Notice-of-Claim Prerequisite Extends to Economic Torts Against Village Officials Acting Within Scope; Donnelly Act and Tortious Interference Pleading Standards Reaffirmed

Commentary on Dibble v. Schroedel, 2025 NY Slip Op 04083 (App Div, 2d Dept, July 9, 2025)

Introduction

This appeal arises from a wide-ranging business dispute involving public procurement and development activity in the Village of Sleepy Hollow. The plaintiffs—Karl Dibble, Karl Dibble, Inc., and River Rock Supply Corp.—supply construction materials and services. They sued a constellation of defendants, including the Village of Sleepy Hollow, its Local Development Corporation (LDC), current and former Village officials, and private contractors and consultants, alleging tortious interference with existing and prospective contracts and a conspiracy in violation of New York’s antitrust statute, the Donnelly Act (General Business Law § 340). They also sought injunctive relief.

The Supreme Court, Westchester County, dismissed the complaint in its entirety, including, sua sponte, as against one defendant (Earth Improvements, Inc.). The Second Department affirmed. The decision delivers two principal messages:

• First, when municipal officials act within the scope of their duties, the statutory notice-of-claim requirement applies to suits against both the municipality and the officials (due to indemnification), even when the claims sound in “economic” torts like tortious interference or allege antitrust violations.
• Second, plaintiffs must meet well-established but exacting pleading standards for tortious interference and Donnelly Act claims; conclusory and speculative allegations will not survive a CPLR 3211(a) motion to dismiss.

Summary of the Judgment

• The Appellate Division affirmed dismissal of all claims against the Village of Sleepy Hollow, the Sleepy Hollow Local Development Corporation, and individual Village actors (the mayor, a trustee, the Village administrator, and a former trustee), as well as private defendants (Hudson Valley Management Consulting, LLC; Andrew Cortese; Cortese Construction, Inc.; James McGovern; and, sua sponte, Earth Improvements, Inc.).
• As to the “Village defendants,” the court held that the plaintiffs failed to comply with the notice-of-claim regime and one-year commencement requirement applicable to actions against a village (CPLR 9802; General Municipal Law § 50-e). Because the individual defendants’ alleged conduct fell within the scope of their official duties, the municipality would be obligated to indemnify them, triggering the notice-of-claim requirement for claims against them as well (GML § 50-e[1][b]).
• Independently, the court held the complaint failed to state causes of action for tortious interference with existing or prospective contractual relations because it did not adequately allege the necessary elements and relied on conclusory and speculative assertions.
• The Donnelly Act claim was also dismissed because the complaint did not plead the minimum elements: an identified product/geographic market, concerted action by at least two entities, and a resultant restraint of trade in that market, consistent with the Court of Appeals’ recent guidance (Taxi Tours Inc. v Go N.Y. Tours, Inc., 41 NY3d 991).
• Although the Supreme Court dismissed the claims against Earth Improvements, Inc. sua sponte, the Appellate Division treated the notice of appeal as an application for leave to appeal, granted leave (CPLR 5701[c]), and affirmed on the merits.

Detailed Analysis

Precedents Cited and Their Influence

• Notice-of-claim and timing requirements:
  • Matter of Nunez v Village of Rockville Ctr., 176 AD3d 1211, 1213: confirms service of a notice of claim within 90 days is a condition precedent to tort suits against municipalities.
  • Solow v Liebman, 175 AD2d 867, 868–869: anchors the one-year commencement requirement for suits against villages (CPLR 9802).
  • Parpounas v Ohagan, 216 AD3d 985, 986–987 and Singh v City of New York, 189 AD3d 1697, 1699, affd 40 NY3d 138: failure to comply with statutory notice-of-claim requirements warrants dismissal under CPLR 3211(a)(7) for failure to state a cause of action.
• Notice-of-claim for municipal employees; scope-of-employment and indemnification:
  • General Municipal Law § 50-e(1)(b); Blake v City of New York, 148 AD3d 1101, 1106; Zwecker v Clinch, 279 AD2d 572, 573; International Shared Servs. v County of Nassau, 222 AD2d 407, 409: if the municipality is obligated to indemnify an employee, timely service of a notice of claim on the municipality is a condition precedent to suing the employee. Indemnification turns on whether the employee acted within the scope of employment.
  • McCormack v Port Washington Union Free School Dist., 214 AD2d 546, 546–547: supports the conclusion that tortious acts alleged in a complaint were within officials’ duties.
• Pleading sufficiency in economic torts:
  • Franklin D. Nastasi Trust v Bloomberg, L.P., 224 AD3d 804, 808: reinforces dismissal where a complaint does not allege sufficient facts for required elements.
  • Tumayeva v Geyber, 220 AD3d 634, 635; Kronos, Inc. v AVX Corp., 81 NY2d 90, 94; Influx Capital, LLC v Pershin, 186 AD3d 1622, 1624; Ferrandino & Son, Inc. v Wheaton Bldrs., Inc., LLC, 82 AD3d 1035, 1036: articulate elements of tortious interference with contract and the prohibition on speculative pleading.
  • Law Offs. of Ira H. Leibowitz v Landmark Ventures, Inc., 131 AD3d 583, 585; NBT Bancorp v Fleet/Norstar Fin. Group, 87 NY2d 614, 621; Stuart’s, LLC v Edelman, 196 AD3d 711, 713: define the “more culpable conduct” standard and “wrongful means” requirement for interference with prospective business relations.
  • 106 N. Broadway, LLC v Lawrence, 189 AD3d 733, 740; Nero v Fiore, 165 AD3d 823, 825; Jones v Voskresenskaya, 125 AD3d 532, 533–534: applied to find plaintiffs’ conclusory/speculative allegations insufficient.
• Donnelly Act pleading:
  • Taxi Tours Inc. v Go N.Y. Tours, Inc., 41 NY3d 991, 994: a Donnelly Act complaint must allege concerted action by two or more entities and a consequent restraint of trade within an identified relevant product market.
  • Neri’s Land Improvement, LLC v J.J. Cassone Bakery, Inc., 65 AD3d 1312, 1315; Watts v Clark Assoc. Funeral Home, 234 AD2d 538: detail the minimum allegations—relevant market, nature/effects of conspiracy, and economic impact.
  • Benjamin of Forest Hills Realty, Inc. v Austin Sheppard Realty, Inc., 34 AD3d 91, 97; Hall Heating Co. v New York State Elec. & Gas Corp., 180 AD2d 957, 958: support dismissal where Donnelly Act pleadings lack essential elements.
• Appellate review of sua sponte dismissals:
  • CPLR 5701(c): when a lower court issues an order sua sponte, the Appellate Division may treat a notice of appeal as an application for leave and grant leave; here, it did so and affirmed the sua sponte dismissal of claims against Earth Improvements, Inc.

Legal Reasoning

1) Notice-of-Claim and One-Year Commencement Against Villages; Indemnification-Based Extension to Officials

The court reaffirmed that a plaintiff must serve a notice of claim within 90 days of accrual as a condition precedent to tort suits against a municipality and must commence the action within one year after the event (CPLR 9802; GML § 50-e). Crucially, the court extended this barrier to claims against municipal employees when the municipality would be obligated to indemnify them, an obligation that turns on whether the alleged acts were undertaken within the scope of employment (GML § 50-e[1][b]; Zwecker v Clinch). Applying those principles, the court concluded that, liberally construing the complaint, the alleged tortious acts by the Village mayor, trustee, administrator, and former trustee were taken in their official capacities. The plaintiffs’ submissions did not establish that any defendant acted outside the scope of official duties or that the municipality would not indemnify them. The failure to comply with the notice-of-claim regime therefore required dismissal of the claims against both the municipal entities (the Village and its LDC) and the individual officials.

Notably, the court treated the Sleepy Hollow Local Development Corporation, LLC—formed by Village resolution—as a “municipal defendant” for purposes of the notice-of-claim analysis. While the opinion does not separately analyze the LDC’s status, practitioners should anticipate that closely affiliated LDCs may be treated like municipal entities in this context.

2) Pleading Defects in Tortious Interference Claims

On the merits, the complaint also failed. For tortious interference with contract, a plaintiff must allege: (1) a valid contract with a third party; (2) defendant’s knowledge; (3) intentional procurement of a breach without justification; and (4) damages (Kronos, Inc. v AVX Corp.). The court found that plaintiffs did not adequately allege which third-party contracts were breached, how they were breached, or how any defendant’s wrongful conduct induced those breaches. Speculation is insufficient at the pleading stage (Influx Capital, LLC v Pershin; Ferrandino & Son, Inc.).

For tortious interference with prospective business relations, the bar is higher: plaintiffs must plead “more culpable conduct,” typically “wrongful means,” such as fraud, misrepresentation, civil suits/criminal prosecutions, certain economic pressure, or conduct undertaken solely to harm the plaintiff (NBT Bancorp; Law Offs. of Ira H. Leibowitz). Here, the complaint and opposition papers offered only conclusory allegations that defendants’ conduct caused plaintiffs to lose potential contracts. Without concrete factual allegations of wrongful means or the sole-motive-to-harm exception, the cause of action cannot stand (Nero v Fiore; Jones v Voskresenskaya).

3) Donnelly Act: Minimum Pleading Standards Reinforced

The Donnelly Act claim failed because the complaint did not identify a relevant product and geographic market, did not describe the nature and effects of the alleged conspiracy, and did not allege how the conspiracy restrained trade in that market via concerted action by two or more economic actors. The court cited Taxi Tours Inc. v Go N.Y. Tours, Inc. (41 NY3d 991, 994), underscoring the Court of Appeals’ insistence on these minimum elements. Allegations of harm to a single competitor, or conclusory labels of “collusion,” do not suffice; plaintiffs must plead the who, what, where, and how of an anticompetitive agreement and its market-wide effects (Neri’s Land Improvement; Benjamin of Forest Hills Realty; Hall Heating).

4) Sua Sponte Dismissal and Appellate Review

Finally, the Supreme Court dismissed claims against Earth Improvements, Inc. sua sponte. Although such orders are generally nonappealable as of right, the Appellate Division treated the notice of appeal as an application for leave under CPLR 5701(c), granted leave, and affirmed, relying on the same pleading deficiencies addressed above.

Impact and Practical Implications

• Municipal litigation posture: This decision reinforces that business tort and antitrust claims against villages and their officials are squarely subject to the notice-of-claim and one-year commencement regime where the officials acted within the scope of their duties. Plaintiffs in procurement and development disputes should assume the notice-of-claim requirement applies unless they can plausibly allege and support that an official acted outside the scope of employment.
• Local Development Corporations (LDCs): By treating the Sleepy Hollow LDC as a “municipal defendant” for notice-of-claim purposes, the decision signals that LDCs created and controlled by a municipality may be functionally assimilated to municipal entities in this context. Litigants should serve a timely notice of claim when suing an LDC connected to a village or risk dismissal.
• Pleading rigor for tortious interference: Naming contracts and counterparties is not enough. Plaintiffs must allege in nonconclusory terms: specific contractual provisions, the third party’s breach, causal procurement by the defendant via wrongful conduct, and damages. For prospective relations, they must detail the “wrongful means” used or single-minded malice; ordinary competitive behavior will not suffice.
• Antitrust claims in New York courts: Following Taxi Tours, Donnelly Act complaints must plead an identified relevant market and harm to competition within that market caused by concerted action. This decision confirms that courts will dismiss Donnelly Act claims that blur “harm to a competitor” with “harm to competition,” or that fail to articulate conspiratorial agreement and market effects with specificity.
• Risk of sua sponte dismissal: Where a complaint’s defects are global, courts may dismiss as to nonmoving defendants sua sponte. Appellate review is available by leave (CPLR 5701[c]), but the safest route is to ensure the initial pleading meets all elements against all defendants.

Complex Concepts Simplified

• Notice of Claim (GML § 50-e; CPLR 9802): A sworn, written notice describing your claim that must be served on the municipality within 90 days of when the claim accrues. For villages, the lawsuit must also be started within one year of the event. Without timely service and commencement, tort claims are dismissed.
• Scope of Employment & Indemnification: If a municipal employee’s alleged wrongful acts occurred while performing official duties, the municipality may have to pay any judgment (indemnify). In that case, you must serve a notice of claim even when suing the employee personally.
• CPLR 3211(a)(7): A motion to dismiss for failure to state a cause of action. Courts assume the pleaded facts are true but ignore bare conclusions and speculation.
• Tortious Interference with Contract: Requires a valid contract, defendant’s knowledge, intentional unjustified procurement of a breach by the third party, and damages. You must allege the breach and how the defendant caused it.
• Tortious Interference with Prospective Business Relations: No contract is needed, but you must show “wrongful means” (e.g., fraud, threats, some economic pressure) or that the defendant’s sole motive was to harm you.
• Donnelly Act (GBL § 340): New York’s antitrust law. To plead it, you must identify the relevant market (product and geography), allege an agreement among at least two entities, and explain how the agreement restrains trade in that market. Injury merely to your own business is not enough; the law targets harm to competition.
• Sua Sponte Dismissal & CPLR 5701(c): A court may dismiss on its own initiative for legal insufficiency. Appellate review typically requires leave; the Appellate Division can treat an attempted appeal as a leave application and decide the merits.

Practice Pointers

• Before suit:
  • Calendar the 90-day notice-of-claim deadline and the one-year commencement deadline for any tort claims against a village and related officials. When in doubt about an LDC’s status, serve the notice.
  • Assess scope-of-employment issues. If facts support conduct outside official duties, plead them clearly to avoid triggering indemnification-based notice requirements.
• Pleading economic torts:
  • Identify each contract by party, date, and key terms; allege the precise breach and how the defendant caused it.
  • For prospective relations, narrate the “wrongful means” with specifics: who said/did what, when, to whom, and how it crossed the line from competition to misconduct.
• Pleading a Donnelly Act claim:
  • Define the relevant product and geographic market, and why it is economically coherent.
  • Plead the agreement: participants, timing, communications, and conduct evidencing concerted action.
  • Explain the anticompetitive effect on the market (e.g., output reduction, price increases, foreclosure of rivals), not just injury to your firm.
• Anticipating motions to dismiss:
  • Attach or quote operative contract provisions to ground interference claims.
  • Avoid group pleading; allocate acts to specific defendants.
  • Use contemporaneous documents or detailed factual allegations to bridge any causation gaps.

Conclusion

Dibble v. Schroedel reinforces two bedrock propositions in New York practice. First, statutory prerequisites to suit against villages—including timely notice of claim and commencement—apply broadly to tort claims and can extend to suits against individual officials if they acted within the scope of their public duties due to indemnification rules. Litigants who overlook these steps do so at their peril. Second, courts will rigorously police the elements of tortious interference and Donnelly Act claims at the pleading stage. Plaintiffs must supply concrete, nonconclusory facts showing contractual breach and wrongful procurement (or wrongful means for prospective relations), and, for antitrust claims, specify a cognizable market, concerted action, and a restraint of trade within that market. The case also illustrates that when pleading defects are global, courts may dismiss as to all defendants—including sua sponte—with limited recourse on appeal.

In the broader legal landscape, the decision tightens the procedural and substantive filters for business disputes with municipal actors and underscores the alignment of New York antitrust pleading with recent Court of Appeals guidance. Practitioners confronting procurement-related controversies should integrate notice-of-claim compliance into their litigation strategy and draft complaints that meet the heightened factual particularity demanded by economic tort and antitrust doctrine.