Commercial Division Blog

Posted: February 6, 2014 / Categories Commercial, Damages, Motion to Dismiss; Motion for Judgment on the Pleadings

Motion to Dismiss May be Used to Limit Damages Theories Even if Claims Survive

On February 5, 2014, the Second Department issued a decision in Hecht v. Andover Associates Management Corp., 2014 NY Slip Op. 00632, discussing the dismissal of damages claims on a motion to dismiss.

Hecht is one of the myriad cases relating to the Bernard Madoff Ponzi scheme. One of the defendants in Hecht, an independent auditor, moved to dismiss, including moving to dismiss the claims to the extent they sought certain damages. The Second Department explained that

damages may properly be limited on a motion to dismiss. When a party seeks damages for lost profits, the profits may not be imaginary. It is undisputed that the profits reported by Madoff were completely imaginary. The fictitious profits never existed and, thus, [the plaintiff] did not suffer any loss with respect to the fictitious sum.

(Internal quotations and citations omitted).

This decision reminds us of the option of using a motion to dismiss to limit the potential damages for which a defendant might be liable.