Peter Sluka wrote a month ago about Matter of Lin v Sun ___ AD3d ___ (2026 NY Slip Op 02065 [1st Dept Apr. 7, 2026]). In Lin, the First Department unanimously rejected a petitioner-appellant’s claim she acquired standing to sue to dissolve an LLC merely from an oral promise by the founder to transfer her a 40% membership interest. The Court ruled that a claim of LLC membership status fails where there is noncompliance with the operating agreement’s requirement for admission of new members, such as execution of a joinder agreement.

Lin is among good company: we’ve written about many lawsuits that suffered standing-based dismissals for noncompliance with contractual requirements for creation of full-blown equityholder status. You can read an article summarizing some of those stories here. But every once in a while, courts go the other way, finding an issue of fact where there is extensive indicia of ownership, an example of which you can read here.

When we write our blogs, there’s often more to a decision than we can tackle in a single article. With Peter Sluka’s gracious consent, I’m going pick up where he left off, focusing on a curious holding at the tail end of Lin — the Court’s resurrection of a dismissed cause of action for promissory estoppel.

In my personal experience litigating business divorce cases, I have never encountered a cause of action for promissory estoppel survive dispositive motion practice, and certainly never had one reinstated on appeal. What made this particular claim for promissory estoppel stick? Does Lin provide a template for spurned, would-be equity owners to allege promissory estoppel as a substitute for a nonviable claim of direct business ownership? Let us see.

Before the motion court, the outcome for petitioner Yuchen Lin (“Lin”) could not have been more harsh: dismissal at oral argument of the entirety of her petition, including all eleven declaratory, statutory, tort, contractual, and quasi-contractual claims. But her showing of a promise to convey an ownership interest in the business was not insignificant. In her petition, Lin alleged that, after forming the LLC as a single-member entity to own and operate a Stretch Lab physical therapy franchise, the founder, respondent Xu Sun (“Sun”), told Lin of his “need for a partner in operating the franchise due to his work commitments outside of the company.” Sun allegedly offered Lin a “membership interest in the company in consideration” for six concrete duties by Lin:

• agreeing to “oversee the initial construction and renovation of the location” in Manhattan;

• “physically being at the location nearly every day that that franchise was open to the public”;

• “overseeing employees and contractors of the business, excluding setting the rate of pay and making any payments for salaries and contractor fees”;

• “performing customer services and maintaining customer relations”;

• “attending all owner training sessions and meetings required by the franchisor”; and

• “performing all other duties for the general operations of the franchise.”

Lin said she “accepted the terms” of Sun’s “offer” and went all in. She contributed $10,000 towards the cost of construction, which she characterized as “not a loan,” “not a gift,” but a “capital contribution” for equity. She faithfully fulfilled all her duties, including devoting “approximately 2,312.4 hours in furtherance of the company’s business” for “no compensation whatsoever.” Sun even circulated a quasi-partnership agreement entitled “EdSun & AngLin Partnership Terms” and printed business cards naming Lin “owner.”

But then, inevitably, came the falling out: heated arguments, alleged physical violence, not one, but two criminal arrests, an order of protection, and finally, Lin’s banishment from the business, with Sun denying she was ever an owner.

Which brings us to the promissory estoppel claim. Promissory estoppel is a fragile cause of action, best with vulnerabilities.

First, it is an open question whether promissory estoppel even exists as a cause of action in New York. Last year, New York’s highest court wrote: “While we have never recognized promissory estoppel as a standalone cause of action, the Appellate Division has done so in at least some circumstances” (Bentkowski v City of New York, 44 NY3d 611 [2025]). In Bentkowski, the Court chose to “not decide whether to recognize a promissory estoppel cause of action” under New York law, leaving the question still open. While the cause of action itself is of shaky provenance, motion courts are bound under the doctrine of stare decisis to follow the rulings of all four Departments of the Appellate Division recognizing the cause of action’s existence, unless or until the Court of Appeals announces a “contrary rule” (D’Alessandro v Carro, 123 AD3d 1 [1st Dept 2014]).

Second, promissory estoppel is not a viable cause of action where an agreement — oral or written — governs the same subject. “The existence of a valid and enforceable contract governing a particular subject matter precludes recovery under a promissory estoppel cause of action arising out of the same subject matter” (Del Vecchio v Gangi, 225 AD3d 666 [2d Dept 2024]). In Behler v Tao (43 NY3d 343 [2025]), the Court of Appeals applied this rule of law in the business entity context, ruling that where an “LLC agreement governs the promise at issue,” a “promissory estoppel claim” – based upon what the intermediate appeals court labeled an “oral side agreement” (Behler v Tao, 227 AD3d 121 [1st Dept 2024]) – must be “dismissed as duplicative of the breach of contract claim.”

Third, among the essential elements of a cause of action for promissory estoppel are the requirements to plead and prove a “clear and “unambiguous” promise that the plaintiff “reasonably relied upon to its detriment” (Patrick Capital Markets, LLC v Rabina Props., LLC, 225 AD3d 525 [1st Dept 2024]). So a requirement for any successful claim for promissory estoppel is to show that the plaintiff’s alleged reliance was “reasonable” and “justifiable” (Schum v Spatorico, 181 AD3d 1245 [4th Dept 2020]). This requirement is challenging – as with fraud, courts often find a plaintiff’s alleged reliance “unreasonable as a matter of law” (StarVest Partners II, L.P. v Emportal, Inc., 101 AD3d 610 [1st Dept 2012]), even at the pleadings stage, where the court assumes the complaint’s truth (see e.g. Behler v Tao, 2022 NY Slip Op 34708[U] [Sup Ct, NY County 2022] [“The promissory estoppel claim fails because Mr. Behler’s reliance on Mr. Tao’s alleged promise was unreasonable based on the lack of definite terms as to any purported guaranteed exit strategy”], affd 227 AD3d 121 [1st Dept 2024], affd 43 NY3d 343 [2025]).

Plaintiffs navigating these rules of law seldom survive dispositive motion practice, as the motion court ruled in Lin. But the First Department mercifully reversed, holding that Lin “sufficiently stated a cause of action for promissory estoppel” by alleging that Sun “promised to transfer to petitioner a 40% interest,” that Lin “relied on that promise in rendering services and providing capital for the business,” and that Lin “suffered damages.” No analysis. No explanation. Just a conclusion. Would it not be helpful to know why the Court reached this outcome?

Here is what I think. Courts don’t always mechanically apply rules of law. Based on the harsh results we write about here all the time on New York Business Divorce, it’s easy to think otherwise, but courts really do try to achieve justice. Before the motion court, Lin took a beating. Seems to me the Appellate Division felt sympathy for her. According to Lin’s petition, she devoted an immense amount of uncompensated time to the enterprise – more hours than many of even the most high-performing lawyers work in a full year. If true, she undoubtedly suffered a wrong. For her wrong, the Appellate Division supplied a remedy, at least for now, via an uncommon example of a promissory estoppel claim surviving dismissal.

But Lin is not entirely without precedent in the world of close owner disputes. I wrote five years ago about a marijuana partnership dispute, CIP GP 2018 v Koplewicz (194 AD3d 639 [1st Dept 2021]). Though this aspect of the decision did not make the blog, the First Department there, like in Lin, reinstated a dismissed claim for promissory estoppel, ruling that the plaintiff “adequately pleaded” that it “reasonably relied” upon an alleged oral promise to form a general partnership. The Court wrote that the claim for promissory estoppel “should not have been dismissed as duplicative” of the accompanying claim for breach of oral partnership agreement because “where there is a bona fide dispute as to the existence of a contract” a plaintiff “may proceed upon a theory of quasi contract as well as breach of contract, and will not be required to elect his or her remedies.”

And in Williams v Eason (49 AD3d 866 [2d Dept 2008]), the Court ruled that the plaintiff “raised a triable issue of fact” sufficient to survive summary judgment on a claim for promissory estoppel by alleging the defendant promised he “would form a corporation in which both he and the plaintiff would have ownership interests,” then transfer title to a piece of real property to the corporation for the two own together through incorporation.

Under these authorities, on the right set of facts, a plaintiff may be able to plead, even raise a triable issue of fact, on a claim for promissory estoppel based upon an unfulfilled promise to make the plaintiff an owner of a closely-held business. Promissory estoppel cannot solve the lack-of-standing problem for judicial dissolution, nor for derivative claims. But it may potentially salvage a damages remedy. So don’t look down your nose at that promissory estoppel claim. There may be something to it.