James T. Martin, Dan T. Ryerson, Gislason, Martin & Varpness, P.A., 7600 Parklawn Avenue South, Suite 444, Edina, MN 55435 (for respondent)

Charles E. Spevacek, Joseph W.E. Schmitt, Meagher & Geer, P.L.L.P., 4200 Multifoods Tower, 33 South Sixth Street, Minneapolis, MN 55402 (for amicus curiae CNA Insurance Companies and Federated Insurance Company)

Considered and decided by Randall, Presiding Judge, Lansing, Judge, and Harten, Judge.

On appeal from an order permanently enjoining an insurers' association from paying member claims according to a settlement agreement, the association argues that the district court erred by granting the permanent injunction without a trial and by ordering the association to post $500,000 to guarantee payment of a claim by the settling member-insurer. We reverse and remand.

In 1990, based on an erroneous rating formula, MWCIA's members undercharged their policyholders for workers' compensation premiums. Upon discovery of the error, Western and several other MWCIA members sought to retroactively recoup the amounts they had undercharged their policyholders. The other MWCIA members settled with the policyholders, but Western refused to settle. Ultimately, this court concluded that Western was not entitled to recover from its policyholders. D.J.'s Upholstery, Inc. v. Western Nat'l Mut'l Ins., 505 N.W.2d 379 (Minn. App. 1993), review denied (Minn. Nov. 16, 1993).

Western sued MWCIA, and the association eventually agreed to a settlement. MWCIA agreed to pay Western's claim in the amount of $416,000, but only after MWCIA had notified its members of the settlement and had afforded them an opportunity to submit substantially similar claims. The settlement authorized the MWCIA "in its reasonable discretion" to establish a cutoff date for member claims. Western acknowledged that any members' claims would be assessable against other MWCIA members, including Western, which could result in a reduction in the net amount received by Western.

MWCIA sent several letters to its members, notifying them of the settlement and offering information from its files. Western objected to the delay in the claims process and sued MWCIA, claiming that it had breached the settlement agreement by failing to reasonably limit the time for allowing member claims. In addition to its breach of contract claims, Western sought temporary and permanent injunctive relief.

Based on memoranda and arguments by counsel, the district court issued an order permanently enjoining MWCIA from processing or paying any more member claims. The court also required MWCIA to deposit $500,000 with the clerk of court to guarantee payment of Western's claim. The court found that MWCIA had provided no justifiable reason or reasonable pretext for its delay in refusing to pay Western's claim.

Western filed a motion for summary judgment and informed MWCIA that, pending a decision on the motion, it would agree to construe the permanent injunction as a temporary injunction and would waive the district court's order that MWCIA post $500,000. Instead of accepting these concessions, MWCIA appealed from the permanent injunction.

MWCIA correctly points out that the parties could not disregard the district court's order that MWCIA post $500,000, nor could the parties dictate to the district court that its order be construed as a temporary injunction. MWCIA's appeal from the injunction was timely and proper. The appellate rules specifically authorize an appeal from an order granting an injunction. Minn. R. Civ. App. P. 103.03 (b).

Although permanent injunctive relief is ordinarily granted after a trial on the merits, the district court may conduct a combined hearing on a motion for an injunction and a motion for summary judgment. Breezy Point Holiday Harbor Lodge-Beachside Apartment Owners' Ass'n v. B.P. Partnership, 531 N.W.2d 917, 918 (Minn. App. 1995). The rules of civil procedure provide: "Before or after the commencement of the hearing on a motion for a temporary injunction, the court may order the trial of the action on the merits to be advanced and consolidated with the hearing on the motion." Minn. R. Civ. P. 65.02 (c).

But the district court did not order that the trial be advanced or consolidated with the injunction hearing, and Western had not yet moved for summary judgment. Nevertheless, without indicating that summary judgment was appropriate, the district court issued its order for a permanent injunction.

A decision whether to grant a permanent injunction lies "within the sound discretion of the trial court," and we will not disturb that decision, absent an abuse of discretion. Unique Sys. Dev. Inc. v. Star Agency, 500 N.W.2d 144,146 (Minn. App. 1993), review denied (Minn. July 15, 1993). But even under the broad abuse-of-discretion standard we can not countenance a procedure that abrogates the rights of the litigants to provide affidavit or testimonial evidence.

In effect, the district court construed the parties' settlement agreement and found that the cutoff dates established by MWCIA were not within the MWCIA's "reasonable discretion." Prior to a motion for summary judgment supported by affidavits or a hearing on the merits, this finding was premature. In addition we find no support in the limited record for several of the court's other findings. For example, the record at this point does not support the court's finding that MWCIA had "attempted to develop a pretextual claims process in order to avoid a just debt," or that MWCIA had conceded that all of its members' claims were "far too late."

Reversed and remanded; motion denied.