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DEFENDANT CORPORATION IN THIS FORECLOSURE ACTION RAISED A QUESTION OF FACT ABOUT WHETHER THE PERSON WHO SIGNED THE LOAN DOCUMENTS ON BEHALF OF THE CORPORATION HAD THE APPARENT AUTHORITY TO DO SO; PLAINTIFF CANNOT RELY SOLELY ON THE PURPORTED AGENT’S ASSERTIONS OF AUTHORITY, BUT RATHER MUST MAKE A REASONABLE INQUIRY (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the defendant corporation in this foreclosure action raised a question of fact whether Wing Fung Chau had apparent authority to sign the loan documents on behalf of the corporation at the time of the closing:

“One who deals with an agent does so at his [or her] peril, and must make the necessary effort to discover the actual scope of authority” … . “Essential to the creation of apparent authority are words or conduct of the principal, communicated to a third party, that give rise to the appearance and belief that the agent possesses authority to enter into a transaction. The agent cannot by his [or her] own acts imbue himself [or herself] with apparent authority” … . “‘It is axiomatic that apparent authority must be based on the actions or statements of the principal'” … . “[T]he existence of apparent authority depends upon a factual showing that the third party relied upon the misrepresentations of the agent because of some misleading conduct on the part of the principal—not the agent” … . “A third party cannot rely on the alleged agent’s own action and statements, since apparent authority cannot be based upon the agent’s acts” … . Furthermore, the third party “may rely on an appearance of authority only to the extent that such reliance is reasonable” … .

Here, the corporation submitted, among other things, affidavits from its president and secretary/vice president, as well as a shareholder agreement dated December 15, 2017, and the corporation’s bylaws, which demonstrated that Wing Fung Chau held no corporate office and did not have the authority to execute the consolidated note and mortgage on behalf of the corporation, and that the corporation had not communicated to the plaintiff, as a third party, words or conduct that gave rise to the appearance and reasonable belief that Wing Fung Chau possessed authority to execute the consolidated note and mortgage on behalf of the corporation … . While the plaintiff relied on the purported bylaws it received from Wing Fung Chau that identified him as the sole shareholder of the corporation and the loan documents he signed that identified him as the president, the plaintiff produced no evidence that it took any further steps to assure itself that Wing Fung Chau had the authority to enter into the loan transaction … . Thus, the record showed only that any authority of Wing Fung Chau’s arose from his own acts, by which he could not “imbue himself with apparent authority” … . “This is especially true where, as here, the [plaintiff] failed to conduct a reasonable inquiry into the scope of [Wing Fung Chau’s] alleged authority” … . BP3 Capital, LLC v 5120 Realty Corp., 2026 NY Slip Op 03286, Second Dept 5-27-26

Practice Point: Here there is a question of fact whether the person who signed the loan documents on behalf of the corporation had the apparent authority to do so. One who deals with a purported agent must make an effort to learn the scope of the purported agent’s authority and cannot rely solely on the purported agent’s assertions.

 

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ALTHOUGH PLAINTIFF IS A NEW JERSEY RESIDENT WORKING FOR A NONDOMICILIARY EMPLOYER, SHE WAS REQUIRED TO MAKE REGULAR VISITS TO HER EMPLOYER’S CLIENT IN NEW YORK CITY; PLAINTIFF ALLEGED SHE WAS SEXUALLY HARASSED, IN NEW YORK CITY, BY THE CLIENT’S EMPLOYEE; BECAUSE THE ALLEGED DISCRIMINATORY CONDUCT “HAD AN IMPACT IN NEW YORK,” NEW YORK HAD SUBJECT MATTER JURISDICTION FOR THE HUMAN RIGHTS LAW CAUSES OF ACTION (FIRST DEPT).

The First Department, in a full-fledged opinion by Justice Shulman, reversing Supreme Court, determined New York had jurisdiction over this employment discrimination action brought under the NYS Human Rights Law and the NYC Human Rights Law. The plaintiff is a New Jersey resident and Ethicon, alleged to be her employer, is a New Jersey corporation. Plaintiff alleged she was assigned to a sales account for Mount Sinai Health System, Inc. which required her to meet regularly with an manager at Mount Sinai in New York City. Plaintiff alleged Ethicon knew that she would be subject to sexual harassment by the Mount Sinai manager. The First Department held that the term “employer” in the Human Rights Law included the nondomiciliary Ethicon because the discriminatory conduct at issue “had an impact in New York.” ​

​… [T]he issue here is how we should interpret the State HRL’s definition of an “employer” as used in the phrase “all employers within the state” for purposes of liability under the State HRL (Executive Law § 292 [5]). The motion court read this definition as requiring an employer to have a physical presence in New York and therefore found both the State HRL and the City HRL inapplicable to Ethicon, “a New Jersey employer of [plaintiff,] a New Jersey resident.”  * * *

… [T]he Court of Appeals in Hoffman v Parade Publs. (15 NY3d 285 [2010]), adopted an impact test for nonresidents who seek the protection of the City HRL and found that test “relatively simple for courts to apply and litigants to follow, leads to predictable results, and confines the protections of the City HRL to those who are meant to be protected—those who work in the city” …. . * * *

Thus, the relevant inquiry is whether the alleged discriminatory conduct had an impact in New York regardless of the residency of the parties. Here, plaintiff, a New Jersey resident, alleges that Ethicon, her nondomiciliary employer, assigned her to service a New York-based account, requiring her regular presence at Mount Sinai’s hospital where the alleged traumatic sexual harassment occurred. Plaintiff further alleges that Ethicon was aware of the harassment and nevertheless required her to continue the assignment because of the account’s importance. At the pleading stage, plaintiff’s allegations, among other discriminatory acts, that her Ethicon manager discouraged her from complaining and “coached her to ‘lean into’ the sexual harassment so Mount Sinai would continue using Ethicon’s services” are more than sufficient to allege sexual discriminatory conduct having a concrete impact on plaintiff within New York to confer subject matter jurisdiction. Plaintiff’s residency outside New York does not preclude application of the State HRL or City HRL where the alleged misconduct occurred in New York City and affected plaintiff while she was working there. Arizzo v Ethicon, Inc., 2026 NY Slip Op 03262, First Dept 5-26-26

Practice Point: Consult this opinion for insight into subject matter jurisdiction under the NYC and NYS Human Rights Law. If a nonresident employee of a nondomiciliary corporation, as part of her job, meets regularly with a client in New York City and is sexually harassed by the client, New York has subject matter jurisdiction over Human Rights Law causes of action.​

 

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THIS LAWSUIT BY A PENNSYLVANIA PENSION FUND AGAINST A LONDON BANKING AND FINANCIAL SERVICES COMPANY TRIGGERED THE APPLICATION OF NEW YORK’S CONFLICT-OF-LAW RULES (“PROCEDURAL” VS “SUBSTANTIVE”) AND THE “FORUM NON CONVENIENS” DOCTRINE (SECOND DEPT). ​

The Second Department, applying conflict-of-law rules, determined the complaint in this shareholder derivative action should not have been dismissed based on plaintiff’s lack of standing. But the complaint should have been conditionally dismissed on “forum non conveniens” grounds:

The plaintiff commenced this shareholder derivative action in the Supreme Court, Nassau County. The plaintiff, the trustee of a Pennsylvania pension fund, is a shareholder in the nominal defendant Standard Chartered PLC (hereinafter SC). SC is a multinational banking and financial services company. SC is publicly owned, is registered and organized under the laws of England and Wales, and is headquartered in London. The nominal defendant Standard Chartered Holdings, Ltd. (hereinafter SC Holdings) is a wholly-owned subsidiary of SC. Nonparty Standard Chartered Bank (hereinafter SC Bank) is a wholly-owned subsidiary of SC Holdings. SC Bank, an international bank, is licensed to operate a foreign bank branch in New York. * * *

Since the procedural law of the forum typically applies under our conflict-of-law rules, the plaintiff’s failure to commence the action in England and Wales or Northern Ireland does not bar it from relying on the UK Companies Act to establish derivative standing in New York … . * * *

… [T]he plaintiff is the trustee of a Pennsylvania pension fund, and SC is registered and organized under the laws of England and Wales and is headquartered in London. None of the individual defendants reside in New York. Further, the central actionable events transpired in the United Kingdom, where SC’s directors and officers held their meetings. Although the plaintiff contends that SC presided over a money laundering scheme centered on SC Bank’s New York branch, its derivative claims center on management decisions made in the United Kingdom … . Further, it is undisputed that English substantive law governs the plaintiff’s claims. Under these circumstances, the Supreme Court should have conditionally granted SC’s motion to dismiss the amended complaint insofar as asserted against it pursuant to CPLR 327 on the ground of forum non conveniens, as the burden which would be imposed upon the courts of this State if this action was retained would be substantial … . City of Philadelphia Bd. of Pensions & Retirement v Winters, 2026 NY Slip Op 03141, Second Dept 5-20-26

Practice Point: Consult this decision for insight into the application of New York’s conflict-of-laws rules and the “forum non conveniens” doctrine in a lawsuit brought in New York by a Pennsylvanian pension fund against a London banking and financial services company.

 

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THE FACT THAT THE CRITERIA FOR PIERCING THE CORPORATE VEIL WERE NOT MET DID NOT PRECLUDE AN ACTION AGAINST A CORPORATE OFFICER INDIVIDUALLY FOR PARTICIPATING IN AND BENEFITING FROM A TORT, HERE THE MISAPPROPRIATION OF TRADE SECRETS (FIRST DEPT).

The First Department, reversing (modifying) Supreme Court, determined that the fact that the criteria for piercing the corporate veil were not met did not preclude an action against a corporate officer individually if the officer participates in and benefits from the commission of a tort:

Supreme Court improperly dismissed the misappropriation of trade secrets cause of action as asserted against the individual defendants. In granting the motion to dismiss against those defendants, the court limited its analysis of their liability to the issue of whether they completely dominated the corporation with respect to the transaction attacked, finding that there was no basis to pierce the corporate veil. However, even where the corporate veil is not pierced, a corporate officer who participates in and benefits from the commission of a tort may still be held individually liable … . The record presents sufficient evidence regarding the individual defendants’ participation, for their own personal gain, in the corporate defendant’s allegedly tortious acts, thus raising issues of material fact as to their personal liability. Thus, the claim for misappropriation of trade secrets should be reinstated … . Century First Credit Solutions, Inc. v Priority Capital, LLC, 2026 NY Slip Op 00224, First Dept 1-20-26

Practice Point: Here an action for misappropriation of trade secrets was properly brought against an corporate officer individually, despite the fact that the criteria for piercing the corporate veil were not met.

 

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THE ALLEGATIONS IN THE COMPLAINT SUPPORTED “PIERCING THE CORPORATE VEIL;” PLAINTIFF ALLEGED FUNDS OWED TO HER WERE DIVERTED TO RENDER THE CORPORATION JUDGMENT PROOF (FIRST DEPT).

The First Department, reversing (modifying) Supreme Court, determined the cause of action alleging alter-ego liability should not have been dismissed. The court noted that New York does not recognize a separate cause of action to pierce the corporate veil, but in the context of a motion to dismiss, the issue is whether the facts fit any cognizable legal theory. Piercing the corporate veil is such a theory:

“Generally. . . piercing the corporate veil requires a showing 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” … .

Initially, “while fraud certainly satisfies the wrongdoing requirement, other claims of inequity or malfeasance will also suffice” … . “Allegations that corporate funds were purposefully diverted to make [the corporation] judgment proof . . . are sufficient to satisfy the pleading requirement of wrongdoing which is necessary to pierce the corporate veil on an alter-ego theory” … . When “legitimate business activity” is involved, we have sometimes required a plaintiff to allege that the dominator “engaged in th[e] conduct for the purpose of harming plaintiff” … . However, this requirement does not apply when “the defendant against whom alter ego liability [i]s asserted . . . commit[s] fraud and malfeasance” … .

In any event, giving plaintiff the benefit of all favorable inferences as required on a CPLR 3211(a)(7) motion, she alleges that [defendant] caused the … funds owed to her to be diverted … in order to circumvent payment of the funds owed to her, which would render her judgment against the [the corporation] “nothing more than a pyrrhic victory” … . This allegation satisfies the “fraud or wrong” requirement of piercing the corporate veil … . Cohen v Cohen, 2026 NY Slip Op 00192, First Dept 1-15-26

Practice Point: Consult this decision for insight into what type of “fraud or wrong” must be alleged in the complaint to support piercing the corporate veil.

 

 

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TO PIERCE THE CORPORATE VEIL THE PLAINTIFF MUST DEMONSTRATE (1) THE OWNERS EXERCISED COMPLETE DOMINATION OF THE CORPORATION WITH RESPECT TO THE TRANSACTION AT ISSUE AND (2) THE DOMINATION WAS USED TO COMMIT A FRAUD OR WRONG AGAINST THE PLAINTIFF; HERE THERE WAS NO EVIDENCE THE TRANSACTION AT ISSUE WAS FRAUDULENT (CT APP).

The Court of Appeals, affirming the Appellate Division, over a three-judge concurrence, determined the complaint in this “pierce the corporate veil” action was properly dismissed because there was no evidence the recapitalization at issue was done to commit a fraud:

From the concurrence:

A court will disregard the corporate form and pierce the corporate veil when there is a showing by plaintiffs 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” … . Because the use of the corporate form to limit liability of owners is a legal and beneficial principle of corporations, those who seek to pierce the corporate veil bear a heavy burden … .

Here, [the] attempts to pierce the corporate veil fail to raise a triable issue on prong two. The … defendants met their initial burden on summary judgment to demonstrate that they did not abuse the privilege of doing business in the corporate form to perpetrate a wrong or injustice, and [plaintiff] failed to raise a triable issue of material fact in opposition. [Plaintiff] points to no evidence in the record that supports its claim that the 2006 recapitalization at issue was fraudulent. Cortlandt St. Recovery Corp. v Bonderman, 2025 NY Slip Op 07078, CtApp 12-18-25

Practice Point: This decision illustrates the two prongs of proof required to pierce the corporate veil: the owners must completely dominate the corporation with respect to the transaction at issue; and the transaction at issue must be fraudulent or wrongful with respect to the plaintiff.

 

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PLAINTIFF RADIATION ONCOLOGIST, THE SOLE SHAREHOLDER IN PLANTIFF PROFESSIONAL SERVICE CORPORATION, WHICH PAID PLAINTIFF ONCOLOGIST’S SALARY, SUCCESSFULLY SUED THE HOSPITAL WHICH EMPLOYED HIM FOR BREACH OF CONTRACT; THE COURT, IN A MATTER OF FIRST IMPRESSION, HELD THAT PLAINTIFF’S SALARY WAS NOT A CORPORATE EXPENSE AND THEREFORE WAS RECOVERABLE AS LOST PROFITS IN THE BREACH OF CONTRACT ACTION (THIRD DEPT).

The Third Department, in a full-fledged opinion by Justice Fisher, determined plaintiff’s salary, paid to hm as the sole shareholder in a professional service corporation, was not a corporate expense and therefore could be recoverable as damages for lost profits in this breach of contract action. Plaintiff, a radiation oncologist, successfully sued the hospital for breach of contract after the hospital terminated him. The instant dispute is about the available damages. In addition to ruling plaintiff could recover his lost salary from his professional service corporation as damages, the Third Department held defendant could present proof plaintiff mitigated his damages by finding employment, through another professional service corporation, with another hospital. The Third Department affirmed Supreme Court’s rulings:

Plaintiffs commenced this action asserting causes of action for, among others, breach of contract, wrongful termination, libel and slander. Following the completion of disclosure and motion practice, a judgment was entered in favor of plaintiffs on the four remaining causes of action for breach of contract. A jury trial on damages was scheduled, and the parties filed respective motions in limine disputing the method of calculating damages and whether evidence of ]plaintiffs’] duty to mitigate the damages suffered from defendant’s breach may be submitted to the jury. Such dispute essentially distills to whether the salary paid by a professional service corporation to its sole shareholder must be treated as an expense in calculating the lost profits, thus subtracting it from the corporation’s profits and correspondingly reducing its damages. Supreme Court, in a pair of well-reasoned decisions, determined that [plaintiff’s] salary as paid by [plaintiff professional service corporation] under the coverage agreement is not an expense and could be recoverable as damages for lost profits. Supreme Court further found that evidence of [plaintiffs’] efforts to mitigate the damages suffered from defendant’s breach may be submitted to the jury, and whether or not [plaintiff’s] postbreach earnings are income derived because of defendant’s breach is a question to be resolved by the jury in determining damages. Radiation Oncology Servs. of Cent. N.Y., P.C. v Our Lady of Lourdes Mem. Hosp., Inc., 2025 NY Slip Op 06112, Third Dept 11-6-25

Practice Point: Here, in a matter of first impression, the Third Department ruled that plaintiff oncologist, whose salary was paid by plaintiff professional service corporation in which plaintiff oncologist was the sole shareholder, could, in a breach of contract action, recover his lost salary as lost profits. In other words, in this situation, plaintiff’s salary was not considered to be a corporate expense which must be deducted from lost profits when calculating damages for breach of contract.

 

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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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WITH RESPECT TO A RESIDENTIAL COOPERATIVE, INDIVIDUAL MEMBERS OF THE BOARD OF DIRECTORS CAN BE SUED BY A SHAREHOLDER FOR BREACH OF A FIDUCIARY DUTY, BUT THE BOARD OF DIRECTORS IS NOT AMENABLE TO SUIT APART FROM A SUIT AGAINST THE CORPORATION (FIRST DEPT).

The First Department, reversing Supreme Court, in a full-fledged opinion by Justice Scarpulla, determined the board of directors of a residential cooperative is not amenable to a lawsuit separate and apart from a suit against the cooperative. Here plaintiff shareholder sued the board of directors for breach of fiduciary duty after the dismissal of a similar suit against the directors individually:

New York trial courts have explicitly held that a board of directors is not an entity that may be sued separately from the corporation … . * * *

Applying the Business Corporation Law … , the residential cooperative board of defendant … is not an entity with the capacity to sue and be sued separate and apart from the corporation on whose behalf it acts. * * *

While a shareholder cannot assert allegations of breach of fiduciary duty against a board of directors, a shareholder may assert the claim against the individual directors … . Here, plaintiff originally brought breach of fiduciary duty causes of action against fourteen of the individual board members and the corporation … . Those causes of action were largely dismissed, and plaintiff may not simply replace those parties with “the board” to revive those now dismissed claims. Tahari v 860 Fifth Ave. Corp., 2025 NY Slip Op 05584, First Dept 10-8-25

Practice Point: This opinion clarifies the law. The board of directors of a corporation is not amenable to suit for breach of a fiduciary duty separate and apart from a suit against the corporation. However, individual members of the board of directors may be sued for breach of a fiduciary duty.

 

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SUPREME COURT PROPERLY APPLIED THE “PIERCE THE CORPORATE VEIL CRITERIA” AND ASSESSED DAMAGES FOR BREACH OF CONTRACT AGAINST THE DEFENDANT PARENT CORPORATION; THERE WAS A COMPREHENSIVE TWO-JUSTICE DISSENT (FIRST DEPT).

The First Department, in a full-fledged opinion by Justice Kapnick, over a comprehensive two-justice dissent, determined Supreme Court had properly applied the “pierce the corporate veil” criteria to assess damages for breach of contract against the defendant parent company:

“Because a decision to pierce the corporate veil in any given instance will necessarily depend on the attendant facts and equities, there are no definitive rules governing the varying circumstances when this power may be exercised” … . However, under the totality of the circumstances presented here, we conclude that plaintiffs met their heavy burden of showing that “[JAE] exercised complete domination of [J.A. Madison] in respect to the transaction attacked[,] [specifically the Consulting Agreement]” … . Thus, we will address the second prong of the test – namely, whether plaintiffs met their burden to show “that such domination was used to commit a fraud or wrong against the plaintiff[s] which resulted in plaintiff[s’] injury” … . * * *

“Wrongdoing in this context does not necessarily require allegations of actual fraud. While fraud certainly satisfies the wrongdoing requirement, other claims of inequity or malfeasance will also suffice … . Allegations that corporate funds were purposefully diverted to make it judgment proof or that a corporation was dissolved without making appropriate reserves for contingent liabilities are sufficient to satisfy the pleading requirement of wrongdoing which is necessary to pierce the corporate veil on an alter-ego theory … .

… The evidence presented at trial showed that JAE used its domination of J.A. Madison to commit a wrong against plaintiffs by stopping payments to plaintiffs under the Consulting Agreement, causing J.A. Madison to become judgment proof, and then by dissolving J.A. Madison after this action had already been commenced, making plaintiffs’ judgment against J.A. Madison nothing more than a pyrrhic victory. The fact that J.A. Madison may have initially been created for a legitimate purpose of operating a store selling Jonathan Adler merchandise and products does not change the analysis. Rich v J.A. Madison, LLC, 2025 NY Slip Op 04818, First Dept 8-28-25

Practice Point: Consult this opinion and the dissent for a comprehensive discussion of the criteria for piercing the corporate veil in the context of a breach of contract.

 

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