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CONCLUSORY AND SPECULATIVE ALLEGATIONS WILL NOT SUPPORT PIERCING THE CORPORATE VEIL (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the plaintiffs’ motion to amend the complaint to “pierce the corporate veil” should not have been granted: The allegations in the proposed amended complaint were “conclusory” rather than fact-based:

“‘Broadly speaking, the courts will disregard the corporate form, or, to use accepted terminology, “pierce the corporate veil,” whenever necessary “to prevent fraud or to achieve equity”‘” … . “‘Generally, a plaintiff seeking to pierce the corporate veil must show that (1) the owners exercised complete domination of the corporation in respect to the transaction attacked; and (2) that such domination was used to commit a fraud or wrong against the plaintiff which resulted in plaintiff’s injury'” … . The mere contention that a corporation was completely dominated by its owners or conclusory assertions that a corporation acted as the owners’ “alter ego,” without more, will not suffice to support the equitable relief of piercing the corporate veil … . “Factors to be considered in determining whether the owner has ‘abused the privilege of doing business in the corporate form’ include whether there was a ‘failure to adhere to corporate formalities, inadequate capitalization, commingling of assets, and use of corporate funds for personal use'” … . Moreover, even under the liberal standards of CPLR 3025(b), the proposed amended complaint must still sufficiently allege the material elements of the cause of action asserted … .

Here, the proposed amended complaint contains only conclusory allegations that the Berkovics [the principals of defendant corporation] breached a settlement agreement, thereby acting in bad faith and in furtherance of their own interests, and that the Berkovics exercised complete domination over the defendant in the transaction at issue and, in doing so, abused the privilege of doing business in the corporate form. The proposed amended complaint fails to assert that the Berkovics acted other than in their alleged capacity as the principals of the defendant or that they failed to respect the separate legal existence of the defendant. Thus, the proposed cause of action seeking to pierce the corporate veil was palpably insufficient and patently devoid of merit as it was speculative and conclusory … . Anderson v ML Real Estate Holdings, LLC, 2025 NY Slip Op 05931, Second Dept 10-29-25

Practice Point: Consult this decision for insight in the the nature of the allegations required to “pierce to corporate” veil. The allegations must be fact-based. Conclusory or speculative allegations will not suffice.

 

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THE SURETY BOND, A CONTRACT, WAS UNAMBIGUOUS AND MADE NO MENTION OF PREJUDGMENT INTEREST; THE SURETY THEREFORE WAS NOT OBLIGATED TO PAY PREJUDGMENT INTEREST; THE ARGUMENT THAT CPLR 5001 MAKES PAYMENT OF PREJUDGMENT INTEREST MANDATORY WAS REJECTED (THIRD DEPT).

The Third Department, modifying Supreme Court, determined that the terms of the surety bond governed whether the surety was obligated to pay prejudgment interest. Because the bond, a contract, did not mention prejudgment interest, the surety was not obligated to pay it. The argument that CPLR 5001 makes an award of prejudgment interest mandatory, regardless of the language of the surety bond, was rejected:

Here, the contract states that the surety will “pay for labor, materials, and equipment furnished for use in the performance of the [c]onstruction [c]ontract”; importantly to this case, there is no commitment to remit — or even mention of — prejudgment interest. “Surety bonds — like all contracts — are to be construed in accordance with their terms under established rules of contract construction. . . . [A] surety’s obligation upon its undertaking is defined solely by the language of the bond and cannot be extended by the court” … . In the matter before us, the damage claimed by plaintiff is the amount of prejudgment interest it did not receive in the judgment against the surety. However, under the clear and unambiguous terms of the payment bond, the surety had no obligation to remit same. Stone Cast, Inc. v Couch, Dale Marshall P.C., 2025 NY Slip Op 05860, Third Dept 10-23-25

Practice Point: CPLR 5001 does not make payment of prejudgment interest mandatory in breach of contract cases. The language of the surety bond, a contract, controls.​

 

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THE CLASS HAD STANDING TO SEEK DECLARATORY, INJUNCTIVE AND MONETARY RELIEF BASED UPON ALLEGATIONS THE COUNTY REAL PROPERTY TAX SYSTEM WAS IRRATIONAL, DISCRIMINATORY AND UNCONSTITUTIONAL RESULTING IN A SHIFT OF THE TAX BURDEN FROM THE WEALTHIER PREDOMINANTLY WHITE COMMUNITIES TO THE LOWER INCOME PREDOMINANTLY NONWHITE COMMUNITIES (SECOND DEPT). ​

The Second Department, reversing Supreme Court, in a full-fledged opinion by Justice Barros, determined the class of property owners in Nassau County had standing to  seek declaratory, injunctive and monetary relief stemming from the “irrational, discriminatory and unconstitutional” real property tax system:

… [T]he plaintiffs allege that the County’s tax assessment policies and procedures, i.e., its freeze on reassessments from January 2010 until January 2018 and its use of a grievance procedure which was voluntary and yielded unscientific results unrelated to property values, shifted the property tax burden from wealthier, predominantly white communities in the County to lower income, predominantly nonwhite communities. The plaintiffs allege that from 2010 through 2016, property taxes on 61% of the County’s residential and commercial properties increased by only $466, or 5%, on average, whereas the average increase for the other 39% of County properties was six times that amount: $2,748, or 35.7%. They allege that most properties in predominantly nonwhite communities comprised that 39%, which amounted to an aggregate shift in the property tax burden onto the plaintiffs and those similarly situated in a sum in excess of $1.7 billion. * * *

… [T]he allegations in the complaint, if true, … establish standing, including that the plaintiffs suffered an injury-in-fact … . The plaintiffs “allege[d] that publicly-criticized systemic inequities have resulted in [more expensive] properties increasingly shouldering less of a tax burden than properties worth far less” … and alleged that they were “being treated differently from other, similarly-situated property owners, and that no rational basis exists for this allegedly disparate treatment” … . Hall v Nassau County, 2025 NY Slip Op 05796, Second Dept 10-22-25

Practice Point: Here the allegations made by the plaintiff class demonstrated an injury-in-fact stemming from the county’s property tax system, i.e., a shift in the tax burden from the wealthier predominantly white communities to the lower income predominantly nonwhite communities. Therefore the class demonstrated standing to bring the lawsuit.

 

A DEFAULT JUDGMENT CANNOT EXCEED IN AMOUNT OR DIFFER IN THE KIND OF RELIEF DEMANDED IN THE COMPLAINT (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the default judgment must be vacated because the judgment awarded relief which was not requested in the complaint:

“A default judgment cannot exceed in amount or differ in the kind of relief from that demanded in the complaint” … . Moreover, “‘at an inquest, the court may not permit amendments of the pleadings which would broaden the scope of the inquest and increase the amount of damages provable by the plaintiff'” … . Here, the complaint only sought damages … in the principal sum of $20,357. Accordingly, the judgment must be vacated and the matter remitted … for entry of an amended judgment limiting the award … to the amount originally demanded in the complaint. Deutsch v Levy, 2025 NY Slip Op 05790, Second Dept 10-22-25

Practice Point: A default judgment cannot exceed in amount or differ in the kind of relief requested in the complaint.​

 

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A JUDGE CANNOT ORDER DISCOVERY IN A FOREIGN JURISDICTION WHICH IS A SIGNATORY TO THE HAGUE CONVENTION WITHOUT COMPLYING WITH THE REQUIREMENTS OF THE CONVENTION (FIRST DEPT).

The First Department, reversing Supreme Court, determined the judge should not have ordered discovery of a nonparty’s electronic devices in a foreign jurisdiction without complying with the Hague Convention. The nonparty, de Putron, resides in the island country of Jersey in the United Kingdom:

… Supreme Court improperly directed the discovery of de Putron’s electronic devices. First, “when discovery is sought from a nonparty in a foreign jurisdiction [that is a signatory to the Hague Convention on the Taking of Evidence Abroad in Civil or Commercial Matters … , application of the . . . Convention . . . is virtually compulsory” … . An order directing discovery of such a party without complying with the Hague Convention is therefore an “improper assertion of power beyond the . . . Court’s jurisdiction” … . As it is undisputed that de Putron is a nonparty in a foreign jurisdiction that is a signatory to the Hague Convention, Supreme Court lacked the power to direct discovery of his electronic devices without complying with the Hague Convention. Dorilton Capital Mgt. LLC v Stilus LLC, 2025 NY Slip Op 05744, First Dept 10-16-25

Practice Point: Here discovery of a foreign nonparty’s electronic devices was improperly ordered by the judge. The country in which the nonparty resided was a signatory to the Hague Convention. Compliance with the Convention is a prerequisite to any discovery order.

 

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THE ADMINSTRATOR’S SIX-YEAR DELAYING IN SEEKING SUBSTITUTION FOR THE DECEASED PLAINTFF, COUPLED WITH THE PREJUDICE TO THE DEFENDANT IN THIS PERSONAL INJURY CASE, WARRANTED DISMISSAL OF THE COMPLAINT (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the administrator’s six-year delay in substituting the estate for the deceased in this personal injury case, warranted dismissal of the complaint:

“The death of a party divests the court of jurisdiction and stays the proceedings until a proper substitution has been made” … . CPLR 1021 provides that “[a] motion for substitution may be made by the successors or representatives of a party or by any party” … and requires that such substitution “be made within a reasonable time” …. If substitution is not made within a reasonable time, “the action may be dismissed as to the party for whom substitution should have been made” (CPLR 1021). “[T]he determination of whether the timing is reasonable requires consideration of several factors, including the diligence of the party seeking substitution, the prejudice to the other parties, and whether the party to be substituted has shown that the action or the defense has potential merit” … .

Here, the administrator’s protracted delay of almost six years in obtaining limited letters of administration so as to be substituted in this action, for which he provided no explanation in his initial motion papers and only an unsubstantiated, partial explanation in his reply attorney affirmation, demonstrated a lack of diligence. Furthermore, in this 16-year-old personal injury action, in which the deposition of the bus driver was never obtained, the administrator failed to rebut the defendants’ showing of prejudice arising both from the passage of time and the unavailability of the bus driver. Finally, the administrator did not submit in support of his motion the complaint, a bill of particulars, deposition transcripts, or any proof at all as to the potential merit of the cause of action. Under these circumstances, the Supreme Court improvidently exercised its discretion in granting the administrator’s motion and, in effect, denying the defendants’ application to dismiss the complaint for failure to timely seek substitution ..Watson v New York City Tr. Auth., 2025 NY Slip Op 05718, Second Dept 10-15-25

Practice Point: Here an administrator’s six-year delay in seeking substitution for the deceased plaintiff, coupled with prejudice to the defendant, warranted dismissal of the personal injury complaint.

 

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DEFENDANT DEFAULTED IN THIS CHILD VICTIMS ACT CASE ALLEGING HE SEXUALLY ABUSED PLAINTIFF; DEFENDANT SHOULD NOT HAVE BEEN ALLOWED TO DENY THE ABUSE IN THE DAMAGES TRIAL; NEW DAMAGES TRIAL ORDERED (SECOND DEPT). ​

The Second Department, ordering a new trial on damages, determined defendant, who had defaulted in this Child Victims Act case alleging sexual abuse of the plaintiff by the defendant, should not have been allowed to deny the abuse in the damages trial:

…Supreme Court erred in permitting the defendant to testify that the plaintiff’s allegations of sexual abuse were untrue and that he had never sexually abused the plaintiff. The testimony violated the court’s pretrial order expressly prohibiting such testimony. Moreover, a defaulting defendant “admits all traversable allegations in the complaint, including the basic allegation of liability, but does not admit the plaintiff’s conclusion as to damages” … . “Accordingly, at a trial to determine the amount of a plaintiff’s real damages, the defendant will not be allowed to introduce evidence tending to defeat the plaintiff’s cause of action” … . The defendant’s testimony denying the basic allegation of liability prejudiced a substantial right of the plaintiff, as that issue had been decided in her favor, and possibly affected the jury’s verdict on the issue of damages. Accordingly, the court should have granted the plaintiff’s motion pursuant to CPLR 4404(a) to set aside the jury verdict on the issue of damages in the interest of justice and for a new trial on the issue of damages … . Reilly v Grieco, 2025 NY Slip Op 05711, Second Dept 10-15-25

Practice Point: Here defendant defaulted in this Child Victims Act case but was allowed to deny the abuse in the damages trial. That was error requiring an new trial on damages.

 

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ONE OF THE THREE DEFENDANTS, THE OWNER OF THE OTHER TWO, WAS NOT SHOWN TO BE LIABLE UNDER THE LABOR LAW; THEREFORE THE $10,000,000 PUNITIVE-DAMAGES JUDGMENT AGAINST THE OWNER SHOULD NOT HAVE BEEN AWARDED; NEW YORK DOES NOT RECOGNIZE AN INDEPENDENT CAUSE OF ACTION FOR PUNITIVE DAMAGES (SECOND DEPT).

The Second Department, reversing the $10,000,000 judgment for punitive damages in this Labor Law 220, 240(1) and 241(6) action, noted that New York does not recognize an independent cause of action for punitive damages. Summary judgment was granted against two defendants. but was denied with respect to Berger, the owner of the other two defendants. The jury was instructed to decide whether to award punitive damages based on Berger’s conduct and did so:

The plaintiff and his wife …, with leave of court, served an amended complaint to add a claim for punitive damages. The defendants answered the amended complaint, and the matter proceeded to a trial limited to the issue of damages. After both parties rested, the jury was instructed to decide whether to award punitive damages based upon conduct of Berger. The jury awarded the plaintiff and his wife punitive damages in the sum of $10,000,000, and the Supreme Court entered a judgment … in favor of the plaintiff and his wife and against the defendants … in the principal sum of $10,000,000 for punitive damages. The defendants appeal from that portion of the judgment.

“New York does not recognize an independent cause of action for punitive damages. Instead, ‘[a] demand or request for punitive damages is parasitic and possesses no viability absent its attachment to a substantive cause of action'” … . Here, the Supreme Court erroneously instructed the jury that the issue of Berger’s liability had already been determined against him, and the jury was not asked to consider Berger’s liability under the Labor Law or otherwise. Because Berger was never determined to be liable with respect to any substantive cause of action, no punitive damages could be awarded based upon his alleged conduct … . Petrosian v B & A Warehousing, Inc., 2025 NY Slip Op 05708, Second Dept 10-15-25

Practice Point: Here plaintiffs were awarded a $10,000,000 punitive-damages judgment against a defendant who was not determined to have been liable. New York does not recognize an independent cause of action for punitive damages. The punitive-damages judgment was therefore reversed.

 

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THERE IS A QUESTION OF FACT WHETHER THE SCHOOL DISTRICT HAD CONSTRUCTIVE NOTICE OF THE ALLEGED SEXUAL ABUSE OF PLAINTIFF-STUDENT IN THIS CHILD VICTIMS ACT CASE (SECOND DEPT).

The Second Department, reversing (modifying) Supreme Court, determined defendants in this Child Victims Act case against the school district for negligent hiring, retention and supervision did not demonstrate a lack of constructive notice of the alleged sexual abuse of plaintiff-student by a custodian. Therefore the defendant’s motion for summary judgment should not have been granted:

“To establish a cause of action based on negligent hiring, negligent retention, or negligent supervision, it must be shown that the employer knew or should have known of the employee’s propensity for the conduct which caused the injury” … .

Here, the defendants’ evidence included testimony given by the plaintiff during his deposition that he was abused on dozens of occasions over three to four years, that there were several other students who were similarly abused, and that other custodians employed by the District were present in the school building after hours and on weekends and saw the plaintiff alone with the custodian in the building. Thus, contrary to the defendants’ contention, they failed to establish, prima facie, that the District lacked constructive notice of the custodian’s alleged abusive propensities and conduct … . PC-14 Doe v Lawrence Union Free Sch. Dist., 2025 NY Slip Op 05693, Second Dept 10-15-25

Practice Point: Consult this decision for insight into how a question of fact is raised about a school-defendant’s constructive notice of sexual abuse of a student by a school employee.

 

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IT WAS A PROPER EXERCISE OF DISCRETION TO EXTEND THE DEADLINE FOR THE FORECLOSURE SALE DUE TO THE COVID PANDEMIC; HOWEVER IT WAS AN ABUSE OF DISCRETION TO DENY THE MOTION TO TOLL THE ACCRUAL OF INTEREST DURING THE DELAY (SECOND DEPT).

The Second Department, reversing (modifying) Supreme Court in this foreclosure action, determined the deadline for the foreclosure sale mandated by RPAPL 1351 was properly extended due to the COVID pandemic, but the accumulation of interest during the delay should have been tolled:

… Supreme Court providently exercised its discretion in granting the plaintiff’s motion pursuant to CPLR 2004 to extend the time to conduct the foreclosure sale to the extent of extending the time to conduct the sale to 90 days from the date of the order … . The plaintiff demonstrated that “the delay [wa]s largely attributable to, among other things, . . . the COVID-19 pandemic” … . Further, the defendant failed to establish that the delay caused him any prejudice … .

“A foreclosure action is equitable in nature and triggers the equitable powers of the court” … . “Once equity is invoked, the court’s power is as broad as equity and justice require” … . Thus, “[i]n an action of an equitable nature, the recovery of interest is within the court’s discretion. The exercise of that discretion will be governed by the particular facts in each case, including any wrongful conduct by either party” … . “Further, a tolling and cancellation of interest may also be warranted where there is an unexplained delay in prosecution of a mortgage foreclosure action” … . “[A] plaintiff should not benefit financially, in the form of accrued interest, from an unexplained delay in the prosecution of a mortgage foreclosure action” … .

… Supreme Court improvidently exercised its discretion in denying the defendant’s cross-motion to toll the accrual of interest on the subject mortgage loan … . The plaintiff asserted that the COVID-19 pandemic impacted its ability to proceed with the sale of the property … . However, the pandemic-related stays on foreclosure sales did not go into effect until after the expiration of the 90-day deadline to conduct the sale of the property … , and the plaintiff failed to adequately explain its failure to conduct the sale within that 90-day period … . Under the circumstances presented, the court should have granted the defendant’s cross-motion to the extent of tolling the accrual of interest on the subject mortgage loan after February 17, 2020 … . M&T Bank v Givens, 2025 NY Slip Op 05677, Second Dept 10-15-25

Practice Point: A foreclosure is an equitable proceeding triggering the exercise of discretion by the the judge. Here the extension of the deadline for the foreclosure sale due to the COVID pandemic was a proper exercise of discretion, but the denial of the motion to toll the accrual of interest during the delay was an abuse of discretion.

 

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