Contract Claim Survives Dismissal Standard Even In Absence of Damages

Posted: April 4, 2025 / Written by: Jeffrey M. Eilender, Thomas A. Kissane, Samuel L. Butt, Joshua Wurtzel, Channing J. Turner / Categories Damages, Breach of Contract

Contract Claim Survives Dismissal Standard Even In Absence of Damages

On March 6, 2025, Justice Andrea Masley of the New York County Commercial Division issued a decision in Penske v. National Holding Corp., Index No. 655002/2022, holding that defendants' claim for breach of contract satisfied the dismissal standard even in the absence of damages, explaining:

Plaintiffs also challenge defendants’ contract damages or the lack thereof. Dismissal on this ground is not warranted. There is a difference between injury and damages and to establish liability for breach of contract there must be an injury to the complaining party regardless of whether that party suffered actual damages as a result of such injury. In Kronos, Inc. v AVX Corp., the Court of Appeals determined that when a claim for tortious interference of contract accrues, the statute of limitations does not start to run until plaintiff sustains an injury. (81 NY2d 90 [1993].), In its analysis, the Court detailed the differences between tort and contract principles, stating:

“Nominal damages are always available in breach of contract actions, but they are allowed in tort only when needed to protect an ‘important technical right.’ For example, nominal damages have been recognized in tort to protect a landowner’s right to be free of trespass, but that exception from the established rule that actual injury must be shown is warranted because a continuing trespass may ripen into a prescriptive right and deprive a property owner of title to his or her land. There is no similarly compelling reason for departing from the actual injury rule when the trespass alleged is not to real property but to a chattel or, as in the present case, to an intangible property right arising under contract. In such cases, actual loss must be demonstrated. …

Fundamentally different functions are served by an action in tort on the one hand, and an action in contract on the other, and an understanding of that functional difference is critical to understanding why nominal damages are appropriate in one and not in the other. Contract liability is ‘imposed by the law for the protection of a single, limited interest, that of having the promises of others performed … The law of torts … is concerned with the allocation of losses arising out of human activities.’ In other words, a party’s rights in contract arise from the parties’ promises and exist independent of any breach. Nominal damages allow vindication of those rights. In tort, however, there is no enforceable right until there is loss. It is the incurring of damage that engenders a legally cognizable right. To recognize nominal damages element of tort claims would be to wrest the cause of action from its traditional purposes--the compensation of losses--and to use it to vindicate nonexistent or amorphous inchoate rights when unlike in trespass to property, there is no compelling reason to do so.”

(Id. at 95-97 [internal citations omitted].)

The Court’s determination that nominal damages are always available for claims of breach of contract implies that the breach of the contract in and of itself is the injury to which plaintiff would be entitled to nominal damages at the least if it could not show actual damages. The Appellate Division, First Department has also sustained breach of contract claims in the absence of actual damages on the ground that nominal damages are available for those claims. (See NGM Mgt. Group, LLC v Bareburger Group, LLC, 224 AD3d 600, 602 [1st Dept 2024] [declining to dismiss breach of contract claim, even though defendant attempted to demonstrate no damages were suffered, on the ground that nominal damages are available]; Gordon v Schaeffer, 176 AD3d 431, 431 [1st Dept 2019] [holding that “plaintiff’s motion as to liability need not be denied because he failed to demonstrate damages as a result of the breach”]; Matter of Schleifer v Yellen, 158 AD3d 512, 513 [1st Dept 2018] [sustaining breach of contract claim even though respondents argued “that petitioners were not injured by the delay in providing the financial statement, [because] ‘[n]ominal damages are always available in breach of contract action’” (internal citation omitted)].

Though holding here that nominal damages are available for a breach of contract, the court also noted that the First Department has, in other cases, held that "where a party cannot demonstrate that it suffered damages, the claim must be dismissed." But critically, the court here held that, alternatively, defendants adequately alleged damages. Thus, the court did not expressly grapple with this seemingly contradictory authority. Contact the Commercial Division Blog Committee at commercialdivisionblog@schlamstone.com if you or a client have questions concerning damages on a contract claim.