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Current Developments in the Commercial Divisions of the
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Posted: June 19, 2017

Undertaking Vacated Because Not Related to Potential Damages That Might Result from Injunction

On June 14, 2017, the Second Department issued a decision in Olympic Ice Cream Co., Inc. v. Sussman, 2017 NY Slip Op. 04852, vacating an undertaking and remitting for determination of the amount of undertaking that would compensate for damages suffered if the injunction was improvidently issued, explaining:

The fixing of the amount of an undertaking is a matter within the sound discretion of the Supreme Court, and its determination will not be disturbed absent an improvident exercise of that discretion. The amount of the undertaking, however, must not be based upon speculation and must be rationally related to the damages the nonmoving party might suffer if the court later determines that the relief to which the undertaking relates should not have been granted.

Here, the Supreme Court improvidently exercised its discretion in fixing the amount of the undertaking at $2,500,000, the amount equal to the value of the estate’s shares as set by the agreement, which was not rationally related to the potential damages the estate might suffer if it is later determined that the preliminary injunction should not have been granted. Since the estate did not submit any evidence as to the amount of damages which it might sustain in that event, and the plaintiffs suggested an amount which was not rationally related to the potential damages the estate might sustain if the preliminary injunction was improvidently granted, we remit the matter to the Supreme Court, Queens County, for a new determination as to the amount of the undertaking reflective of the amount of potential damages to the estate in the event that the preliminary injunction was improvidently granted.

(Internal quotations and citations omitted).

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