Appellate Motion in Osg, Llc v. Spencer Lee Schneider| Trellis.Law

On July 05, 2023 a Exhibit,Appendix was filed involving a dispute between Osg, Llc, and Spencer Lee Schneider, for Torts - Other (Defamation) in the District Court of New York County.

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FILED: NEW YORK COUNTY CLERK 10/18/2023 02:29 PM INDEX NO. 155983/2023
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EXHIBIT C
FILED: NEW YORK COUNTY CLERK 10/18/2023 02:29 PM INDEX NO. 155983/2023
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FILED: APPELLATE DIVISION - 1ST DEPT 04/26/2023 01:42 PM 2023-01782
NYSCEF DOC. NO. 5 To be Argued by: NYSCEF: 04/26/2023
RECEIVED
MORDY YANKOVICH
(Time Requested: 15 Minutes)

Supreme Court of the State of New York
Appellate Division – First Department
Case No.:
2023-01782
STEPHANIE ROSENBERG and MARJORIE HOCHMAN,
individually and on behalf of others similarly situated,

Plaintiffs-Appellants,

-against-

OSG, LLC D/B/A ODYSSEY STUDY GROUP,
ESTATE OF SHARON GANS HORN, MINERVA TAYLOR
AND LORRAINE IMLAY, both individually and as
fiduciaries OF THE ESTATE OF SHARON GANS HORN,
MICHAEL HORN AS A FIDUCIARY OF THE ESTATE OF
SHARON GANS HORN, KEN SALAZ, GREG KOCH,

Defendants-Respondents.

BRIEF FOR PLAINTIFFS-APPELLANTS

LIEB AT LAW, P.C.
Attorney for Plaintiffs-Appellants
308 West Main Street, Suite 100
Smithtown, New York 11787
(631) 878-4455
mordy@liebatlaw.com

New York County Clerk’s Index No.: 158616/2021

Printed on Recycled Paper 1244
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Table of Contents
Table of Authorities ....................................................................................................... ii
Questions Presented ...................................................................................................... 1
Preliminary Statement .................................................................................................. 3
Statement of Facts ......................................................................................................... 5
Standard of Review ...................................................................................................... 15
Argument ..................................................................................................................... 20
I. THE LABOR LAW CLAIMS WERE SUFFICIENTLY PLED ............................... 20
II. THE COMMON LAW CLAIMS WERE SUFFICIENTLY PLED ......................... 32
A. The Fraud in the Inducement Claim Was Properly Pled.............................. 32
B. The Unjust Enrichment Claim Was Properly Pled ....................................... 39
C. The Quantum Meruit Claim Was Properly Pled ........................................... 41
Conclusion .................................................................................................................... 43

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Table of Authorities
Cases
ACA Financial Guarty Corp. v. Goldman, Sachs & Co., 25 N.Y.3d 1043 (2015) ...... 37
Ackerman v. Vertical Club Corp., 94 A.D.2d 665 (1st Dep’t 1983) ............................. 33
Armstrong v. Simon & Schuster, Inc., 85 N.Y.2d 373 (1995) .................................... 17
Barfield v. New York City Health & Hosps. Corp., 537 F.3d 132 (2d Cir. 2008) ...... 23
Bhanti v. Brookhaven Mem'l Hosp. Med. Ctr., 260 A.D.2d 334 (2nd Dep’t 1999) ..... 31
Bonito v. Avalon Partners, Inc., 106 A.D.3d 625 (1st Dep’t 2013) .............................. 19
Braddock v. Braddock, 60 A.D.3d 84 (1st Dep’t 2009) ................................................ 32
Brock v. Superior Care, Inc., 840 F.2d 1054 (2d Cir. 1998) ....................................... 27
Caribbean Direct, Inc. v. Dubset, LLC, 100 A.D.3d 510 (1st Dep’t 2012) .................. 42
Central Hudson Gas and Electric v. PSC, 108 A.D. 2d 266 (3rd Dep’t 1985) ............ 22
Corsello v. Verizon New York, Inc., 18 N.Y.3d 777 (2012) ......................................... 40
Cortlandt St. Recovery Corp. v. Bonderman, 31 N.Y.3d 30 (2018)............................ 17
Derosa v. Estate of Iannazzo, 186 A.D.3d 1318 (2nd Dep’t 2020) ............................... 40
Draskovic v. Oneota Assocs., LLC, 2019 WL 783033 (E.D.N.Y. Feb. 21, 2019) .. 23, 26
EBC I, Inc. v. Goldman, Sachs & Co., 5 N.Y.3d 11 (2005) ......................................... 16
Elliman v. Elliman, 259 A.D.2d 341 (1st Dep’t 1999) ................................................. 19
Eurycleia Partners, LP v. Seward & Kissel, LLP, 12 N.Y.3d 553 (2009) .................. 32
Feldman v. Byrne, 210 A.D.3d 646 (1st Dep’t 2022) ................................................... 37
Fleet Factors Corp. v. Werblin, 114 A.D.2d 996 (2nd Dep't 1985) ........................ 34, 38
Foley v. D'Agostino, 21 A.D.2d 60 (1st Dept 1964) ................................................ 17, 33
Glatt v. Fox Searchlight Pictures, Inc., 811 F.3d 528 (2d Cir. 2016)............. 23, 24, 27
Godfrey v. Spano, 13 N.Y.3d 358 (2009) ..................................................................... 16
Goshen v. Mutual Life Insurance Co. of New York, 98 N.Y.2d 314 (2002) ............... 16
Guggenheimer v. Bernstein Litowitz Berger & Grossmann LLP, 11 Misc. 3d 926,
(Sup. Ct., N.Y Co., 2006) ......................................................................................... 41
Imprimis Investors LLC v. Insight Venture Management, Inc., 300 A.D.2d 109 (1st
Dep’t 2002) ............................................................................................................... 19
Johnson v. Proskauer Rose LLP, 129 A.D.3d 59 (1st Dep’t 2015) .............................. 16
Kirby McInerney & Squire, LLP v. Hall Charne Burce & Olson, S.C., 15 A.D.3d 233
(1st Dep’t 2005) ......................................................................................................... 40
Kolchins v. Evolution Markets, Inc., 128 A.D.3d 47 (1st Dep’t 2015), aff'd, 31 N.Y.3d
100 (2018) ................................................................................................................. 13
Leon v. Martinez, 84 N.Y.2d 83 (1994) ....................................................................... 16
Leuvan-Monroe v. Karla Otto Inc., 2017 WL 65661 (N.Y. Sup. Ct., N.Y. Co., Jan. 6,
2017) ......................................................................................................................... 22
Limmer v. Medallion Group, Inc., 75 A.D.2d 299 (1st Dept 1980) ............................. 33
Mandarin Trading Ltd. v. Wildenstein, 16 N.Y.3d 173 (2011) .................................. 39
Marcucilli v. Alicon Corp., 41 A.D.2d 932 (2nd Dep't 1973) ........................................ 34
Markwica v. Davis, 64 N.Y.2d 38 (1984) .................................................................... 40
Marshall v. Baptist Hosp., Inc., 668 F.2d 234 (6th Cir. 1981) ................................... 30

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Marshall v. UBS Fin. Servs., Inc., 2015 WL 4095232 (S.D.N.Y. July 7, 2015) ......... 26
Matter of Marx v. Bragaline, 6 N.Y.2d 322 (1959) ..................................................... 23
Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Wise Metals Grp., LLC, 19 A.D.3d
273 (1st Dep’t 2005) .................................................................................................. 36
Odigie v. Gateway Secuity Guard Servs., Inc., 213 A.D.3d 495 (1st Dep’t 2023) ...... 18
P.T. Bank Cent. Asia, N.Y. Branch v. ABN AMRO Bank N.V., 301 A.D.2d 373 (1st
Dep’t 2003) ............................................................................................................... 38
Paramount Film Distrib. Corp. v. State of New York, 30 N.Y.2d 415 (1972) ........... 39
Pludeman v. N. Leasing Sys., Inc., 10 N.Y.3d 486 (2008) .......................................... 33
Ribbler v. Chicksation, Inc., Index No. 159716/19 (N.Y. Sup. Ct., N.Y. Co., July 31,
2018) ......................................................................................................................... 31
Rodriguez v 5W Public Relations, LLC, 2016 WL 4013990 at *5 (N.Y. Sup. Ct., N.Y.
Co., 2016) ................................................................................................................. 22
Scholastic Inc. v. Pace Plumbing Corp., 129 A.D.3d 75 (1st Dep’t 2015) ................... 17
Talansky v. Schulman, 2 A.D.3d 355 (1st Dep't 2003) ................................................ 37
Travelsavers Enterprises, Inc. v. Analog Analytics, Inc., 149 A.D.3d 1003 (2nd Dep’t
2017) ......................................................................................................................... 41
Velarde v. GW GJ, Inc., 914 F.3d 779 (2d Cir. 2019) ..................................... 22, 24, 26
Vermont Mut. Ins. Co. v. McCabe & Mack, LLP, 105 A.D.3d 837 (2nd Dep’t 2013) .. 36
Western Electric Co. v. Brenner, 41 N.Y.2d 291 (1977) ............................................. 13
Zavala v. 411 Holbrook Inc., 2017 WL 936338 (N.Y. Sup. Ct., Suffolk Co., Mar.1,
2017) ......................................................................................................................... 22
Statutes
CPLR § 3013 ................................................................................................................ 33
CPLR Rule 3016(b) .............................................................................................. passim
CPLR § 3026 ................................................................................................................ 17
CPLR Rule 3217(a)(7) ...........................................................................................passim
New York Labor Law §190 et seq ....................................................................... passim
New York Labor Law § 650 et seq. ..................................................................... passim
Treatises
3 Weinstein-Korn-Miller, New York Civil Practice, ¶ 3013.03 .................................. 17
Siegel, Practice Commentaries, § 3016:3 .................................................................... 33
Regulations
12 NYCRR §146 ........................................................................................................... 11
12 NYCRR § 142–2.2 ................................................................................................... 19

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Questions Presented

1. Does the New York Labor Law (“NYLL”) afford a remedy for

victims of a cult who are coerced and intimidated to provide free labor

for the cult’s benefit?

Yes. Under the NYLL’s broad definitions of “employer” and

“employee” and the strong public policy against worker exploitation, the

courts have held, in the analogous situation of unpaid students, interns,

and family members, that such unpaid workers may recover if the busi-

ness is the primary beneficiary of the free labor. Plaintiffs alleged spe-

cific facts establishing that defendants were the sole beneficiaries of

forced labor, and the lower court erred in not applying the primary ben-

eficiary test, which necessarily implicates issues of fact not resolvable

on a pre-answer motion.

2. Did the lower court err in dismissing plaintiffs’ common law

causes of action for fraudulent inducement, unjust enrichment, and

quantum meruit, all of which alleged specific facts that satisfied all of

the elements of the causes of action?

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Yes. The lower court did not even mention –– let alone apply ––

the requirements that all pleadings must be liberally interpreted to ac-

cord plaintiff the benefit of every possible favorable inference, that

courts should determine whether the alleged facts fit within any cog-

nizable legal theory, that pleadings should be sustained so long as they

apprise the court and parties of the subject matter of the controversy,

and that defects in a pleading must be ignored if a substantial right of a

party is not prejudiced. Moreover, to the extent it found certain allega-

tions conclusory or vague, the lower court erred by rejecting plaintiffs’

request for leave to amend its complaint.

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Preliminary Statement

Plaintiffs-appellants Stephanie Rosenberg and Marjorie Hochman

submit this brief in support of their appeal of an order of the Supreme

Court, New York County (Sattler, J.), dated October 3, 2022, which

granted the pre-answer motion of defendants-respondents OSG, LLC

d/b/a Odyssey Study Group, the Estate of Sharon Gans Horn, Minerva

Taylor and Lorraine Imlay, both individually and as fiduciaries of the

Estate of Sharon Gans Horn, Michael Horn as a fiduciary of the Estate

of Sharon Gans Horn, Ken Salaz, and Greg Koch to dismiss plaintiffs’

verified complaint with prejudice, and denied plaintiffs’ request to

amend its complaint.

This suit alleges that for decades, defendants operated a for-profit

“study group” in Manhattan which has all the earmarks of a cult ––

through psychological indoctrination they exploit and abuse victims for

the sole purposes of lining their own pockets. Defendants’ group is unu-

sual in that it (a) targets highly educated young professionals at vulner-

able stages in their lives, and (b) operates in absolute secrecy. Plaintiffs

joined the group, paying $400 per month in reliance on the defendants’

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representations that the group was an “esoteric school” that would pro-

vide them with means to improve their lives spiritually, emotionally,

and financially. These were all deliberate lies upon which plaintiffs re-

lied. As a result, not only did their lives not improve, their lives were

turned upside down, and they suffered psychologically and financially.

After gaining plaintiffs’ trust, defendants coerced plaintiffs,

through threats of serious harm, to provide them with hundreds of

hours of free labor. Defendants reaped the sole benefits from this labor

which consisted of, among other things, meals, cleaning services, chauf-

fer services, parties thrown in their honor, and the recruitment of new

dues-paying members so defendants’ scheme could be perpetuated.

Plaintiffs’ verified complaint detailed defendants’ methods of coercion,

specified the deliberate misrepresentations, described the work per-

formed, and alleged the damages suffered. The legal elements of the

causes of action were pled with factual specificity. Plaintiffs should not

be denied their day in court at this early stage.

For the reasons stated below, the decision below should be re-

versed.

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Statement of Facts

In 2005, plaintiffs were recruited by defendants to become

members of defendant Odyssey Study Group (“OSG”). (R. 71 ¶ 45.)1

OSG represented itself to plaintiffs as an “esoteric school,” which taught

students how to improve their lives economically, physically, and spirit-

ually. (Id., R. 111 ¶ 4.) Plaintiffs agreed to attend the two weekly even-

ing classes taught by OSG leaders, pay OSG $400 per month, and keep

the existence of OSG and their participation in it a secret. (R. 71 ¶¶ 46-

47.) At no time when plaintiffs were recruited –– or even during the ini-

tial year after they started to attend classes–– were they told that they,

and other members, were going to be coerced and manipulated by de-

fendants into performing free labor for defendants, that consumed hun-

dreds of hours and spanned decades. (R. 71 ¶48.)

Defendants also took pains to keep plaintiffs in the dark about

their past: that instead of being a legitimate esoteric school formed to

1 All references to “R. __” refer to the Record on Appeal.

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help students, they were founded in San Francisco in the 1970’s and op-

erated as a cult that engaged in systematic physical and mental abuse,

child abuse, sexual abuse, private adoptions, arranged marriages, and

financial crimes. (R. 65-66. )2 Indeed, OSG was far from a legitimate

school or spiritual group. OSG LLC is a New York state for-profit lim-

ited liability company, and has no educational goals, legitimate teach-

ers, or graduates. (R. 68 ¶ 18; R. 112 ¶ 8.)

OSG and the other defendants –– each of whom were leaders of

the group and owners of OSG –– used the bi-weekly classes, over the

course of several years, to gain trust and then establish control over the

members’ lives (including plaintiffs). (R. 112 ¶ 11.) As noted, defendants

used methods traditionally used by cults to indoctrinate members and

make them dependent upon defendants: they isolated plaintiffs and oth-

ers from friends and family, publicly humiliated them, gaslighted them,

established and enforced strict rules, and demanded absolute obedience

2The lower court noted with apparent disapproval that these allegations were
taken from a media report but plaintiffs and other witnesses would testify at
the trial that defendants continue to engage in these activities.

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to the leaders, especially Gans Horn who was the founder and main

leader until her death in January 2021. (R. 71 ¶ 46; R. 112 ¶ 11.)

Once plaintiffs were indoctrinated by defendants and under

their control, defendants claimed that the only way plaintiffs could im-

prove their lives would be to perform free labor for the sole benefit of de-

fendants. (R. 71 ¶ 49.) Known as the “Third Line of Work,” plaintiffs

were promised spiritual fulfillment if they worked for free, but only for

defendants’ benefit. (R. 112 ¶ 14.) Defendants deliberately and fraudu-

lently induced plaintiffs to believe that under the “teachings of the

school,” it was an honor, privilege, and a condition for self-improvement

for students to exclusively serve the leaders of OSG. (Id.)

Indeed, defendants benefitted greatly from plaintiffs: over the

course of over a decade, defendants received over $100,000 from plain-

tiffs alone (just part of the millions generated from this scheme). (R. 71

¶ 46; R. 73 ¶¶ 57-58.) In addition, defendants received extensive and

free labor from plaintiffs, including, but not limited to:

1. Cooking, cleaning, and setting up for classes;

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2. Shopping for food for classes, which plaintiffs paid for

without reimbursement;

3. Cleaning up after class;

4. Working in excess of eighty (80) hours a week to prepare

for the annual Christmas party which honored the defendants;

5. Acting as personal assistants, cooks, housekeepers, driv-

ers, and personal shoppers for Gans Horn and defendants;

6. Working scores of hours per week, often in excess of

twenty (20) hours; recruiting new members to join the group.

Recruiting included, but was not limited to, locating, and

speaking to a minimum number of random strangers who they

would befriend and eventually target to join OSG. (R. 71 ¶ 50.)

The defendants established total control over plaintiffs, so

much so that the plaintiffs believed that they could not leave the group

without incurring significant negative consequences (such as loss of

community, loss of their livelihoods, and loss of emotional support) and

thus, were compelled to continue paying the monthly cash payments

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and perform free labor. (R. 113-114 ¶¶ 19-20.) They were essentially

trapped. (R. 73 ¶¶ 57-58.)

Eventually, however, plaintiffs were able to escape from OSG:

after approximately 14 years of paying monthly dues of $400 and

providing free labor to defendants through their ruse, Rosenberg es-

caped from OSG on April 5, 2019; after approximately 11 years of pay-

ing monthly dues of $400 and providing free labor to defendants

through their ruse, Hochman escaped from OSG in or around May 2016.

(Id.) As a result of their ordeal, plaintiffs suffered emotional distress, fi-

nancial losses, and other injuries, including long-lasting trauma.

This Lawsuit

On behalf of themselves and others similarly situated, plaintiffs

filed their verified complaint on September 20, 2021. (R. 63-83.) It spe-

cifically pleads that defendants OSG and each individual defendant (ex-

cept for Michael Horn who is sued only in his capacity as a fiduciary)

were employers under the NYLL and directed plaintiffs to perform work

under defendants’ instruction and control. (R. 69-70 ¶¶ 23, 31, 36, 39,

43.) The complaint also specifically alleges that the plaintiffs were em-

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ployees under the NYLL and that defendants were the primary benefi-

ciaries of the parties’ relationship. (R. 71-73 ¶¶ 50-53, 56; R. 67 ¶ 8.) In-

deed, the complaint showed that all of the services and labor provided

(e.g., cooking and cleaning for defendants and recruiting for defendants’

sole profit) were for the sole benefit of the defendants and that defend-

ants’ claims that plaintiffs would benefit were knowingly false and

amounted to gaslighting. (Id.; R. 112 ¶¶ 11-14.)

The complaint further alleges that defendants led plaintiffs to

believe that they would obtain psychological, physical, and emotional

benefits from performing the above-detailed labor as instructed by de-

fendants. Defendants even promised plaintiffs that they might one day

become paid-teachers. (R. 113 ¶17.) Instead, plaintiffs suffered trauma

and psychological injuries as a result of the reality that the defendants

essentially enslaved them for years by their threats, public humiliation,

and abuse. (Id., R. 67 ¶ 9.) Defendants never paid plaintiffs for their

work. (R. 67 ¶ 8.)

The complaint contains the following causes of action:

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1. Under New York Labor Law (“NYLL”) §190 et seq. and §§

650 et seq. for failure to pay wages. (R. 75-76 ¶¶ 73-84.)

2. Under NYLL § 195(1) for failure to provide notice of pay.

(R. 76 ¶¶ 85-88.)

3. Under 12 NYCRR §146 for failure to maintain records of

hours worked. (R. 76-77 ¶¶ 89-91.)

4. Under NYLL §195-1(d), for failure to provide wage state-

ments. (R. 77 ¶¶ 92-95.)

5. Fraud in the inducement in that defendants made material

misrepresentations that attending classes sponsored by OSG would

lead to self-improvement but in fact they resulted in their indoctri-

nation to provide free labor and pay monthly fees of $400. (R. 77-78

¶¶ 96-102.)

6. Unjust enrichment in that plaintiffs performed valuable

services at the behest of and for the benefit of defendants. (R. 78 ¶¶

103-108.)

7. Quantum meruit in that plaintiffs provided substantial

work in good faith on behalf of and at the behest of defendants with

the expectation that defendants would compensate plaintiffs for

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said work and that defendants accepted and retained benefits of

such work but failed to pay for same. (R. 78-79 ¶¶ 109-112.)

The Decision Below

On or about January 31, 2022, defendants moved to dismiss pur-

suant to CPLR Rule 3211(a)(7), claiming that the complaint failed to

state any causes of action and that, pursuant to CPLR Rule 3211(a)(3),

plaintiffs lacked standing to pursue the first cause of action.3 (R. 17-19.)

Plaintiffs opposed the motion (R. 96-130) and requested permission for

leave to amend in the event the complaint was found deficient. (R. 97 n.

2.) Plaintiffs also submitted the affidavit from plaintiff Rosenberg fur-

ther detailing the allegations. (R. 111-114.)

In its decision and order dated October 4, 2022, the lower court

(Sattler, J.) granted defendants’ motion and dismissed the complaint, in

its entirety, with prejudice, and without leave to amend. (R. 4-14.)

3Defendants also moved to strike the pleadings as prejudicial and scandalous,
but the lower court deemed this branch of the motion as moot. (R. 14.)

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The lower court dismissed all of plaintiffs’ NYLL claims (first, sec-

ond, third and fourth causes of action) finding that there was no em-

ployment relationship between the parties. (R. 9.)

Although all the parties argued that the primary beneficiary test

should be applied to determine whether an employment relationship ex-

ists (R. 38-39, R. 96-97), the lower court ignored the parties (and the

statute and the case law) and failed to even mention the standard. In-

stead, citing decisions having nothing to do with the NYLL,4 the lower

court ruled that there must be an “enforceable employment contract” in

order for a plaintiff to recover under the NYLL. (R. 9.) The court found

that plaintiffs did not “assert the existence of an employment contract

with defendants or plead facts that imply such a contract existed” be-

cause plaintiffs did not plead an offer, consideration, or mutual assent.

(Id.) The court held,

4 Western Electric Co. v. Brenner, 41 N.Y.2d 291 (1977), involved an em-
ployer suing an employee for violation of the duty of loyalty. Kolchins v. Evo-
lution Markets, Inc., 128 A.D.3d 47 (1st Dep’t 2015), aff'd, 31 N.Y.3d 100
(2018), involved an employee suing his former employer, alleging, inter alia,
breach of contract in relation to his termination of employment.

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“Plaintiffs’ bare contention that Defendants directed them to
perform work over which Defendants maintained substantial
control is the only basis for their allegation that Defendants
were employers as defined by the Labor Law (Complaint ¶¶
19-23, 30-31, 35-39, 41-43). These allegations are patently
insufficient to find that any employment agreement was bar-
gained for between the parties.” (Id.)

The lower court also dismissed plaintiffs’ claim for fraudulent in-

ducement. Although the lower court noted that plaintiffs alleged that

OSG misrepresented to them that their program would improve their

lives and that defendants falsely claimed that it was an honor to serve

the leaders of OSG, the lower court concluded that (but did not explain

how) these claims lacked “specificity.” The court also found that plain-

tiffs failed to plead they justifiably relied upon defendants’ alleged mis-

representations. (R. 10.) The lower court stated that the complaint

“merely alleges that ‘[a]s a result of Defendants’ misrepresentation,

Plaintiffs were led to believe that if they were asked to leave (or quit)

they would suffer psychologically and emotionally’ . . . and states, in a

conclusory manner, that they justifiably relied upon Defendants’ repre-

sentations. . . .” (R. 11.) Moreover, the lower court found that plaintiffs

were required to but failed to plead the existence of a relationship of

trust or confidence between themselves and defendants. (Id.)

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The lower court also dismissed plaintiffs’ unjust enrichment cause

of action, holding that it was duplicative of the fraudulent inducement

and quantum meruit claims. (R. 11-12.) Finally, the court dismissed

plaintiffs’ cause of action for quantum meruit because “[although] plain-

tiffs do plead sufficient facts alleging that they performed services for

defendants as members of OSG, they fail to allege any facts that state

or imply that they expected compensation from defendants at any time

during their membership in OSG.” (R. 13-14.) The lower court dismissed

the lawsuit with prejudice, and it declined, without explanation or men-

tion, plaintiffs’ alternative request for permission to amend any claims

deemed inadequate.

This appeal followed. (R. 2.)

Standard of Review

On a motion to dismiss under CPLR Rule 3211(a)(7) for failure to

state a cause of action, the court must (1) accept the facts alleged in the

pleading as true, (2) give the complaint a liberal construction to accord

the pleading party the benefit of every possible favorable inference, and

(3) determine only whether the facts as alleged fit within any cognizable

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legal theory.5 Goshen v. Mutual Life Insurance Co. of New York, 98

N.Y.2d 314, 326 (2002); Leon v. Martinez, 84 N.Y.2d 83, 87–88 (1994);

Cohen v. Finz & Finz, P.C., 131 A.D.3d 666, 667 (1st Dep’t 2015); John-

son v. Proskauer Rose LLP, 129 A.D.3d 59, 71 (1st Dep’t 2015).

“Whether a plaintiff can ultimately establish its allegations is not

part of the calculus in determining a motion to dismiss.” EBC I, Inc. v.

Goldman, Sachs & Co., 5 N.Y.3d 11, 20 (2005). “Furthermore, ‘[u]nlike

on a motion for summary judgment where the court searches the record

and assesses the sufficiency of the parties' evidence, on a motion to dis-

miss the court merely examines the adequacy of the pleadings.’”

5The lower court did not quote, cite, or even mention –– let alone apply –– the
above second and third requirements. Instead, the lower court zeroed in on
cases holding that pleadings are defective when they contain conclusory alle-
gations –– i.e., “claims consisting of bare legal conclusions with no factual spec-
ificity.” Godfrey v. Spano, 13 N.Y.3d 358, 373 (2009). Godfrey held that plain-
tiff’s claim –– that an executive order regarding out of state same sex mar-
riages would “illegally disburse County funds” –– was conclusory because it did
not “specify a circumstance where taxpayer funds were expended as a result of
the Executive Order. . . .” Id. The complaint herein is far more detailed than
the Godfrey complaint. As explained below, plaintiffs’ verified complaint de-
tails specific facts supporting all of the causes of action as to defendants’
scheme to trick, coerce, and manipulate plaintiffs into providing free labor (e.g.,
the beneficiaries of the labor, the false statements, the work performed, the
reasons they performed the work, and the resulting harm).

16
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Cortlandt St. Recovery Corp. v. Bonderman, 31 N.Y.3d 30, 38 (2018)

(quotation omitted); see also Armstrong v. Simon & Schuster, Inc., 85

N.Y.2d 373, 379 (1995) (observing in a defamation action, “we recognize

as well a plaintiff's right to seek redress, and not have the courthouse

doors closed at the very inception of an action, where the pleading

meets a minimal standard necessary to resist dismissal of a com-

plaint.”)

“‘[P]leadings should not be dismissed . . . unless the allegations

therein are not sufficiently particular to apprise the court and parties of

the subject matter of the controversy.’” Foley v. D'Agostino, 21 A.D.2d

60, 63 (1st Dep’t 1964) (quoting 3 Weinstein-Korn-Miller, New York

Civil Practice, ¶ 3013.03.) Moreover, “’[d]efects shall be ignored if a sub-

stantial right of a party is not prejudiced.’” Foley, 21 A.D.2d at 65 (quot-

ing CPLR § 3026).6 Additionally, “the burden is expressly placed upon

one who attacks a pleading for deficiencies in its allegations to show

6“A party suffers prejudice where he or she ‘has been hindered in the prepa-
ration of his [or her] case or has been prevented from taking some measure in
support of his [or her] position.'” Scholastic Inc. v. Pace Plumbing Corp., 129
A.D.3d 75, 80 (1st Dep’t 2015) (finding prejudice but granting leave to amend).

17
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that he is prejudiced,” in order to discourage “time-consuming pleading

attacks which were unlikely to result in a final disposition of the action

on the merits.” Id. Finally, the courts “must literally apply the mandate

as directed and thus make the test of prejudice one of primary im-

portance.” Id. (emphasis supplied); Edwards v. Codd, 59 A.D.2d 148, 149

(1st Dep’t 1977) (“However imperfectly, informally or even illogically the

facts may be stated, a complaint, attacked for insufficiency, is deemed

to allege whatever can be implied from its statements by fair and rea-

sonable intendment”) (quotation marks omitted).7

When interpreting the meanings of “employees” and “employers”

under NYLL §§ 190 et seq. and §§ 650 et seq., this Court has reversed

dismissals for failure to state a cause of action at the “pre-answer junc-

ture” for the reasons stated above. Odigie v. Gateway Secuity Guard

Servs., Inc., 213 A.D.3d 495, 496 (1st Dep’t 2023) (undisputed allega-

tions are sufficient to establish that the individual defendants were

7Defendants herein never claimed that they were unaware of the subject mat-
ter of the complaint nor cited how any substantial right of theirs was allegedly
prejudiced; the lower court never even considered these two Foley criteria.

18
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“employers” under the Labor Law); Cohen, 131 A.D.3d at 667 (“at this

stage of litigation, it cannot be said that the plaintiff has failed to state

a cognizable cause of action against the individual defendants for al-

leged violations of Labor Law §§ 191 and 195”); Bonito v. Avalon Part-

ners, Inc., 106 A.D.3d 625, 626 (1st Dep’t 2013) (reinstated claims under

Labor Law §§ 650 et seq. and implementing regulations, including 12

NYCRR § 142–2.2; “[a]t this pre-answer juncture, and upon considera-

tion of the economic realities of the case . . . plaintiffs have stated a

cause of action against [defendant] as an ‘employer’ within the meaning

of Labor Law §§ 190(3) and 651(6)”).

Finally, on a motion challenging the sufficiency of the pleadings,

where the court finds allegations to be conclusory, leave should be

granted to “add factual allegations to substantiate” and cure those alle-

gations. Imprimis Investors LLC v. Insight Venture Management, Inc.,

300 A.D.2d 109, 110 (1st Dep’t 2002). Indeed, leave to replead may be

granted even if permission to re-plead is not requested by the party. Id.

(citing Elliman v. Elliman, 259 A.D.2d 341, 341 (1st Dep’t 1999) (leave

granted as a matter of judicial discretion).

19
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Argument

I.
THE LABOR LAW CLAIMS WERE SUFFICIENTLY PLED

The lower court held that plaintiffs failed to plead that they were

“employees” under the NYLL, finding that unpaid workers cannot re-

cover wages unless there is proof of an “employment contract” between

plaintiffs and defendants. The lower court erred. The statute’s remedial

purposes, liberal construction,8 and purposely broad definition of an

“employee” do not condition recovery upon a “employment contract” and

the lower court’s decision, if left undisturbed, would be the first case to

so hold.

Courts have regularly held that the NYLL’s wage provisions constitute re-
8

medial legislation intended to protect individuals from oppressive employ-
ment and therefore must be liberally construed “so as to permit as many indi-
viduals as possible to take advantage of its benefits.” Archie v. Grand Cent.
Partnership, Inc., 997 F. Supp. 504, 535 (S.D.N.Y. 1998); Settlement Home
Care, Inc. v. Indus. Bd. of Appeals of Dep't of Lab., 151 A.D.2d 580, 581 (2nd
Dep’t 1989); see also P & L Grp., Inc. v. Garfinkel, 150 A.D.2d 663, 664 (2nd
Dep’t 1989) (statute “reflect[s] a strong legislative policy aimed at protecting
an employee's right to wages earned.”)

20
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Rather, every federal and state court ruling on analogous fact pat-

terns involving unpaid interns, vocational students, and family mem-

bers seeking wages under the NYLL9 have applied the primary benefit

test or economic reality test to determine the existence of an employ-

ment relationship; the existence of an employment contract is of no mo-

ment under the statute. As shown below, plaintiffs pled the existence of

an employment relationship under these tests. And, because the appli-

cation of the test involves factual determination, dismissal, with preju-

dice and without leave to amend, at this initial stage was entirely inap-

propriate.

As noted, plaintiff’s first cause of action alleges violations under

NYLL Article 6 (“Payment of Wages”) and NYLL Article 19 (“Minimum

Wage Act”) and supporting regulations. NYLL §190(2) and (3), both

within Article 6, define an “employee” as “any person employed for hire

by an employer in any employment” and define an “employer” as any

9 Although cult victims –– such as plaintiffs –– present far more compel-
ling cases for recovery than interns or vocational students of legitimate
businesses, the analogy is apt precisely because neither relationship in-
volves employment contracts.

21
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entity “employing any individual in any occupation, industry, trade,

business or service.” Similarly, NYLL § 651 of the Minimum Wage Act

defines an employee as “any individual employed or permitted to work

by an employer in any occupation” and an “employer” as any entity “act-

ing as employer.” Additionally, 12 NYCRR § 142-2.14 defines an em-

ployee as “any individual employed, suffered or permitted to work by an

employer.”

Since these definitions are far from “model[s] of clarity,” Velarde

v. GW GJ, Inc., 914 F.3d 779, 783 (2d Cir. 2019), federal courts (sitting

in New York interpreting the NYLL) and New York State lower courts10

Zavala v. 411 Holbrook Inc., 2017 WL 936338 (N.Y. Sup. Ct., Suffolk Co.,
10

Mar. 1, 2017) (adopting the economic reality test to determine whether an in-
dividual defendant qualified as an employer under NYLL); Leuvan-Monroe v.
Karla Otto Inc., 2017 WL 65661 (N.Y. Sup. Ct., N.Y. Co., Jan. 6, 2017) (apply-
ing primary beneficiary test for an unpaid intern); Rodriguez v 5W Public Re-
lations, LLC, 2016 WL 4013990 (N.Y. Sup. Ct., N.Y. Co., July 26, 2016)
(same).

The Leuvan-Monroe court noted that “although not binding, federal court de-
cisions concerni

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Richard G. Latin Track Judge’s New Case

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