On February 13, 2025, Justice Bannon of the New York County Commercial Division issued a decision in CMB Export Infrastructure Inv. Group 48, LP v. Motcomb Estates, Ltd., 2025 NY Slip Op. 30572(U), discussing the categories of costs recoverable from an injunction undertaking, explaining:
In dismissing the complaint as against RB, the First Department clearly held that the Preliminary Injunction was improper from the outset. Therefore, CMB does not dispute that RB is now entitled to recover against the $5 million undertaking for any damages or harm sustained by reason of the Preliminary Injunction. The issue presented here is the scope of the costs recoverable.
CPLR 6312(b) provides, in pertinent part, that prior to the granting of a preliminary injunction, the plaintiff shall give an undertaking in an amount to be fixed by the court and 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. An undertaking posted under CPLR 6312(b) does not constitute liquidated damages, but provides a ready source from which the defendant may recover for damages which it may have sustained where it is later finally determined that the preliminary injunction was improperly granted. The party seeking such damages bears the burden of presenting evidence to prove the damages sought.
The measure of such damages is the amount necessary to compensate the injured party for losses sustained by reason of the improperly granted preliminary injunction. Any damages must arise directly from the injunction, and damages cannot be recovered for costs related to litigating the merits of the case or other underlying issues. Counsel fees incurred in opposing a preliminary injunction motion in the first instance are not recoverable because they would be incurred even if the injunction were denied.
It is not disputed that, where supported by the record, attorneys’ fees incurred in a successful effort to vacate a restraining order may be recoverable damages under CPLR 6315. This, of course, includes attorney’s fees and costs incurred to appeal the court’s order granting the Preliminary Injunction. Since the nature of a motion to reargue pursuant to CPLR 2221(d) is akin to an appeal, logic dictates that the attorney’s fees incurred on a motion to reargue the preliminary injunction motion are likewise recoverable, as such fees flow directly from, and would not have been incurred but for, the improper granting of the Preliminary Injunction.
To demonstrate its recoverable legal fees and costs, RB submit the affirmation of their counsel, Matthew D. Parrott, of Fried, Frank, Harris, Shriver & Jacobson LLP (“Fried Frank”), as well as a set of Fried Frank’s invoices for work done on this matter. Parrott avers that the approximately $4.3 million in fees and costs reflected in Fried Frank’s invoices include fees and costs incurred in connection with: opposing CMB’s preliminary injunction motion in the first instance; the motion to reargue and renew RB’s motion to dismiss; the appeals of Justice Ostrager’s orders denying the motion to dismiss and the motion to reargue and renew that motion; and engaging a discovery vendor to assist with document review and production in this case. Not all are recoverable.
First, the invoices themselves merely reflect the amounts billed by Fried Frank, without revealing the tasks or aspects of the litigation to which those fees relate. As such, neither the invoices nor Parrott’s affirmation are sufficient to demonstrate how much of the subject $4.3 million in legal fees and costs may properly be considered damages directly resulting from the improper issuance of the Preliminary Injunction, as opposed to fees incurred in opposing the initial preliminary injunction motion or costs related to litigating the merits of the case or other underlying issues. Fees paid to vendors to assist with document review and production are regular litigation costs and are not shown to be recoverable as costs occasioned by the Preliminary Injunction.
As to the default interest accrued on the Senior Mezzanine Loan during the pendency of the Preliminary Injunction, it is well settled that, where some underlying damages are shown to result from the improper grant of a preliminary injunction, interest on those damages may also be recoverable. RB does not demonstrate that it has suffered any such underlying damages. It does not, for example, contend that it suffered lost sales, rents, or profits that would have otherwise been earned on the Project collateral following foreclosure. RB’s evidentiary submissions, consisting of the affirmation of Jamie Farhani, a member of Motcomb’s Finance Advisory team, and an interest calculation prepared by Motcomb, merely establish the amount of interest that accrued on the Senior Mezzanine Loan during the relevant period. However, this calculation relates to default interest that would have ceased to accrue had the enjoined foreclosure been allowed to proceed. Nor does RB cite any authority demonstrating that default loan interest accrued during the pendency of a preliminary injunction is recoverable as damages against an injunction bond.
Moreover, CMB, in opposition, submits a signed forbearance agreement, dated April 9, 2023, pursuant to which RB agreed to forbear from foreclosing on the loan collateral through April 9, 2024. RB do not dispute the authenticity of this forbearance agreement. Thus, CMB demonstrates that, from just over a month after the Preliminary Injunction was granted on February 28, 2023, through and beyond its vacatur on January 18, 2024, RB were independently barred from foreclosing on the Senior Mezzanine Loan by virtue of the forbearance agreement, regardless of the Preliminary Injunction. RB, in their reply memorandum of law, imply that, had the Preliminary Injunction not been granted they would not have entered into the subject forbearance agreement. However, any such assertion would be speculative and self-serving, and here unsupported by any of their evidentiary submissions. As such, RB fails to demonstrate that continued accrual of interest on the Senior Mezzanine Loan was caused by the pendency of the restraint imposed by the Preliminary Injunction, rather than their own independent decision to sign the forbearance agreement.
For these reasons, the motion is granted to the extent that RB has demonstrated their entitlement to recover from the undertaking the attorneys’ fees and costs incurred in their efforts to vacate the Preliminary Injunction. Specifically, RB is entitled to recover attorney’s fees and costs incurred in its motion to reargue and renew the Preliminary Injunction motion and its appeals from Justice Ostrager’s order granting the Preliminary Injunction and denying renewal. The proper amount of such fees and costs shall be determined by a Special Referee.
(Internal quotations and citations omitted).