This motion by defendant for an order pursuant to CPLR § 7510 confirming the award of Arbitrator Wilkinson dated October 24, 2007, and for an order pursuant to CPLR § 6315 directing a hearing to determine Four Seasons' damages sustained as a result of a preliminary injunction dated January 19, 2007, and for an order pursuant to CPLR § 3211(a)(5) dismissing the complaint and the cross-motion by plaintiff for an order pursuant to CPLR § 6315 [*2]discharging the undertaking posted by Gold Coast are determined a follows.

Plaintiff initially brought this action seeking a declaration of the parameters of a franchise agreement entered into with defendant as to defendant's advertising and selling within plaintiff's Granted Territory. Plaintiff argued that defendant's marketing strategy in Nassau County was unfairly competing with its franchisee's business, i.e. plaintiff's business as a franchisee.

The Franchise Agreement dated March 13, 2002, contained an arbitration clause. Plaintiff moved for a preliminary injunction enjoining defendant from advertising in its Granted Territory which was granted on January 19, 2007. On February 5, 2007, the court directed plaintiff to post a bond in the amount of $100,000 in aid of the preliminary injunction, which it did. No appeal was taken.

A Final Arbitration Award was rendered on October 24, 2007, whereby the arbitrator essentially upheld the defendant's interpretation of the Franchise Agreement. On December 3, 2007, the parties stipulated to vacate the preliminary injunction granted by this court.

Defendant moves now for confirmation of the Final Arbitration Award and for a hearing on damages on the grounds that the preliminary injunction was improvidently granted and defendant sustained a loss of sales by reason of the injunction against advertising in the Granted Territory. Defendant argues that the Bond in the amount of $100,000 was posted to protect against losses resulting from the preliminary injunction where the Arbitrator has denied all relief requested in the complaint and in plaintiff's demand for arbitration. J.A. Preston Corp. v Fabrication Enterprises Inc., 68 NY2d 397 (1986). Defendant contends that "Arbitrator Wilkinson's award makes it clear that Gold Coast was not entitled to a preliminary injunction." Affidavit of Michael Einbinder ¶ 20.

Pursuant to section 6312(b) of the CPLR plaintiff is not liable to defendant for damages covered by the bond until " it is finally determined that [plaintiff] was not entitled to an injunction' (emphasis supplied)." Preston v Fabrication, 68 NY2d at 406. It is well established that the defendant "is not entitled to damages even though the plaintiff eventually lost on the merits where the plaintiff had nonetheless been entitled to the preliminary injunction when it was issued." Margolies v Encounter, 42 NY2d 475,478 (1977) citing to Williams v Montgomery, 148 NY 519; Time Warner Cable v Brustowsky, 233 AD2d 150 (1st Dept 1996)(citing to Margolies v Encounter). Since Margolies was handed down it has been the law that the focus of CPLR § 6312 "is on the propriety of the issuance of the preliminary injunction when it was granted at the commencement of the action," Id. at 479 (citations omitted), not on a final determination on the merits that plaintiffs are not entitled to a permanent injunction. Accord Preston v Fabrication, 68 NY2d at 406 ("liability under CPLR 6312 (b) turns on whether it is finally determined that [plaintiff] was not entitled to an injunction.' ... [Even an] 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 both cases there was at the end - by different procedural avenues - a judicial determination "that there was no predicate for issuance of the preliminary judgment ...and it had been finally determined that plaintiffs were never entitled to the preliminary injunction in the first place." Preston at 407; Greenberg v Tamir, 178 AD2d 184 (1st Dept 1991).

That is not the case here. This case has been finally determined on the merits by an [*3]arbitrator. It was not the province of the arbitrator to review whether the preliminary injunction was erroneously granted, nor did he venture into that territory, defendant's representation not withstanding. This court granted the application for a preliminary injunction in aid of arbitration and to preserve the status quo of the franchise during the pendency of arbitration. Petitioner was directed to post an undertaking of $100,000. Upon the Final Award of the Arbitrator which denied plaintiff's claims for breach of the franchise agreement, breach of the implied covenant of good faith and fair dealing, unfair competition, and for an accounting, the parties on December 3, 2007 stipulated and agreed to vacate the preliminary injunction. There was no reservation of rights by defendant to proceed against the bond for damages.

The court rejects defendant's invitation to accept a rule that in the Second Department a decision against plaintiff on the merits is implicitly a decision that the preliminary injunction was erroneously granted. See Sunrise Plaza Associated v International Summit Equities, 212 AD2d 690 (2d Dept 1995). That case is distinguishable on the merits since that plaintiff's entitlement to a preliminary injunction was on the same facts as were pivotal to the ultimate denial of the permanent injunction. In contrast, the preliminary injunction granted in favor of plaintiff was to protect the award in arbitration against being ineffectual, although this court was in error in not citing to section 7502 of the CPLR as well as articles 62 and 63 of the CPLR. CPLR § 7502(c).

In sum, the application of defendant to confirm the Final Award of the Arbitrator is granted, and it is

ORDERED and ADJUDGED that judgment is granted in favor of defendant and all claims asserted against defendant are denied and the Clerk of the County of Nassau shall enter judgment accordingly.

All other requests by defendant are denied.

The application by plaintiff for an order discharging the undertaking posted is granted, and it is

ORDERED that the undertaking posted in the amount of $100,000 by plaintiff Gold Coast Enterprises be discharged.

Dated: March 27, 2008

J.S.C.

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