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State of New York

Court of Appeals

OPINION

This opinion is uncorrected and subject to revision 

before publication in the New York Reports.

No. 52 

The Moore Charitable Foundation, 

et al.,

 Appellants,

 v.

PJT Partners, Inc., et al.,

 Respondents,

et al.,

 Defendant.

Stephen Shackelford, Jr., for appellants. 

Aidan Synnott, for respondents. 

CANNATARO, J.:

On this appeal, we assess the sufficiency of a cause of action pleaded against an 

investment bank for its negligent supervision and retention of an employee. Plaintiffs—a 

charitable foundation and its affiliate—allege that defendants’ negligent supervision of 
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their employee resulted in him defrauding them of $25 million under the guise of his 

employment, as part of a scheme to cover up mounting personal trading losses and 

embezzlements. 

We hold that it was error to dismiss plaintiffs’ negligence claim at the pleading 

stage. Contrary to the lower courts’ conclusions, the complaint adequately alleged that 

defendants were on notice of the employee’s propensity to commit fraud prior to his 

interactions with plaintiffs and their resulting losses. Nor can we agree that defendants’ 

duty of supervision ran only to their “customers.” We accordingly reverse the order of the 

Appellate Division and reinstate plaintiffs’ claim.

I.

When reviewing a motion to dismiss for failure to state a claim, a court must give 

the complaint a liberal construction, accept the allegations as true, and, providing plaintiffs 

with the benefit of every favorable inference, examine the adequacy of the pleadings (see 

Cortlandt St. Recovery Corp. v Bonderman, 31 NY3d 30, 38 [2018]; AG Capital Funding 

Partners, L.P. v State St. Bank & Trust Co., 5 NY3d 582, 591 [2005]; Goshen v Mut. Life 

Ins. Co., 98 NY2d 314, 326 [2002]). “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 NY3d 11, 19 [2005]). We therefore accept the following 

allegations as true for purposes of this appeal.

Defendants PJT Partners, Inc. (PJT) and Park Hill Group, LLC (Park Hill) are, 

respectively, an investment bank and a division thereof which provides global alternative 

asset advisory and fundraising services. In 2013, Park Hill hired Andrew Caspersen to 
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manage its “secondaries” business, which involved “facilitating the purchase, sale, or 

restructuring of ownership interests in certain kinds of investment vehicles, such as private 

equity or hedge funds” (Compl. ¶ 17). Caspersen was hired primarily to start a new 

business line focusing on “fund recapitalization” work, specifically by “representing 

private equity fund managers who were interested in offering liquidity to their investors” 

(id. ¶ 18). 

In furtherance of that goal, defendants gave Caspersen significant authority. They 

authorized him to solicit potential clients over telephone and email, to use defendants’ 

brand names and resources to market their services, and to engage with clients throughout 

the solicitation and negotiation process. Indeed, defendants encouraged Caspersen to act 

as the primary or sole point of contact for clients on his deals, including with respect to the 

transmission of invoices. Caspersen was also given access to virtual data rooms in which 

defendants stored confidential documents related to their deals.

Caspersen was a successful and high-performing employee who brought in a 

substantial amount of work for defendants. Over time, however, Caspersen began to 

display signs of “dangerous and destructive behaviors” (id. ¶ 25). For example, he would 

engage in “excessive high-risk securities trading” from personal accounts during work 

hours, and “would obsessively monitor his positions, often checking the value of his 

holdings every few minutes . . . using a variety of devices, including the computer and/or 

communication devices supplied to him by” defendants (id. ¶ 26). Caspersen also allegedly 

“began drinking to excess during the work day,” meaning that he would frequently 

“arriv[e] at the office in the morning only after having consumed one or more Bloody 
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Marys,” “typically consume 10 to 15 alcoholic drinks each day, mostly during business 

hours,” and hold meetings with colleagues while inebriated (id. ¶ 27).

Nonetheless, in 2014, Caspersen landed a major deal for defendants involving the 

recapitalization of a private equity fund managed by Irving Place Capital (Irving Place). 

Defendants’ role in the transaction was to find a new investor interested in buying out the 

fund’s existing equity holders. Caspersen pitched the opportunity to Coller Capital, which 

agreed to serve as the lead buyer in the transaction at a price of $500 million. The 

transaction closed in August 2015, at which time Irving Place was to pay defendants a deal 

fee of $8.1 million. When the time came, however, Caspersen intercepted and diverted 

that fee to himself. He did so by sending a fake Park Hill invoice to Irving Place, directing 

that company to transfer the fee into an account created and controlled solely by Caspersen. 

Irving Place followed those instructions and paid the fee to Caspersen’s account. 

Caspersen used the stolen $8.1 million fee to purchase securities on his personal account, 

which promptly lost all of their value.

One month after the closing, in September 2015, employees from defendants’ “back 

office” asked Casperson about the missing fee. Caspersen falsely responded that the fee 

would not be paid until a “stub closing” was complete.1 The complaint pleads that 

defendants “knew or should have known” that this explanation was false because they were 

1 As explained in the complaint, Caspersen meant that “while most of the interests in the 

Irving Place fund had already been paid for and transferred in a primary closing, a ‘stub’ 

portion of the interests had not yet been paid for and transferred but would be in connection 

with a second, smaller ‘stub’ closing” (Compl. ¶ 34). 
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“handling the Irving Place transaction, and knew or should have known that there was no 

stub closing on the deal” (id. ¶ 35). The complaint further pleads that Caspersen’s 

explanation was “implausible and transparently false” because “[t]ypically, when there was 

a stub closing on a deal, which was rare, [defendants] would nevertheless receive [their] 

fee in connection with the primary closing” and only a “pro rata portion of the fee, 

attributable to the undisclosed ‘stub’ part of the deal” would be deferred in connection with 

the stub closing (id. ¶¶ 36-37). Nonetheless, defendants did not challenge Caspersen’s 

explanation or immediately inquire further about the delayed payment. 

Caspersen understood that as the end of the year approached, defendants would 

likely insist on receiving the $8.1 million fee; accordingly, he devised a scheme to obtain 

replacement funds from plaintiff The Moore Charitable Foundation (the Foundation) and 

use them to pay what defendants were owed. In October 2015, Caspersen contacted the 

Foundation “using a legitimate PJT email address” and offered it “an opportunity to invest 

in a security with a risk-free 15% rate of return” (Compl. ¶ 41). In subsequent 

communications, Caspersen told the Foundation that the opportunity related to the Irving 

Place transaction, which he falsely stated had not yet closed. More specifically, Caspersen 

“claimed that he was syndicating an $80 million loan that he had agreed to make to Coller 

Capital in order to help facilitate the closing of the transaction,” and that he was soliciting 

investors in that financing (id.). To support the validity of the transaction, Casperson used 

his PJT email account to send the Foundation a real annual financial report for Irving Place, 

obtained from defendants’ data room, which bore a Park Hill watermark. The Foundation 

ultimately agreed to contribute $25 million in financing. 
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In November 2015, Caspersen used his PJT email account to send wire instructions 

to the Foundation. The instructions were written on Park Hill letterhead and directed that 

the funds be sent to a special purpose vehicle (SPV) created and controlled by Casperson 

but named to appear like an Irving Place-affiliated entity. Over the next few days, 

Caspersen again used his PJT email address to send the Foundation a promissory note, 

security agreement, and letter from the SPV, all bearing the signature of “John Nelson,” a 

fictitious authorized signatory for Irving Place. 

The Foundation transferred the $25 million to the SPV account through plaintiff 

Kendall JMAC. The complaint pleads that plaintiffs did so based on their “reasonable 

reliance on the strong reputation of [defendants] as well as Caspersen’s position there” (id.

¶ 46). Within days, Caspersen transferred $8.1 million from the SPV account to 

defendants, “making it appear” that Irving Place was finally paying the missing deal fee 

(id. ¶ 47). Caspersen transferred the remainder of plaintiffs’ $25 million financing to his 

personal account, where he used the funds to engage in speculative securities trading that 

eventually resulted in losses of approximately $14.5 million.

Caspersen maintained his ruse for several months by making fake interest payments 

to the Foundation on the fake promissory note. In March 2016, however, the Foundation 

discovered the fraud when its representative asked to speak with John Nelson and 

discovered that no such person existed. Later that year, Caspersen entered a plea of guilty 

in federal court to securities and mail fraud charges and was sentenced to a four-year term 

of imprisonment. Although ordered to pay restitution to plaintiffs, Caspersen has not done 

so. 
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Plaintiffs eventually commenced this action against defendants to recover their 

losses, asserting causes of action against defendants for negligent supervision and 

retention, conversion, and fraud. Defendants moved to dismiss the complaint pursuant to 

CPLR 3211 (a) (7) and 3016 (b). As relevant here, Supreme Court dismissed plaintiffs’ 

cause of action for negligent supervision and retention but allowed other claims to proceed. 

The court explained that it was dismissing the negligence claim based on plaintiffs’ failure 

to adequately plead that defendants were on notice of Caspersen’s propensity for fraud, 

and had “not considered” whether defendants’ duty ran only to customers. 

On the parties’ cross appeals, the Appellate Division modified Supreme Court to the 

extent of dismissing plaintiffs’ complaint in its entirety (178 AD3d 433 [1st Dept 2019]). 

The Court affirmed the dismissal of the negligent supervision and retention claim based on 

its conclusion that the complaint did “not allege that defendants were aware of the facts 

that plaintiff[s] contend[] would have put them on notice of the employee’s criminal 

propensity” (id. at 434). “Further,” the Court summarily held, “the complaint also fails to 

allege that plaintiffs were ever customers of defendants, which is fatal to a claim of 

negligent supervision” (id.). This Court granted plaintiffs’ motion for leave to appeal (35 

NY3d 914 [2020]).

II.

It is well-settled that to establish a claim of negligence, a plaintiff must prove: 

a duty owed to the plaintiff by the defendant, a breach of that duty, and injury proximately 

resulting therefrom (Pasternack v Laboratory Corp. of Am. Holdings, 27 NY3d 817, 825 

[2016]; Solomon v City of New York, 66 NY2d 1026, 1027 [1985]; Akins v Glens Falls City 
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School Dist., 53 NY2d 325, 333 [1981]). Where the negligence claim relates to an 

employer’s retention and supervision of an employee, the complaint must include 

allegations that: (1) the employer had actual or constructive knowledge of the employee’s 

propensity for the sort of behavior which caused the injured party’s harm; (2) the employer 

knew or should have known that it had the ability to control the employee and of the 

necessity and opportunity for exercising such control; and (3) the employee engaged in 

tortious conduct on the employer’s premises or using property or resources available to the 

employee only through their status as an employee, including intellectual property and 

confidential information (see e.g. Restatement [Second] of Torts § 317, Comment b; 

Restatement [Second] of Agency § 219 [stating an employer is liable for the torts of 

employees acting outside the scope of their employment if, inter alia, the employee was 

“aided in accomplishing the tort by the existence of the agency relation”]; Kenneth R. v 

Roman Catholic Diocese of Brooklyn, 229 AD2d 159, 161 [2d Dept 1997] [citing, inter 

alia, Hall v Smathers (240 NY 486 [1925]), Park v New York Cent. & Hudson R. R. Co.

(155 NY 215 [1898]), and Detone v Bullit Courier Serv. (140 AD2d 278, 279 [1st Dept 

1988])]).

Here, plaintiffs’ complaint adequately states a claim for negligent supervision and 

retention. Contrary to the holdings of the courts below, the complaint adequately alleges 

that defendants had notice of Caspersen’s propensity to commit fraud. Further, the 

Appellate Division erred in holding that a customer relationship is a prerequisite to duty in 

a negligent supervision claim.
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A.

When an employer has notice of its employee’s propensity to engage in tortious 

conduct, yet retains and fails to reasonably supervise such employee, the employer may 

become liable for injuries thereafter proximately caused by its negligent supervision and 

retention (see 52 NY Jur Employment Relations § 391; Park, 155 NY 215). As every 

Department of the Appellate Division has recognized, a defendant is on notice of an 

employee’s propensity to engage in tortious conduct when it knows or should know of the 

employee’s tendency to engage in such conduct (see e.g., Belcastro v R.C. Diocese of 

Brooklyn, NY, 213 AD3d 800, 800 [2d Dept 2023]; Druger v Syracuse Univ., 207 AD3d 

1153, 1154 [4th Dept 2022]; Pirro v Bd. of Trustees of the Vil. of Groton, 203 AD3d 1263, 

1271 [3d Dept 2022]; Gibbs v L,man Manhattan Preparatory Sch., 201 AD3d 569, 569 

[1st Dept 2022]; 52 NY Jur Employment Relations § 391). 

In this case, defendants argue that the only circumstance in which an employer 

“should know” of an employee’s propensity for tortious conduct is when the employer has 

actual knowledge of multiple past acts by the employee similar to those alleged in the 

complaint. Because the complaint here does not contain such allegations, defendants argue 

that dismissal was proper.

We disagree. Certainly, allegations that a defendant had actual knowledge of prior 

acts by an employee similar to those alleged in the complaint satisfy the notice element 

(see Hogle v H. H. Franklin Mfg. Co., 199 NY 388, 392 [1910] [knowledge of propensity 

established by evidence that employees threw objects out of factory windows onto 

plaintiff’s property for more than a year “with the knowledge of the defendant”]). 
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However, an employer cannot avoid liability for negligent supervision and retention by 

shutting its eyes to the tortious practices and propensities of its employees—that is, by 

being doubly negligent. An employer “should know” of an employee’s dangerous 

propensity if it has reason to know of the facts or events evidencing that propensity, and 

may be liable if it nonetheless “place[s] the employee in a position to cause foreseeable 

harm” (see Detone, 140 AD2d at 279; see e.g., Hall, 240 NY at 490 [notice of 

superintendent’s violent tendencies was shown by “repeated complaints” made to 

defendants by tenants and visitors]; Park, 155 NY at 219 [constructive knowledge of 

railroad employee’s propensity for negligence “may be shown by evidence tending to 

establish that such incompetency was generally known in the community”]).2 Put 

differently, the notice element is satisfied if a reasonably prudent employer, exercising 

ordinary care under the circumstances, would have been aware of the employee’s 

propensity to engage in the injury-causing conduct. Where the various facts and 

circumstances alleged in a complaint permit such an inference, the notice element is 

adequately pleaded (see Cortlandt St. Recovery Corp., 31 NY3d at 38). 

2 Defendants’ argument that actual knowledge of prior bad acts is required to plead notice 

in this context is similar to an argument we rejected in Sanchez v State (99 NY2d 247, 253-

254 [2002]), involving a claim against the State for its alleged negligent supervision of 

incarcerated persons. Although defendants’ actual knowledge requirement would establish 

“a bright-line test” for the pleading of negligent supervision and retention claims, that line 

would “redefine[] the traditional standard of reasonableness that has long been the 

touchstone of the law of negligence” by “cut[ting] off consideration of other factors that 

have previously been found relevant to foreseeability” (id. at 254). 
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Plaintiffs allege that defendants had notice of Caspersen’s propensity to commit 

fraud because Caspersen engaged in excessive drinking and obsessive personal stock 

trading during work hours, and because he gave defendants’ back-office employees a 

“transparently false” response when they inquired as to when defendants would receive the 

$8.1 million deal fee from Irving Place.

The allegations of Caspersen’s purported drinking and gambling problems do not, 

standing alone, justify an inference that defendants should have known of Caspersen’s 

propensity to commit fraud. For prior conduct to provide notice of an employee’s 

propensity to commit a tort, that conduct must be “similar to the [] injury-causing act” (see 

Brandy B. v Eden Cent. Sch. Dist., 15 NY3d 297, 302 [2010] [reaching similar conclusion 

with respect to a claim against a school district for failing to supervise a troubled student]). 

As defendants correctly argue, there is a significant disconnect between excessive drinking 

and obsessive personal stock trading—neither of which are illegal or tortious—and the 

sophisticated fraud Caspersen ultimately perpetrated against plaintiffs. The former habits 

may be unprofessional or irresponsible in a financial advisor, and may warrant some degree 

of oversight or discipline,3 but they are not acts of dishonesty or indicative of a proclivity 

to mislead or intentionally harm others (see McBride v City of New York, 160 AD3d 414, 

414 [1st Dept 2018]; Milosevic v O’Donnell, 89 AD3d 628, 629 [1st Dept 2011]; see also

3 However, the type and degree of oversight that might be reasonable when an employee 

displays signs of alcoholism or gambling addiction likely differ from that appropriate when 

an employee displays fraudulent tendencies.
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Naegele v Archdiocese of New York, 39 AD3d 270, 270 [1st Dept 2007], lv denied 9 NY3d 

803 [2007]). 

Here, however, plaintiffs also plead that defendants should have known of 

Caspersen’s propensity to commit fraud based on the missing $8.1 million Irving Place 

deal fee and Caspersen’s purportedly sloppy attempt to cover up his embezzlement of that 

fee. As discussed, the complaint pleads that one month after the Irving Place transaction 

closed, employees in defendants’ back office noticed the fee was missing and asked 

Caspersen when it would be received. Caspersen allegedly responded that it would not be 

paid until a “stub closing” was complete. Affording plaintiffs the benefit of all favorable 

inferences at this stage, we must accept that the back-office employees who heard 

Caspersen’s explanation should have recognized it as either false or questionable based on 

their familiarity with the Irving Place deal or the “typical” payment structure of stub 

closings, and that a reasonable employer would have investigated and uncovered the 

embezzlement prior to the fraud against plaintiffs. The complaint also alleges that 

Caspersen engaged in at least one other similar diversion-and-cover-up scheme, and that 

further discovery could reveal more of the same behavior. Under the circumstances, we 

cannot dismiss that possibility as entirely speculative. At this juncture, evidence of exactly 

what defendants knew—and when—is primarily within their sole possession and control. 

Thus, we find the allegations of notice sufficient to survive a motion to dismiss under our 

liberal pleading standards. 
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B.

The Appellate Division also dismissed the negligent supervision claim based on 

plaintiffs’ failure to allege that they “were ever customers of defendants,” which the Court 

characterized as “fatal” (178 AD3d at 434). We disagree.

“The existence and scope of a tortfeasor’s duty is, of course, a legal question for the 

courts” (532 Madison Ave. Gourmet Foods, Inc. v Finlandia Ctr., Inc., 96 NY2d 280, 288 

[2001] [532 Madison]). However, “[a]bsent a duty running directly to the injured person 

there can be no liability in damages, however careless the conduct or foreseeable the harm” 

(id. at 289). We fix the point of a duty in a particular case 

“‘by balancing factors, including the reasonable 

expectations of parties and society generally, the 

proliferation of claims, the likelihood of unlimited or 

insurer-like liability, disproportionate risk and 

reparation allocation, and public policies affecting the 

expansion or limitation of new channels of liability’”

(532 Madison, 96 NY2d at 288, quoting Hamilton v Beretta U.S.A. Corp., 96 NY2d 222, 

232 [2001]; Palka v Servicemaster Mgt. Servs. Corp., 83 NY2d 579, 586 [1994]). This 

policy-driven analysis reflects that, “[a]t its foundation, the common law of torts is a means 

of apportioning risks and allocating the burden of loss” (532 Madison, 96 NY2d at 289). 

The purpose of a civil action for tort is to “compensate for the damage suffered, at the 

expense of the wrongdoer” (Prosser and Keeton, Torts § 2, at 7 [5th ed 1985]); however, 

courts first must determine whether defendants owed a duty to plaintiffs. “This restriction 

is necessary to avoid exposing defendants to unlimited liability to an indeterminate class 

of persons conceivably injured by any negligence in a defendant’s act,” even if some of 
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those persons’ injuries might be characterized as foreseeable (532 Madison, 96 NY2d at 

289).

We have never held that a cause of action for negligent supervision and retention is 

maintainable only by customers of the defendant. Indeed, there is substantial authority in 

this State that non-customers may pursue such claims, particularly when they allege 

physical injuries or property damage inflicted by a negligently supervised employee (see 

e.g. Hogle, 199 NY at 392; Selmani v City of New York, 116 AD3d 943, 943 [2d Dept 

2014]; Quiroz v Zottola, 96 AD3d 1035, 1036 [2d Dept 2012]; see also Restatement 

[Second] of Torts § 317). Thus, to the extent defendants argue that a special relationship 

or privity between plaintiff and employer is a necessary element of a negligent supervision 

claim, we expressly reject any such requirement (see NY PJI 2:240, Comment [advising 

that an employer “is liable for any harm to other persons resulting from its employee’s” 

act, and that liability is “not necessarily predicated on any special relationship between the 

employer and plaintiff”] [citing Haddock v New York, 75 NY2d 478 [1990]]).4

4

In support of their argument that a special relationship should be required when a plaintiff 

seeks to recover purely economic losses, defendants cite two cases in which the First and 

Second Departments dismissed negligent supervision and retention claims based on the 

absence of a “special duty” or “privity” running between the defendant employers and the 

plaintiffs (see Heffernan v Marine Midland Bank, 267 AD2d 83, 84 [1st Dept 1999]; 

Gottlieb v Sullivan & Cromwell, 203 AD2d 241, 241–242 [2d Dept 1994]). Neither case 

supports the rule adopted below. In Gottlieb, a law firm’s rogue employees stole

confidential information and sold it to third parties who used it to make illegal trades. The

plaintiff was an unaffiliated trader on the American Stock Exchange, who alleged losses

because the illegal trades affected the market and, consequently, the value of his holdings.

Gottlieb correctly refused to extend the duty to persons injured because of an attenuated

chain of events eventually allegedly affecting the stock market. Here, unlike in Gottlieb,

plaintiffs alleged they were directly defrauded by the negligently supervised employee. 
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Concerns about crushing liability to an indeterminate class of plaintiffs carry less 

weight in a negligent supervision and retention case, because the elements of the tort 

already protect employers from limitless liability in several ways. First, we have already 

recognized that the employer-employee relationship gives rise to a duty to properly 

supervise and oversee the conduct of employees (see Hamilton, 96 NY2d at 233). Second, 

as discussed above, the employer must have had actual or constructive notice of the 

employee’s propensity to engage in a particular type of tortious conduct. Third, a 

defendant’s duty in this context is only to act as a prudent and reasonable employer would 

under the circumstances. Finally, as in every tort action, the injuries alleged must have 

been proximately caused by the defendant’s negligent supervision and retention. In other 

words, there must be a nexus between the actions or omissions of the employer and the 

harm the employee was able to inflict. Ultimately, if the employee’s tortious conduct is 

too attenuated from the employment relationship, the employer will not be liable.

In light of the above requirements, our dissenting colleagues are simply incorrect 

that without a customer rule, “any employee . . . who goes into the office or uses a telephone 

to defraud any third party may expose the employer to liability,” making New York 

“unpalatable” to employers and threatening its status as “a leading commercial center” 

(dissenting op. at 4, 11). Rather, our framework ensures that an employer is liable only 

Heffernan, in turn, relied exclusively on Gottlieb to support its summary determination that

plaintiffs in that case failed to allege facts “showing a special duty running from the bank

to them” (Heffernan, 267 AD2d at 84). Insofar as that case relied on Gottlieb, it does not

support a rule requiring a customer relationship; insofar as it would require a “special”

duty, it is an inaccurate framing of the law.
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when it has notice of a particular employee’s propensity for tortious conduct but neglects 

to reasonably supervise and control such employee, enabling the employee to harm third 

parties aided by the use of the employer’s resources. There is no policy or commercial 

benefit that would justify relieving employers of liability for injuries proximately resulting 

from such negligence based solely upon the absence of a customer relationship between 

the employer and the injured party.

Here, plaintiffs were not customers of defendants, as that term is typically 

understood, but plaintiffs alleged that they were prospective customers who were solicited 

by Caspersen to participate in a financing arrangement related to one of defendants’ 

legitimate business deals, supported by defendants’ genuine documentation and 

information, which he was given access to by defendants as part of his employment. We 

hold that these allegations support the existence of a duty on the part of defendants to nonnegligently supervise Caspersen for plaintiff’s benefit (see 532 Madison, 96 NY2d at 288 

[listing “the reasonable expectations of parties” as one of the critical factors to be balanced 

in defining the scope of a duty]).

The dissent characterizes this holding as out-of-step with the laws of other 

jurisdictions (see dissenting op. at 9-10), but most of the cases it cites do not in fact involve 

negligent supervision and retention claims. Two of the cases involved negligent 

misrepresentation claims (see Giannacopoulos v Credit Suisse, 37 F Supp 2d 626 [SD NY 

1999]; Clark v Davenport, 2019 WL 3230928 [Del Chancery Court 2019]). The majority 

of the cases involved large-scale industrial accidents, which can pose the risk of liability 

on a mammoth scale from a single incident (see S. California Gas Leak Cases, 7 Cal 5th 
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391, 396 [2019]; Balfour Beatty Infrastructure, Inc. v Rummel Klepper & Kahl, LLP, 451 

Md 600 [2017]; Lawrence v O & G Indus., Inc., 319 Conn 641 [2015]; In re Chicago Flood 

Litig., 176 Ill 2d 179 [1997]; Petitions of Kinsman Transit Co., 388 F 2d 821 [2d Cir 1968]). 

Finally, in two of the cases, the plaintiffs argued that the defendant-employers had duties 

to prevent their former employees from committing torts even after terminating those 

employees (see Prymark v Contemporary Fin. Solutions, Inc., 2007 WL 4250020 [D Colo 

Nov. 29, 2007, No. 07-cv-00103_EWN-KLM]; Palmer v Shearson Lehman Hutton, 622 

So 2d 1085 [Fla Dist Ct App, 1st Dist 1993]). None of the cases cited by the dissent limit 

the persons eligible to bring negligent supervision and retention claims to customers or 

those in privity with the employer. 

Thus, plaintiffs have adequately alleged a claim for negligent supervision and 

retention. The Appellate Division therefore erred in dismissing the claim. 

The order of the Appellate Division insofar as appealed from should be reversed, 

with costs, and so much of defendants’ motion as sought dismissal of plaintiffs’ negligent 

supervision claim denied.
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SINGAS, J. (dissenting):

New York is the financial capital of the country, if not the world. This preeminent 

status, which has drawn business interests to New York for centuries, is due in large part 

to the predictability of our law. Commercial and financial sectors depend on our courts for 
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clarity and guidance. Today’s majority opinion offers neither. Worse, it exposes law firms, 

banks, hedge funds, and countless other financial institutions to limitless liability for the 

criminal actions of rogue employees. Such unprecedented exposure will all but transform 

employers into insurers, an outcome against which we have repeatedly cautioned. I dissent. 

I.

In his capacity as manager, and then partner, at PJT, Andrew Caspersen specialized 

in representing private fund managers in fund recapitalization deals. In October 2015, 

having lost millions of dollars due to excessive personal trading, Caspersen used his PJT 

email address to contact his friend, James McIntyre, at Moore Capital Management. 

Caspersen offered a fake opportunity to invest in a security—not a recapitalization—that 

he promised would result in large, risk-free returns. Neither McIntyre nor Moore Capital 

Management was a client of either Caspersen or PJT. Instead, Caspersen knew McIntyre 

because they went to college together. 

The Moore Charitable Foundation, an entity related to Moore Capital Management, 

expressed interest in Caspersen’s fraudulent proposal after he sent a PJT document from a 

real, but closed, recapitalization deal. Caspersen also sent the Foundation instructions on 

PJT letterhead to wire money to a non-PJT entity he had created and used his PJT email 

account to send a fake promissory note and security agreement in connection with the 

Foundation’s proposed investment. The Foundation then wired Caspersen $25 million 

dollars, which Caspersen largely gambled away. 
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II.

We must now answer the “threshold question in [this] negligence action[]: does 

defendant owe a legally recognized duty of care to plaintiff?” (Hamilton v Beretta U.S.A. 

Corp., 96 NY2d 222, 232 [2001]). Traditionally, courts determine the scope of a duty upon 

a consideration of multiple factors, including, as most relevant here, “the proliferation of 

claims [and] the likelihood of unlimited or insurer-like liability” (Matter of New York City 

Asbestos Litig., 5 NY3d 486, 493 [2005] [internal quotation marks omitted]). As to these 

factors, the majority recognizes that courts must “ ‘avoid exposing defendants to unlimited 

liability to an indeterminate class of persons conceivably injured by any negligence in a 

defendant’s act,’ even if some of those persons’ injuries might be characterized as 

foreseeable” (majority op at 13-14, citing 532 Madison Ave. Gourmet Foods, Inc. v 

Finlandia Ctr., Inc., 96 NY2d 280, 289 [2001] [532 Madison]). But despite that significant 

concern, the majority proceeds to effectively imply that an employer owes a duty to all 

prospective customers.1 

Permitting all potential customers to sue employers for an employee’s fraud 

unrelated to the employment but perpetrated via company email or phone would result in 

unmitigated proliferation of claims and virtually unlimited liability, well beyond the 

1 The majority correctly notes that the underlying litigation is at the pleading stage, where 

we “must give the complaint a liberal construction [and] accept the allegations as true,”

without regard to whether plaintiffs “ ‘can ultimately establish [their] allegations’ ”

(majority op at 2, quoting EBC I, Inc. v Goldman, Sachs & Co., 5 NY3d 11, 19 [2005]). 

The very fact that the allegations thus are necessarily unestablished renders the majority’s 

vast expansion of duty jurisprudence especially troubling. 
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traditional concepts of respondeat superior and apparent authority.2 This Court has 

repeatedly cautioned against subjecting a defendant “to limitless liability to an 

indeterminate class of persons conceivably injured” (Hamilton, 96 NY2d at 232). But the 

majority now suggests that any time an employee makes use of “the employer’s premises” 

or of “property or resources available to the employee only through their status as an 

employee,” the employer may be held liable in negligent supervision (majority op at 8). 

The majority opines that this standard will limit liability. But by their logic, any employee, 

regardless of their title, who goes into the office or uses a telephone to defraud any third 

party may expose the employer to liability. Arguably, employers now could owe a duty to 

virtually anyone. 

The majority also posits that liability would be limited, in part, by the elements of 

the tort itself (majority op at 15), but none of the elements contemplates, much less imposes 

a reasonable limit on, the number of potential victims—and therefore prospective 

plaintiffs—to whom the employer owes a duty. Moreover, though there is a propensity 

2 The majority references plaintiffs’ allegations that “they were prospective customers who 

were solicited by Caspersen to participate in a financing arrangement related to one of 

defendants’ legitimate business deals” (majority op at 16), but plaintiffs have also 

acknowledged that the deal proposed to them was not legitimate; therefore, it is debatable 

whether plaintiffs were ever even prospective customers. Regardless, the fraud theories of 

respondeat superior and apparent authority already protect potential customers interacting 

with employees, so long as the employee’s conduct is within the scope of his employment 

and benefits the employer (respondeat superior) or the employer presented the employee 

to the potential customer as having authority to act on the employer’s behalf, and the 

potential customer reasonably relied on that presentation (apparent authority) (see Judith 

M. v Sisters of Charity Hosp., 93 NY2d 932, 933 [1999]; Hallock v State of New York, 64 

NY2d 224, 231 [1984]). The lower courts dismissed these claims below, correctly 

recognizing that plaintiffs’ allegations were insufficient to sustain them. 
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element to negligent supervision, that does not pertain to the existence of a legal duty; 

“foreseeability bears on the scope of a duty, not whether a duty exists in the first place” 

(Matter of New York City Asbestos Litig., 5 NY3d at 494; see also Credit Alliance Corp. v 

Arthur Andersen & Co., 65 NY2d 536, 553 [1985] [eschewing a duty rule “permitting 

recovery by any foreseeable plaintiff”]). 

The majority further disregards our previous emphasis on the public policy necessity 

of limiting an employer’s liability for an employee’s fraud. “[A]ny extension of the scope 

of duty must be tailored to reflect accurately the extent that its social benefits outweigh its 

costs” (Hamilton, 96 NY2d at 232). Generally, a defendant is not expected to control the 

conduct of third parties, “even where as a practical matter defendant can exercise such 

control” (D’Amico v Christie, 71 NY2d 76, 88 [1987]). It is reasonable to envision a duty 

only “where there is a relationship either between defendant and a third-person tortfeasor 

that encompasses defendant’s actual control of the third person’s actions, or between 

defendant and plaintiff that requires defendant to protect plaintiff from the conduct of 

others” (Hamilton, 96 NY2d at 233). “Landowners, for example, have a duty to protect 

tenants, patrons and invitees from foreseeable harm caused by the criminal conduct of 

others while they are on the premises, because the special relationship puts them in the best 

position to protect against the risk” (532 Madison, 96 NY2d at 289, citing Nallan v 

Helmsley-Spear, Inc., 50 NY2d 507, 518-519 [1980]). But that duty “does not extend to 

members of the general public” (id., citing Waters v New York City Hous. Auth., 69 NY2d 

225, 229 [1987]). The policy of limiting liability is fulfilled “because the special 

relationship defines the class of potential plaintiffs to whom the duty is owed” (id.). 
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Certainly, a special relationship is not required in every negligent supervision case, 

particularly where employers are deemed responsible for non-economic injuries inflicted 

by their employees. “Liability in such cases is imposed not necessarily because of any 

special relationship between the employer and the injured party” (Rodriguez v United 

Transp. Co., 246 AD2d 178, 180 [1st Dept 1998], citing Haddock v City of New York, 75 

NY2d 478 [1990]). Instead, because the employer put the employee in a position to cause 

that kind of harm (i.e. physical injury), those courts recognized the employer’s legal duty 

to “take reasonable care in making its decision concerning the hiring and retention of the 

employee” (Sheila C. v Povich, 11 AD3d 120, 129 [1st Dept 2004]; see also e.g. Hogle v 

Franklin Mfg. Co., 199 NY 388, 392 [1910] [plaintiff injured by items thrown by employee 

from factory window]; Restatement [Third] of Torts § 1 [“Physical forces that cause injury 

ordinarily spend themselves in predictable ways; their exact courses may be hard to predict, 

but their lifespan and power to harm are limited”]).

But while “[e]conomic injuries may be no less important than injuries of other 

kinds[,] courts impose tort liability for economic loss more selectively than liability for 

other types of harms,” as “[e]conomic losses proliferate more easily than losses of other 

kinds” (Restatement [Third] of Torts § 1; see 532 Madison, 96 NY2d at 291-292 [where 

the potential claims of “those who have suffered purely economic losses” are 

indeterminate, “limiting the scope of defendants’ duty to those who have . . . suffered 

personal injury or property damage⸻as historically courts have done⸻affords a principled 

basis for reasonably apportioning liability”]). Therefore, this Court has consistently stated 
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that certain negligence actions require a relationship “so close as to approach that of 

privity” (Ultramares Corp. v Touche, 255 NY 170 [1930]). 

In Credit Alliance Corp., where the plaintiffs alleged fraudulent and negligent 

preparation of a financial report, the Court considered the “limits” of the defendant 

accountants’ liability toward non-privy parties (65 NY2d at 541). We held that, 

“[a]lthough accountants might be held liable in fraud to non-privy parties who were 

intended to rely upon the accountants’ misrepresentations,” it is a “different question . . . 

whether they owed a duty” to these parties (id. at 547 [emphasis added]). Because the 

negligence claim “fail[ed] to set forth either a relationship of contractual privity with 

[defendants] or a relationship sufficiently intimate to be equated with privity, [it] should 

be dismissed” (id. at 543, 547; see also 532 Madison, 96 NY2d at 289 [a duty to protect a 

plaintiff from risk of economic harm inflicted by a third party “may arise from a special 

relationship” requiring that the defendant provide such protection]). The majority scarcely 

acknowledges this settled liability principle regarding claims of purely economic loss. 

Indeed, in relying on the Restatement (Second) of Torts § 317—which, by its plain 

language, applies to claims of “bodily harm”—to support its creation of a duty under the 

circumstances here, the majority effectively removes any distinction between economic 

and physical injury and affirmatively jettisons our precedent regarding the principles 

underlying that distinction altogether. 

The majority further disputes the relevance of two Appellate Division decisions 

unequivocally requiring a special relationship in similar cases (see majority op at 14-15 n 

4, citing Heffernan v Marine Midland Bank, 267 AD2d 83, 84 [1st Dept 1999] and Gottlieb 
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v Sullivan & Cromwell, 203 AD2d 241, 241-242 [2d Dept 1994]). In Heffernan, a rogue 

employee of the defendant bank perpetrated a Ponzi scheme, convincing friends and family 

to turn over funds for a nonexistent investment that the employee represented was 

guaranteed by the bank. The employee then deposited the funds into his personal account 

at the bank. The First Department affirmed the trial court’s dismissal of the negligence 

claims against the bank, holding that “plaintiffs fail[ed] to allege any facts showing a 

special duty running from the bank to them” (267 AD2d at 84). The First Department cited 

Gottlieb, in which employees at Sullivan & Cromwell shared confidential firm information 

with third parties, who then engaged in insider trading. The Second Department affirmed 

the lower court’s grant of summary judgment to the defendant. Rather than relying on “an 

attenuated chain of events eventually allegedly affecting the stock market” (majority op at 

14-15 n 4), the Court observed that plaintiff, a trader who lost money on the securities in 

question, “was not a client of the defendant’s, with the result that, in the absence of any 

privity between the parties, the defendant owed the plaintiff no duty in the hiring and/or 

supervision of its employees” (203 AD2d at 241-242). Accordingly, both cases are directly 

on point. And yet, because the employees in each case used the employers’ property or 

resources, it is difficult to conceive, under the majority’s standard, how the employers 

would not be liable to the plaintiffs.

Additional public policy urges caution here. Unrestricted and unpredictable liability 

could have disastrous consequences for “New York’s status as the preeminent commercial 

center in the United States, if not the world” (159 MP Corp. v Redbridge Bedford, LLC, 33 

NY3d 353, 359-360 [2019]). That New York is “a convenient forum which dispassionately 
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administers a known, stable, and commercially sophisticated body of law may be 

considered as much an attraction to conducting business [here] as its unique financial and 

communications resources” (Eherlich-Bober & Co. v University of Houston, 49 NY2d 574, 

581-583 [1980]). If subjected to open-ended tort liability on the part of plaintiffs 

indiscernible in both amount and identity, financial institutions undoubtedly would 

consider conducting their business in foreign jurisdictions with predictable and consistent 

precedent. The limitless standard espoused by the majority “might engender uncertainties 

in the free market system in connection with untold numbers of sophisticated business 

transactions—a not insignificant potentiality in the State that harbors the financial capital 

of the world” (Bluebird Partners v First Fid. Bank, 94 NY2d 726, 739 [2000]).

Indeed, as did New York courts before today, other forums require a customer 

relationship to give rise to an employer’s liability for fraud perpetrated by a rogue 

employee. In Prymark v Contemporary Fin. Solutions, Inc., the employee of a brokerdealer registered with SEC sold unregistered securities as part of Ponzi scheme. The 

United States District Court of Colorado concluded that the broker-dealer “owed no duty 

to protect those [p]laintiffs who were not clients of [the employee] while he was in [the 

broker-dealer’s] employ” (2007 WL 4250020, at *14 [D Colo Nov. 29, 2007, No. 07-cv00103_EWN-KLM]). Notably, the Court did find a duty to a separate class of plaintiffs 

who had a client relationship (id. at *13). But the District Court deemed it “untenable that 

every employer has a special relationship, giving rise to tort liability based on harm done 

by third parties, with every potential customer or client” (id. at *12 [emphasis omitted]; 

see also e.g. Giannacopoulos v Credit Suisse, 37 F Supp 2d 626 [SD NY 1999] [dismissing 
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negligent supervision claims brought by plaintiff who was induced by defendant’s 

employee to invest in failed oil venture; “not all strangers generally qualified to respond to 

a negligent misrepresentation can sue based on their reliance on the misrepresentation”]; 

Clark v Davenport, 2019 WL 3230928 [Del Chancery Court 2019] [“allegations 

describ(ing) ‘mere personal friendship’ . . . would not support a claim for negligent 

misrepresentation”]; Palmer v Shearson Lehman Hutton, 622 So 2d 1085 [Fla Dist Ct App, 

1st Dist 1993] [no common law duty via special relationship between defendant employer 

and plaintiffs because plaintiffs were never customers of defendants and did not deal with 

defendant at the time fraudulent employee worked for defendant]).

Still other courts have acknowledged the need for something approaching privity to 

find liability for purely economic harm (see e.g. Petitions of Kinsman Transit Co., 388 F 

2d 821, 824 n 6 [2d Cir 1968] [“compensation may be precluded where—as here—the 

relationship between the negligence and the injury becomes too tenuous”]; see also S. 

California Gas Leak Cases, 7 Cal 5th 391, 400 [2019] [“The primary exception to the 

general rule of no-recovery for negligently inflicted purely economic losses is where the 

plaintiff and the defendant have a ‘special relationship’ ”]; Balfour Beatty Infrastructure, 

Inc. v Rummel Klepper & Kahl, LLP, 451 Md 600, 612 [2017] [no “tort liability (for) 

negligence that causes purely economic harm in the absence of privity, physical injury, or 

risk of physical injury”]; Lawrence v O & G Indus., Inc., 319 Conn 641, 657 [2015] 

[reiterating “the long established common law rule in this state” “that in the absence of 

privity of contract between the plaintiff and the defendant, or of an injury to the plaintiff’s 

person or property, a plaintiff may not recover in negligence for a purely economic loss”]; 
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In re Chicago Flood Litig., 176 Ill 2d 179, 198 [1997] [“The economic loss rule avoids the 

consequences of open-ended tort liability”]).

Our precedent until today, consistent with these foreign cases, makes clear that 

defendants here owed no duty to plaintiffs for Caspersen’s fraud. Plaintiffs had no 

connection to defendants and were targeted by a criminal actor who convinced them to 

invest in his scheme—involving a transaction that was not part of his job description—on 

the basis of his personal friendship with their employee. That Caspersen was able to 

perpetrate his fraud via company email did not bring it within the scope of his employment, 

which is why the lower courts correctly dismissed plaintiffs’ respondeat superior claim. In 

finding an unbounded duty solely because Caspersen was employed by defendants, the 

majority so broadens the tort of negligent supervision as to essentially swallow claims of 

respondeat superior and apparent authority. More importantly here, exposing employers 

to virtually unrestricted liability for fraud committed by rogue employees will unsettle our 

financial and other commercial institutions, to the point that doing business in a State in 

which they face undefined, exponential liability might soon prove unpalatable.

“New York has long been a leading commercial center, and our statutes and 

jurisprudence have, over many years, greatly enhanced New York’s leadership as the 

center of commercial litigation” (Justinian Capital SPC v WestLB AG N.Y. Branch, 28 

NY3d 160, 169 [2016]). Today, we head in a different direction.

I dissent. 
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Order insofar as appealed from reversed, with costs, and so much of defendants' motion as 

sought dismissal of plaintiffs' negligent supervision claim denied. Opinion by Judge 

Cannataro. Chief Judge Wilson and Judges Rivera, Troutman and Smith concur. Judge 

Singas dissents and votes to affirm in an opinion, in which Judge Garcia concurs. Judge 

Halligan took no part.

Decided June 13, 2023