another letter to counsel for APS, detailing the steps Court Street was taking to address APS’s concerns, which included ordering “[architecturally designed fabric shields ... to block patrons view from adjoining tenant space.” However, the letter also stated that Court Street still denied that it was in breach of the lease agreement.

On March 31, 2008, APS gave Court Street notice that it was vacating the premises effective April 1, 2008, and returned the keys to its offices to Sak.

Procedural History

On April 21, 2008 Court Street sued APS, alleging breach of the contract and seeking all rents due under the lease agreement. According to Court Street, APS breached the terms of the lease agreement when it vacated the premises and ceased paying rent without giving Court Street 90 days’ written notice of default and an opportunity to cure any alleged default.

On May 20, 2008, APS filed an answer and counterclaim, in which it asserted that Court Street was in breach of the lease agreement because, APS alleged, Court Street interfered with APS’s beneficial use and quiet enjoyment of the premises in violation of the terms of the lease agreement, and in doing so had breached an implied warranty of quiet enjoyment. APS also claimed that it had been fraudulently induced into entering into the lease agreement by Court Street’s representations that the premises would be appropriate and satisfactory for APS’s psychiatric practice; that, at the time it made the representations, Court Street knew that the representations were false and knew that the addition would house an exercise facility in such a manner as would interfere with APS’s use of its leased space; that Court Street had suppressed information regarding a future tenant; and that Court Street’s false representations and suppression of material information were willful, fraudulent, deceptive, and made to induce it into executing the lease agreement. APS sought an order rescinding and canceling the lease, compensatory damages, and punitive damages.

On August 6, 2010, Court Street filed a motion for a summary judgment as to all claims. On August 30, 2010, APS filed a response to Court Street’s summary-judgment motion and a cross-motion for a summary judgment. On September 7, 2010, the trial court granted Court Street’s motion for a summary judgment and entered a judgment against APS in the amount of $436,502.26. On October 5, 2010, APS filed a notice of appeal.

Standard of Review

“This Court’s review of a summary judgment is de novo. Williams v. State Farm Mut. Auto. Ins. Co., 886 So.2d 72, 74 (Ala.2003). We apply the same standard of review as the trial court applied. Specifically, we must determine whether the movant has made a prima facie showing that no genuine issue of material fact exists and that the movant is entitled to a judgment as a matter of law. Rule 56(c), Ala. R. Civ. P.; Blue Cross & Blue Shield of Alabama v. Hodurski, 899 So.2d 949, 952-53 (Ala.2004). In making such a determination, we must review the evidence in the light most favorable to the non-movant. Wilson v. Brown, 496 So.2d 756, 758 (Ala.1986). Once the movant makes a prima facie showing that there is no genuine issue of material fact, the burden then shifts to the nonmovant to produce ‘substantial evidence’ as to the existence of a genuine issue of material fact. Bass v. SouthTrust Bank of Baldwin County, 538 So.2d 794, 797-98 (Ala.1989); Ala.Code 1975, § 12-21-12.”

Dow v. Alabama Democratic Party, 897 So.2d 1035, 1038 (Ala.2004).

Discussion

On appeal, APS argues that the trial court erred by entering a summary judgment for Court Street. Specifically, APS contends that it was fraudulently induced to sign a lease agreement for space in the building. APS argues that the record contains substantial evidence creating a genuine issue of material fact as to whether Court Street knowingly misrepresented to APS that the addition would be built as a common area with a sufficiently discreet and appropriate main entrance to the building for APS’s clients while suppressing the fact that the space in the addition had already been leased to Make Believe for use as a gym.

APS argues that the summary judgment was inappropriate because, APS contends, the record contains substantial evidence to support its claim that Sak fraudulently induced it to enter into the May 31, 2007, lease agreement with Court Street by misrepresenting and suppressing material information.

The elements of fraudulent misrepresentation are: “ ‘(1) [a] false representation (2) of a material existing fact (3) relied upon by the plaintiff (4) who was damaged as a proximate result of the misrepresentation. Earnest v. Pritchett-Moore, Inc., 401 So.2d 752 (Ala.1981).”’ Pranzo v. ITEC, Inc., 521 So.2d 983, 984 (Ala.1988) (quoting Coastal Concrete Co. v. Patterson, 503 So.2d 824, 826 (Ala.1987)). When, as in this case, “ ‘fraud is based upon a promise to perform or abstain from performing in the future, two additional elements must be proved: (1) the defendant’s intention, at the time of the alleged misrepresentation, not to do the act promised, coupled with (2) an intent to deceive. Clanton v. Bains Oil Co., 417 So.2d 149 (Ala.1982).’ ” Pranzo, 521 So.2d at 983 (quoting Coastal Concrete, 503 So.2d at 826).

The elements of fraudulent suppression are: “(1) the defendant had a duty to disclose an existing material fact; (2) the defendant concealed or suppressed that material fact; (3) the defendant’s suppression induced the plaintiff to act or refrain from acting; and (4) the plaintiff suffered actual damage as a proximate result. Freightliner, LLC v. Whatley Contract Carriers, LLC, 932 So.2d 883, 891 (Ala.2005).” Coilplus-Alabama, Inc. v. Vann, 53 So.3d 898, 909 (Ala.2010). “ ‘[A]n action for suppression will lie only if the defendant actually knows the fact alleged to be suppressed.’ ” Cook’s Pest Control, Inc. v. Rebar, 28 So.3d 716, 726 (Ala.2009) (quoting McGarry v. Flournoy, 624 So.2d 1359, 1362 (Ala.1993)).

The record contains evidence indicating that in May 2006 Sak began negotiations with Make Believe to lease space in the building to be used by Make Believe as a gym; that the lease agreement included an agreement whereby Make Believe would lease not only space in the existing building but also space in an addition that would be built onto the then existing main entrance to the building; and that SRS Group and Make Believe entered into a lease agreement for all this space at one time, before Make Believe took occupancy of the building in December 2006. One could reasonably conclude from this evidence that Sak, who was a principal in SRS Group and in Court Street, knew at least by December 2006 that Make Believe would be leasing the addition and would be operating a gym in it. See Coilplus-Ala-bama, 53 So.3d at 909 (“ ‘ “An action for suppression will lie only if the defendant actually knows the fact alleged to be suppressed.” ’ Cook’s Pest Control, Inc. v. Rebar, 28 So.3d 716, 726 (Ala.2009) (quoting McGarry v. Flournoy, 624 So.2d 1359, 1362 (Ala.1993)).”).

According to the depositions of several witnesses, APS communicated to Sak the importance to APS of a discreet entrance, as well as the importance of maintaining a reasonable degree of privacy for its clients. The record contains evidence indicating that, on multiple occasions both before and after December 2006 when Make Believe moved into the building, and before APS entered into its May 31, 2007, lease agreement with Court Street, APS asked Sak to explain his plans for the addition to the main entrance. See Mason v. Chrysler Corp., 653 So.2d 951, 954 (Ala.1995) (“A duty to communicate can arise from a confidential relationship between the plaintiff and the defendant, from the particular circumstances of the case, or from a request for information, but mere silence in the absence of a duty to disclose is not fraudulent.” (emphasis added)).

The record contains evidence to support the conclusion that, in response to repeated inquiries from APS, Sak represented that the addition to the main entrance would include a discreet entrance that would be appropriate for use by APS’s clients and that this entrance would consist of an enclosed hallway leading to the elevators, with spaces for common use on either side of the hallway. However, the evidence also demonstrates that, before he made these representations to APS, Sak knew that the space in the addition had already been leased to Make Believe for the purpose of operating a gym. Thus, one could reasonably conclude from the evidence that, at the time he made representations to APS regarding the nature of the addition, Sak in fact had no intention of building an addition that consisted of a main entrance into a walled-in hallway to the elevators with doorways to common areas opening off the hallway on either side. See Hillcrest Ctr., Inc. v. Rone, 711 So.2d 901, 906 (Ala.1997) (holding that, for an action for fraudulent misrepresentation to lie “ ‘[w]here the misrepresentation relates to some future event, it must be shown that the person making the representation intended not to do the act promised at the time the misrepresentation was made.’ ” (quoting Russellville Prod. Credit Ass’n v. Frost, 484 So.2d 1084, 1087 (Ala.1986))).

The record contains evidence indicating that, to conduct its business as a psychiatric practice, APS required a building entrance that was usable by psychiatric and mental-health patients and that was sufficiently discreet that clients of APS could not be readily identified as psychiatric patients as they entered the building. The evidence also indicates that APS made these needs known to Sak. The record contains evidence indicating that, contrary to Sak’s representations to APS, both floors of the addition had been leased by Make Believe and the addition did not contain common space on either side of a walled-in hallway leading from the main entrance to the elevators. See Pranzo, supra (holding that a claim of fraudulent misrepresentation requires proof that the defendant misrepresented a material fact); and Coilplus-Alabama, supra (holding that a claim of fraudulent suppression requires proof that the defendant suppressed a material fact).

The record contains evidence indicating that the addition, which was a gym and did not have common space on either side of a walled-in hallway, did not have an entrance that was usable by APS’s clients and was not sufficiently discreet for APS’s clients. As a result, according to witnesses for APS, APS lost clients and revenue because its patients refused to keep appointments when they learned they had to walk through the gym to reach APS’s offices. See Pranzo, supra (holding that a claim of fraudulent misrepresentation requires proof that the plaintiff suffered damage as a result of reliance on the misrepresentation); and Coilplus-Alabama, supra (holding that a claim of fraudulent suppression requires proof that the plaintiff suffered damage as a proximate result of the suppression).

The record contains the depositions of two witnesses who testified as representatives of APS, and who both testified that APS would not have entered into the May 31, 2007, lease agreement with Court Street if it had known that, instead of common space and a walled hallway connecting the main entrance to the elevators, Sak intended, in constructing the addition, to construct space that Make Believe had already leased for use as a gym. See Pranzo, supra (holding that a claim of fraudulent misrepresentation requires proof that the plaintiff relied on the misrepresentation); and Coilplus-Alabama, supra (holding that a claim of fraudulent suppression requires proof that the plaintiff acted or failed to act as a result of the suppression).

Thus, the record contains substantial evidence to support APS’s claim that there exists a genuine issue of material fact as to whether, through misrepresentation and the suppression of material facts, Sak fraudulently induced APS to enter into the May 31, 2007, lease agreement. Accordingly, the trial court erred in entering a summary judgment for Court Street on APS’s counterclaim of fraudulent inducement.

Court Street apparently takes the position that, because APS entered into a lease agreement with SRS Group on October 19, 2006, any fraudulent misrepresentations or suppression of information that may have occurred after October 19, 2006, could not have proximately caused APS any harm, because APS had already entered into the lease agreement.

The record does not contain evidence of the terms of the agreement by which SRS Group transferred its interest in the building to Court Street. The record also does not contain a copy of the October 19, 2006, lease agreement between APS and SRS Group. It is undisputed that APS and Court Street entered into a separate lease agreement on May 31, 2007, a copy of which is contained in the record. Sak testified that the May 31, 2007,' lease agreement between APS and Court Street was “the same lease” as the October 19, 2006, lease, but with a change in the name of the landlord. This Court notes that the May 31, 2007, lease provides that the “[landlord may assign all of its right, title, and interest under this lease upon thirty (30) days notice to [tjenant.”

In sum, the record contains no substantial evidence, and the parties presented no argument, as to whether APS would have been bound by the October 19, 2006, lease agreement after SRS Group sold its interest in the building to Court Street, regardless of whether APS had entered into a separate lease agreement with Court Street on May 31, 2007. Therefore, summary judgment is not appropriate on the basis of Court Street’s implied argument that any fraudulent misrepresentation or suppression that occurred after October 19, 2006, could not have proximately caused APS any harm. See Liberty Nat’l Life Ins. Co. v. University of Alabama Health Sens. Found., P.C., 881 So.2d 1013, 1020 (Ala.2003) (“[T]his Court will affirm the trial court on any valid legal ground presented by the record, regardless of whether that ground was considered ... by the trial court. Ex parte Ryals, 773 So.2d 1011 (Ala.2000), citing Ex parte Wiginton, 743 So.2d 1071 (Ala.1999), and Smith v. Equifax Sens., Inc., 537 So.2d 463 (Ala.1988). This rule fails in application only where due-process constraints require some notice at the trial level, which was omitted, of the basis that would otherwise support an affirmance, such as ... where a summary-judgment movant has not asserted before the trial court a failure of the nonmovant’s evidence on an element of a claim or defense and therefore has not shifted the burden of producing substantial evidence in support of that element, Rector v. Better Houses, Inc., 820 So.2d 75, 80 (Ala.2001) (quoting Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986), and Kennedy v. Western Sizzlin Corp., 857 So.2d 71 (Ala.2003)).” (emphasis added)).

Conclusion

For the reasons stated above, we reverse the judgment of the trial court and remand the case for further proceedings consistent with this opinion.

REVERSED AND REMANDED.

WOODALL, STUART, PARKER, and MAIN, JJ., concur.

MURDOCK and SHAW, JJ., concur in the result.

WISE, J., recuses herself.

      . This is an appeal from a summary judgment. Therefore, where the evidence in the record is conflicting, we have set forth the facts in the light most favorable to APS. See Dow v. Alabama Democratic Party, 897 So.2d 1035, 1038 (Ala.2004) (noting that, in reviewing a summary judgment, the Supreme Court "must review the evidence in the light most favorable to the nonmovant”).

      . Paragraph 18.1 of the May 31, 2007, lease agreement between Court Street and APS states:
      “In the event of any alleged default in the obligations of Landlord under this Lease, Tenant will deliver to Landlord written notice to cure such alleged default or, in the event the alleged default cannot reasonably be cured within a 30-day period, to commence action and proceed diligently to cure such alleged default.”