Counterclaims Rarely Support Human Rights Law Retaliation; Withdrawal Does Not Moot the Alleged Retaliatory Filing

1. Introduction

In Yegoryan v BB Med. & Dermatology P.C. (2026 NY Slip Op 00041), the Appellate Division, Third Department addressed whether a plaintiff alleging disability discrimination under the New York State Human Rights Law (Executive Law § 290 et seq.) should be permitted to amend her pleading to add new retaliation claims based on defendants’ litigation counterclaims.

Plaintiff Mary Yegoryan, a physician assistant, alleged she was terminated after informing defendants of her breast cancer diagnosis. After she sued for discrimination, defendants’ counsel sent a litigation “hold letter” to plaintiff’s then-current employer requesting preservation of evidence. Plaintiff amended as of right to add a retaliation claim based on that letter. Later, defendants filed counterclaims for breach of contract and intentional infliction of emotional distress (IIED) (the IIED claim was later withdrawn). Plaintiff then sought leave to amend again—this time to add retaliation causes of action premised on the allegedly “frivolous” counterclaims. Supreme Court denied leave, and plaintiff appealed only that denial.

The key issues were (i) whether withdrawal of the IIED counterclaim mooted the proposed retaliation claim, and (ii) whether the proposed amendments plausibly stated retaliation under Executive Law § 296 (7) or were “palpably insufficient.”

2. Summary of the Opinion

The Third Department affirmed. It held that Supreme Court erred in deeming the proposed retaliation claim based on the IIED counterclaim “moot” merely because defendants withdrew it. However, the appellate court nevertheless agreed that leave to amend was properly denied because the proposed retaliation amendments—based on both the breach of contract and IIED counterclaims—were “palpably insufficient” and “devoid of merit.”

Emphasizing that it is “the rare case” where filing a counterclaim can constitute retaliation, the court found no basis to infer the counterclaims chilled plaintiff’s rights or were motivated by retaliatory animus beyond conclusory allegations. The court noted that once litigation is underway, courts have tools to address abusive counterclaims without converting them into separate retaliation causes of action.

3. Analysis

A. Precedents Cited

Favourite Ltd. v Cico, 42 NY3d 250 (2024)
Cited for CPLR 3025 (b)’s liberal amendment policy (“leave shall be freely given”). The Third Department used it to frame the baseline rule: amendments are encouraged, but not when the proposed pleading is legally deficient.
Walden v Varricchio, 195 AD3d 1111 (3d Dept 2021)
Provided the operative limitation on liberal amendment: leave is freely granted absent prejudice or surprise, unless the amendment is “palpably insufficient or patently devoid of merit.” This standard was central because the denial was affirmed on “palpable insufficiency,” not delay-based prejudice.
Mohammed v New York State Professional Fire Fighters Assn., Inc., 209 AD3d 1151 (3d Dept 2022) and Petry v Gillon, 199 AD3d 1277 (3d Dept 2021)
These cases reinforced the discretionary nature of leave-to-amend determinations and the deferential “abuse of discretion” appellate review standard.
Matter of Clifton Park Apts., LLC v New York State Div. of Human Rights, 41 NY3d 326 (2024)
Supplied the four-element framework for retaliation claims: (1) protected activity, (2) defendant awareness, (3) adverse action, and (4) causal connection. It also supported the court’s conclusion that withdrawal of the allegedly retaliatory act does not automatically extinguish the retaliatory-filing theory (the “mootness” point).
Mikesh v County of Ulster, 237 AD3d 1285 (3d Dept 2025)
Cited alongside Clifton Park Apts. to confirm the retaliation elements as applied in the Third Department.
Hollandale Apts. & Health Club, LLC v Bonesteel, 173 AD3d 55 (3d Dept 2019)
Used with Clifton Park Apts. to support the proposition that later events do not necessarily moot a claim where the alleged wrong is the prior retaliatory act itself (here, the filing of the counterclaim).
Klein v Town & Country Fine Jewelry Group, 283 AD2d 368 (1st Dept 2001)
The opinion’s anchor authority for the idea that anti-retaliation provisions are “designed principally” to address retaliation occurring outside the judicial process, and that “the filing of a counterclaim” is “the rare case” that can constitute retaliation. The Third Department adopted Klein’s concern that ordinary litigation tactics should not routinely be transformed into new retaliation claims.
Arevalo v Burg, 129 AD3d 417 (1st Dept 2015)
Reinforced Klein and supported affirmance where there was no showing that a counterclaim chilled protected activity.
Glass v IDS Fin. Servs., Inc., 778 F Supp 1029 (D Minn 1991)
Quoted for the policy point that once a lawsuit is filed, courts can address bad-faith counterclaims through procedural tools, reducing the need to treat counterclaims themselves as retaliation. Though nonbinding, it was persuasive authority supporting a “system design” rationale: manage litigation abuse within litigation.
NYAHSA Servs., Inc., Self-Ins. Trust v People Care Inc., 156 AD3d 99 (3d Dept 2017)
Cited to reject conclusory allegations and to support the “palpably insufficient” finding where retaliatory motive is pleaded as a bare assertion rather than supported by factual content.
Anandaraja v Icahn Sch. of Medicine at Mount Sinai, 227 AD3d 533 (1st Dept 2024); Campbell v New York City Dept. of Educ., 200 AD3d 488 (1st Dept 2021); Whitfield-Ortiz v Department of Educ. of City of N.Y., 116 AD3d 580 (1st Dept 2014)
These cases were used to underscore that conclusory retaliation allegations are insufficient; plaintiffs must plead facts that plausibly connect the adverse act to retaliatory intent.

B. Legal Reasoning

Leave to amend is liberal, but not automatic.
The court began with CPLR 3025 (b)’s preference for allowing amendments. But it applied the established limitation: leave may be denied when the proposed pleading is “palpably insufficient” or “patently devoid of merit.” Thus, the dispositive question was not whether plaintiff could add a retaliation theory in the abstract, but whether her proposed allegations stated one in a legally meaningful way.
Withdrawal of a counterclaim does not, by itself, moot a retaliatory-filing theory.
The Third Department corrected Supreme Court on mootness: the alleged adverse act was the filing of an allegedly frivolous counterclaim. A later withdrawal does not erase that act for purposes of a proposed retaliation theory. Even so, the court denied leave because the pleading was substantively deficient.
Counterclaims are rarely “adverse actions” for retaliation purposes in ongoing litigation.
Relying on Klein v Town & Country Fine Jewelry Group and Arevalo v Burg, the court treated counterclaims as generally part of litigation’s adversarial process. Anti-retaliation law is primarily aimed at conduct that intimidates or deters plaintiffs outside judicial channels. Within litigation, courts can police abuses via motion practice, sanctions standards, and other procedural safeguards.
No facts showed “chilling” or a plausible causal connection.
The opinion emphasized the absence of “evidence” or “reason to believe” that the counterclaims chilled plaintiff’s exercise of rights. In addition, plaintiff alleged retaliatory animus in conclusory fashion. Under the cited authorities, a retaliation amendment needs nonconclusory factual allegations supporting causation and adverse impact, not merely the sequencing of lawsuit followed by counterclaim.

C. Impact

Constrains “retaliation-by-counterclaim” theories.
The decision reinforces that, under Executive Law § 296 (7), ordinary counterclaims—without concrete allegations of chilling effect or plausible retaliatory motive—will rarely qualify as actionable retaliation. This reduces the risk that routine defense pleadings trigger satellite retaliation claims.
Channels disputes into litigation-management tools.
By endorsing the principle that courts can address bad-faith litigation conduct within the case (rather than via new statutory retaliation causes of action), the opinion encourages parties to use procedural remedies (e.g., dismissal, strike, sanctions motions where appropriate) rather than expanding Human Rights Law retaliation claims to encompass typical litigation behavior.
Clarifies mootness in the retaliation context.
The court’s correction of Supreme Court indicates that withdrawal of an allegedly retaliatory pleading does not automatically moot a claim based on the fact of filing. Future litigants should expect courts to address mootness separately from whether a pleading is legally sufficient.

4. Complex Concepts Simplified

CPLR 3025 (b) (“leave shall be freely given”): New York’s rule favoring amendments to pleadings. Courts usually allow changes unless the opposing party would be unfairly harmed (prejudice/surprise) or the new claim is clearly defective.
“Palpably insufficient” / “patently devoid of merit”: A proposed amendment fails on its face—meaning that even if the alleged facts are assumed true, the law would not recognize the claim, or the allegations are too conclusory to amount to a viable cause of action.
Retaliation under Executive Law § 296 (7): Prohibits punishing someone because they engaged in protected activity (like filing a discrimination complaint). A plaintiff must plausibly allege protected activity, the defendant’s knowledge, an adverse action, and a causal link between the two.
“Mootness”: A claim is moot when a court decision would no longer have a real-world effect. Here, the appellate court explained that withdrawal of a counterclaim does not automatically moot a claim premised on the act of filing it.
IIED (Intentional Infliction of Emotional Distress): A tort claim alleging extreme and outrageous conduct intended to cause (or recklessly causing) severe emotional distress. In this case, the IIED claim was asserted as a counterclaim and later withdrawn.
Litigation “hold letter”: A notice instructing a person or entity to preserve potentially relevant evidence because litigation is pending or anticipated.

5. Conclusion

Yegoryan v BB Med. & Dermatology P.C. establishes a clear practical rule in New York Human Rights Law practice: a plaintiff generally cannot convert an opponent’s litigation counterclaims into actionable retaliation without concrete, nonconclusory facts showing retaliatory motive and a meaningful adverse impact such as chilling protected rights. While the court rejected the idea that withdrawal of a counterclaim automatically moots a retaliatory-filing theory, it nevertheless affirmed denial of leave to amend because the proposed retaliation amendments were facially deficient.