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Current Developments in the Commercial Divisions of the
New York State Courts by Schlam Stone & Dolan LLP
Posted: January 24, 2019

Undertaking Related to Injunction Released Because There Was No Finding That Plaintiff Was Not Entitled to Injunction

On January 16, 2019, the Second Department issued a decision in Candlewood Holdings, Inc. v. Valle, 2019 NY Slip Op. 00255, holding that an undertaking related to an injunction should have been released because there was no finding that the plaintiff was not entitled to the injunction, explaining:

Before the Supreme Court directed the entry of a judgment declaring that Valle was entitled to the condemnation award, the court granted the plaintiffs a preliminary injunction restraining the defendant law firm Goldstein, Rikon & Rikon, P.C., from paying the proceeds of the condemnation award to the defendants, conditioned on the plaintiffs posting an undertaking in the sum of $250,000. At issue on this appeal is the denial of the defendants’ motion to recover damages resulting from the issuance of the preliminary injunction, and the grant of the plaintiffs’ cross motion for the release of the undertaking. We affirm.

Pursuant to CPLR 6312[b], prior to the granting of a preliminary injunction, the plaintiff shall give an undertaking in an amount to be fixed by the court, that the plaintiff, if it is finally determined that he or she was not entitled to an injunction, will pay to the defendant all damages and costs which may be sustained by reason of the injunction. A defendant can only recover damages resulting from the issuance of a preliminary injunction if there has been a final determination, whether explicit or implicit, that the plaintiff was not entitled to the preliminary injunction. There has not been a final determination that the plaintiffs in this case were not entitled to the preliminary injunction. Rather, the Supreme Court directed the entry of a declaratory judgment in favor of Valle and the dismissal of the remainder of the complaint based on the court’s refusal to intercede to resolve a dispute between two wrongdoers. Accordingly, we agree with the court’s determination denying the defendants’ motion and granting the plaintiffs’ cross motion.

(Internal citations omitted).

It is common in commercial litigation that parties seek equitable relief such as injunctions, attachments or the appointment of a temporary receiver in order to preserve assets or maintain the status quo when money damages will not make them whole at the end of a litigation. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client have questions regarding seeking–or opposing–such relief.

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