On March 11, 2025, the First Department issued a decision in Young Adult Inst., Inc. v. Corporate Source, Inc., 2025 NY Slip Op. 01334, holding that a plaintiff could not recover on a faithless servant claim without evidence of damages, explaining:
There is also no proper legal basis to award employee replacement costs or revenue disgorgement damages on these claims. The standard measure of damages for an employee’s breach of the duty of loyalty is the disgorgement of his or her compensation during the period of disloyalty. YAI is not additionally entitled to recover the costs of replacing the Employees because, as at-will employees not subject to covenants not to compete, they were free to leave YAI to work elsewhere, including for Corporate Source, and Corporate Source was free to recruit them. Although YAI is also entitled to damages for the wrongful diversion of its business measured by the opportunities for profit on the accounts diverted from it through defendants’ conduct, this entitles it to an award reflecting its own lost profits, which may be measured by reference to the profits made by defendants from clients or business opportunities diverted from plaintiff, not to the disgorgement of Corporate Source’s revenue, whether or not related to the diversion of clients or business opportunities from YAI. Plaintiffs have presented no evidence as to how much of Corporate Source’s gross revenue YAI could reasonably have expected to count as its own profits absent the Employees’ breach. YAI also had no tangible expectancy of continued management fees from Corporate Source, as the management agreement had already expired.
(Internal quotations and citations omitted).