On December 11, 2024, Justice Platkin of the Albany County Commercial Division issued a decision in Cyprium Therapeutics, Inc. v. Curia Global, Inc., 2024 NY Slip Op. 51698(U), holding that whether a party can recover on an injunction undertaking is determined by the final decision on the merits, explaining:
Curia argues that it is entitled to recover damages from the Undertaking because the arbitrator considered the questions evaluated by the Court and finally determined that Cyprium was not entitled to a permanent injunction and that Curia properly terminated the MSA and Work Orders.
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In Margolies, the preliminary injunction was reversed on appeal for lack of irreparable harm, and plaintiffs discontinued the action before defendants could obtain a final adjudication of the merits. Defendants then sought damages from the undertaking, which plaintiffs opposed on the ground that the contingency referred to in CPLR 6312 (b) is a determination that plaintiffs are not entitled to prevail in the final outcome of the action itself. The Court of Appeals rejected that view, reasoning that CPLR 6312 (b)”refers to a final determination that the plaintiffs were not entitled to the preliminary injunction, rather than a determination with respect to their right to a permanent injunction or other favorable outcome on the merits. The proper focus is on the propriety of the preliminary injunction when it was granted.
The Court of Appeals returned to CPLR 6312 (b) in J.A. Preston, a case involving an application to discharge an undertaking after plaintiffs’ preliminary injunction was affirmed on appeal. In rejecting plaintiffs’ contention that the affirmance of the preliminary injunction was a final determination that it was properly granted, the Court of Appeals emphasized that CPLR 6312 (b) is concerned with a final determination of rights between the parties. Marshalling more than a century of appellate precedent, the Court of Appeals laid out the following principles:
[W]hen defendant consents to the discontinuance of the action without reserving its rights on the undertaking, there can be no recovery on the bond because there can be no such final determination, but when, without defendant’s consent, plaintiff discontinues the action plaintiff’s doing so is equivalent to a determination that it was not entitled to the injunction and permits defendant to recover on the bond. So also when there is a dismissal for failure to state a cause of action, there is a final determination within the meaning of the provision in question, but when dismissal occurs for a reason arising subsequent to the grant of the injunction but not going to the merits there is not. In the latter case, however, a determination of the merits may thereafter be obtained by either party in order to settle the respective rights on the undertaking.
That there was no error in the grant of a preliminary injunction in terms of its initial issuance, of course, does not mean that it cannot or will not ultimately be found to have been erroneously granted. A preliminary injunction depends upon probabilities, any or all of which may be disproven when the action is tried on the merits, and the affirmance of an order granting a preliminary injunction determines no more than that the discretion exercised in favor of granting the order was not based upon a demonstration of those probabilities so insufficient as to constitute an abuse of discretion.
In short, the Appellate Division’s affirmance, though final in the sense that it could not be further appealed, determined only that plaintiffs had made a sufficient showing to warrant provisional relief but did not foreclose the possibility that it would be finally determined that plaintiffs were not entitled to an injunction.
Recognizing the considerable tension with Margolies, decided just nine years earlier, the Court of Appeals confined the earlier precedent to its particular facts, which involved the reversal of a preliminary injunction that should never have been issued (due to the absence of irreparable harm), coupled with a voluntary discontinuance that denied to the restrained party the opportunity to obtain a favorable final adjudication.
The principal decision of the Appellate Division, Third Department is Bonded Con crete, Inc. v Town of Saugerties (42 AD3d 852 [3d Dept 2007]), a case in which the Third Department had twice determined on interlocutory appeals that the initial issuance of the preliminary injunction was proper, but the restrained plaintiff ultimately prevailed.
In concluding that there had been a final determination that defendants were not entitled to the injunctive relief, the Third Department relied upon the affirmed award of summary judgment to plaintiff and favorable declaration of rights, and concomitant disposition of all remaining claims and counterclaims by defendants. The final determination contemplated by CPLR 6312 (b) is an ultimate determination on the merits of whether the injunction was erroneously granted and should, at that later date, be vacated.
Applying the foregoing principles and precedents, the Court is satisfied that Curia is entitled to pursue damages from the Undertaking under CPLR 6312 (b) and 6315. The Award is a final determination that conclusively establishes Cyprium’s breach of the MSA for non-payment of the Invoices and denies any relief to Cyprium, including the requested permanent injunction. Further, the preliminary injunction hinged on precisely the same factual issue that was pivotal to the Arbitrator’s denial of relief to Cyprium.
The Court therefore concludes that the Award is an ultimate determination on the merits that the injunction was erroneously granted and should be vacated.
As to Cyprium’s reliance on Margolies, the Court recognizes that no appeal was taken from the preliminary injunction, and there has been no ruling that a preliminary injunction should have never been issued. But with the benefit of the Award, which is the final determination of the merits of the parties’ disputes, it is apparent that there was no predicate for issuance of the preliminary injunction the first place.
(Internal quotations and citations omitted).