Trial Court Erred in Not Explaining Basis for Amount of Undertaking

On February 22, 2024, the Third Department issued a decision in Darwish Auto Group, LLC v. TD Bank, N.A., 2024 NY Slip Op. 00955, holding that a trial court erred in not explaining the basis for the amount of an undertaking imposed in connection with an injunction, explaining:

[W]e agree with defendant that, on this record, it is not possible to discern whether Supreme Court set an appropriate undertaking. When granting a preliminary injunction, Supreme Court must require the plaintiff to post an undertaking. The amount of the undertaking is left to the court’s sound discretion, but it should bear some rational relation to the potential damages that the defendant would suffer if the preliminary injunction is ultimately deemed unwarranted. Here, plaintiffs suggested an undertaking of $500 without further explanation; defendant failed to suggest a sum or to provide any evidence as to damages he might suffer. In setting the undertaking at $10,000, Supreme Court failed to provide any rationale for reaching such sum, and the record is insufficient to allow us to determine an appropriate sum. Consequently, we must remit this matter to Supreme Court to fix an undertaking in a sum that bears a rational relation to the potential damages that defendant could recover if the injunction is ultimately deemed unwarranted.

(Internal citations omitted).

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