Constructive Trust Under New York Law Requires Plausible Allegations of a Direct Promise Between the Claimant and the Defendant

I. Introduction

In Re: Orly Genger (2d Cir. Mar. 10, 2026) is a nonprecedential summary order arising from long-running post-divorce litigation over shares in the family business Trans-Resources, Inc. (“TRI”) and related agreements among former spouses Dalia Genger and Arie Genger, and their children, including debtor Orly Genger and non-party Sagi Genger.

The appeal came from the Southern District of New York’s affirmance of a Bankruptcy Court decision dismissing Dalia’s adversary complaint after Orly’s 2019 bankruptcy filing. Dalia’s core theory was equitable: that Orly “monetized” an interest in TRI through a 2013 settlement with third parties, and that equity required Orly to remit a portion of those proceeds to support Dalia’s retirement. Dalia sought a constructive trust and related remedies (equitable lien and injunction), alleging Orly transferred proceeds to shield them from Dalia.

The key legal issues on appeal were: (1) Article III standing; and (2) whether the complaint plausibly stated a claim for a constructive trust under New York law—particularly whether Dalia adequately alleged the required promise element as a direct promise from Orly to Dalia.

II. Summary of the Opinion

The Second Circuit affirmed. It agreed with the District Court that Dalia had standing because she alleged a concrete and redressable injury: entitlement to part of Orly’s 2013 settlement proceeds and Orly’s refusal to pay.

On the merits, the court held Dalia failed to state a claim for a constructive trust under New York law because she did not plausibly plead the existence of a direct promise between Dalia and Orly. The court deemed the complaint’s single-sentence assertion that “Orly promised to pay Dalia” conclusory, contradicted by the broader pleading and the litigation history showing the relationships were governed by the 2004 contractual structure: Dalia’s right to payment ran to Sagi, and Orly’s obligation ran to Sagi by indemnity.

Because the constructive trust claim failed, the court also affirmed dismissal of the derivative requests for an equitable lien and injunctive relief.

III. Analysis

A. Precedents Cited

  • DuVall v. County of Ontario, 83 F.4th 147 (2d Cir. 2023) and Gasson v. Premier Cap., LLC, 43 F.4th 37 (2d Cir. 2022): cited for the appellate framework in bankruptcy appeals—plenary review of the district court’s affirmance, de novo review of legal conclusions, and clear-error review of factfinding. This set the lens through which the Second Circuit reviewed the dismissal for failure to state a claim.
  • Little Hearts Marks Fam. II L.P. v. Carter (In re 305 E. 61st St. Grp. LLC), 130 F.4th 272 (2d Cir. 2025) and City of Pontiac Gen. Emps.' Ret. Sys. v. MBIA, Inc., 637 F.3d 169 (2d Cir. 2011): cited for the motion-to-dismiss posture—accept well-pleaded facts as true and draw reasonable inferences for the plaintiff. The court contrasted that standard with its refusal to credit conclusory statements.
  • ATSI Commc'ns, Inc. v. Shaar Fund, Ltd., 493 F.3d 87 (2d Cir. 2007), McCarthy v. Dun & Bradstreet Corp., 482 F.3d 184 (2d Cir. 2007), Panther Partners Inc. v. Ikanos Commc'ns., Inc., 681 F.3d 114 (2d Cir. 2012), and Starr v. Sony BMG Music Ent., 592 F.3d 314 (2d Cir. 2010): these authorities governed review of denial of leave to amend—abuse of discretion generally, but de novo review when denial rests on legal futility. Although the panel’s affirmance principally rests on failure to plead a promise, these cases frame why futility can justify denying further amendment.
  • Wells Fargo Advisors, LLC v. Sappington, 884 F.3d 392 (2d Cir. 2018) and Headley v. Tilghman, 53 F.3d 472 (2d Cir. 1995): cited for the principle that the appellate court may affirm on any ground supported by the record.
  • Variscite NY Four, LLC v. N.Y. State Cannabis Control Bd., 152 F.4th 47 (2d Cir. 2025) and Murthy v. Missouri, 603 U.S. 43 (2024): provided the three-part Article III standing test (injury in fact, traceability, redressability). Applied here, Dalia’s alleged entitlement and nonpayment sufficed to confer standing even though she ultimately lost on the merits.
  • Jaffer v. Hirji, 887 F.3d 111 (2d Cir. 2018) and Consumers Union of U.S., Inc. v. State, 840 N.E.2d 68 (N.Y. 2005): supplied the four-part New York constructive trust formulation: confidential/fiduciary relationship, promise, transfer in reliance, and unjust enrichment. The panel treated the promise requirement as the dispositive defect.
  • Simonds v. Simonds, 380 N.E.2d 189 (N.Y. 1978): cited to acknowledge New York’s characterization of constructive trust requirements as “factors” rather than rigid elements, yet the panel held that, even under this flexible framing, Dalia’s failure to plead a promise was fatal.
  • Edwards v. Sequoia Fund, Inc., 938 F.3d 8 (2d Cir. 2019) and Nielsen v. Rabin, 746 F.3d 58 (2d Cir. 2014): used to reject “conclusory allegations or legal conclusions couched as factual allegations.” This was the immediate doctrinal basis for dismissing the single-sentence allegation that Orly “promised” Dalia.
  • Prior litigation in the same family dispute: Genger v. Genger, 76 F. Supp. 3d 488 (S.D.N.Y. 2015) and Genger v. Genger, 771 F. App'x 99 (2d Cir. 2019) (summary order): central to the court’s contextual assessment. The panel relied on these decisions to emphasize that the “2004 Integrated Agreement” allocated obligations in a triangular structure: Dalia’s support right ran to Sagi, and Orly’s role was to indemnify Sagi—not to promise Dalia direct payment.
  • Bankruptcy appeal posture below: Genger v. Genger (In re Genger), No. 24CV7072, 2025 WL 835795 (S.D.N.Y. Mar. 17, 2025): the district court reversed the bankruptcy court on standing but affirmed dismissal on other grounds. The Second Circuit agreed on standing and affirmed the ultimate dismissal.

B. Legal Reasoning

  1. Standing was separated from the merits. The panel accepted that Dalia’s claimed entitlement to proceeds and refusal to pay constituted a concrete, redressable injury under Variscite NY Four, LLC v. N.Y. State Cannabis Control Bd. and Murthy v. Missouri. This prevented dismissal on jurisdictional grounds and sharpened the decision into a merits-based pleading ruling.
  2. The constructive trust claim failed at the “promise” requirement. Applying Jaffer v. Hirji (quoting Consumers Union of U.S., Inc. v. State), the panel focused on whether Dalia plausibly alleged “a promise, express or implied” by Orly to Dalia. Dalia’s theory required a direct promise between them, and she conceded as much.
  3. A bare assertion of a promise was treated as conclusory and contradicted by the pleaded context. Dalia relied on a single sentence: “Orly promised to pay Dalia from the monetized proceeds...”. Invoking Edwards v. Sequoia Fund, Inc. (quoting Nielsen v. Rabin), the court refused to credit this statement as a well-pleaded fact. The panel also found it “belied” by: (a) other allegations indicating the established post-divorce agreements governed who owed whom; and (b) the “extensive litigation history,” which consistently reflected Dalia suing Sagi for payment and Sagi suing Orly for indemnification.
  4. Prior decisions were used to negate Dalia’s “pre-existing oral promise” narrative. The panel quoted Genger v. Genger, 76 F. Supp. 3d 488 to show the 2004 agreements “clearly purport” to exchange defined obligations: Dalia transfers TRI shares; Sagi promises financial support; Orly promises to indemnify Sagi. The panel specifically rejected Dalia’s claim that the 2015 decision found a direct Dalia–Orly promise; it did not. The panel also cited Genger v. Genger, 771 F. App'x 99 for its earlier affirmance that Orly’s obligation ran under “the 2004 Indemnity” to indemnify Sagi for amounts owed under “the 2004 Promise”—again, not to pay Dalia directly.
  5. Equitable flexibility did not excuse the missing promise. While acknowledging via Simonds v. Simonds that constructive trust is an equitable doctrine “not rigidly limited,” the court treated the absence of a plausible promise allegation as dispositive here.
  6. Derivative remedies fell with the constructive trust claim. The equitable lien and injunction requests were “premised” on the constructive trust claim, so dismissal followed automatically once the constructive trust theory failed.

C. Impact

  • Pleading discipline for equitable claims in bankruptcy-adjacent disputes. Even where plaintiffs seek equitable remedies (constructive trust, equitable lien, injunction) and invoke equity’s flexibility, the Second Circuit signaled that a complaint must still plead concrete, nonconclusory facts establishing the core doctrinal prerequisites—here, a plausible direct promise.
  • Context and prior litigation can undercut plausibility. The decision illustrates a practical pleading risk: where a dispute has a well-documented contractual/litigation history defining who owes whom, courts may treat an alleged “new” oral promise as implausible—particularly when pleaded in a conclusory way and inconsistent with the established structure.
  • Standing does not predict success. By affirming standing yet rejecting the claim, the panel reinforces that Article III injury can exist even when the plaintiff’s legal theory fails—useful guidance for litigants and bankruptcy courts sorting threshold jurisdictional objections from merits dismissals.
  • Nonprecedential but instructive. As a summary order, it does not create binding precedent, but it is likely to be cited for its application of existing Second Circuit pleading principles to constructive trust claims under New York law, especially in cases attempting to recharacterize contractual rights as direct equitable entitlements.

IV. Complex Concepts Simplified

Summary order (nonprecedential)
A disposition that resolves the parties’ case but does not bind future panels as precedent. It can still be cited under the rules noted in the order.
Constructive trust
An equitable remedy where a court treats someone holding property as if they hold it “in trust” for another because it would be unjust for the holder to keep it. Under New York law (as stated in Jaffer v. Hirji), courts typically look for a special relationship, a promise, a transfer made in reliance, and unjust enrichment.
“Promise” element
The plaintiff must allege facts showing the defendant made an express or implied commitment relevant to the transfer or retention of the property. Here, the court required a direct promise from Orly to Dalia; an obligation running only to Sagi (indemnification) did not substitute.
Conclusory allegation
A statement that asserts a legal conclusion (e.g., “she promised”) without factual detail (who said what, when, how, and in what context) sufficient to make it plausible. Courts may disregard such statements when assessing whether a complaint states a claim.
Standing
The constitutional requirement that a plaintiff show a real, personal injury caused by the defendant and likely to be fixed by a court order. It answers “may you sue?” not “will you win?”

V. Conclusion

In Re: Orly Genger affirms that, under New York constructive trust doctrine as applied in federal court, equity does not relax the need for plausible, nonconclusory allegations of a direct promise where the plaintiff’s theory depends on that promise. The Second Circuit separated standing from merits, found jurisdiction proper, and then dismissed because Dalia’s complaint offered only a bare assertion of a Dalia–Orly promise—an assertion the court found inconsistent with the established contractual structure litigated for years. The result underscores a broader lesson: equitable labels cannot substitute for factual pleading, particularly where prior agreements and litigation history sharply define the parties’ actual obligations.