So in our last game session while the PCs were traveling through thick woods they were ambushed. The creatures got surprise on two of the characters and grappled one of them, since he had less hits then his attacker he was unable to defend (or take any action against during the first IP), but since the attacker grappled him he couldn’t do anything that IP. So I am curious how you would handle that, would you allow the guy to attempt to break free on his turn in the IP or would he be unable to do anything that first IP?

Also am I interpreting the rules correct?

Thanks

The PC still get to perform their action for that pass, even if it is after they got grappled in the surprise phase. They just couldn't act against the Ambushers till the ambushers had acted.