Court Explains Calculation of Undertaking on Attachment

On November 22, 2017, Justice Friedman of the New York County Commercial Division issued a decision in MyPart Software, Ltd. v. Fluent Trade Tech. Ltd., 2017 NY Slip Op. 32499(U), explaining the calculation of an undertaking on an attachment:

By separate motion, petitioner MyPart seeks an order reducing the amount of petitioner's undertaking from $250,00, the amount set in the Prior Decision and Order, to $5,000 or less, and extending the ten day deadline to post such undertaking following expiry or vacation of the emergency stay of the order of attachment.

Commentaries and court procedures suggest that an undertaking on an attachment should generally be set in the amount of five to ten percent of the amount restrained. CPLR 6212 (b) provides that plaintiff shall pay to the defendant all costs and damages, including reasonable attorney's fees, which may be sustained by reason of the attachment if the defendant recovers judgement or if it is finally decided that the plaintiff was not entitled to an attachment of the defendant's property. The courts have reiterated that an undertaking must be sufficient to pay defendant damages, including attorney's fees, in the event that plaintiff was found not entitled to an attachment. Put another way, the undertaking must be rationally related to the potential damages in the event the attachment is found to have been unwarranted.

Applying these standards, the court concludes that if it is ultimately determined that petitioner was not entitled to an attachment, respondents will be entitled to considerable attorney's fees for the litigation over the attachment, even if no other damages are proved. The court further holds that $100,000 is rationally related to such potential damages. The attachment will therefore be reduced to that amount.

(Internal quotations and citations omitted).

An attachment is a powerful tool to preserve assets pending decision of a lawsuit. We are familiar with the sometimes complicated rules regarding obtaining prejudgment attachments, including, as discussed above, the requirement to give an undertaking in order to get an attachment. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client have questions about obtaining a court order preventing an opponent from disposing of property pending the determination of a lawsuit.