Opinion
Index No. 650201/2018 Motion Seq. No. 003
05-07-2024
MRC 56 CORP., Plaintiff, v. THE WEEKS-LERMAN GROUP, LLC, Defendant.
Unpublished Opinion
PRESENT: HON. VERNA L. SAUNDERS, Justice
DECISION + ORDER ON MOTION
HON. VERNA L. SAUNDERS, J.S.C.
The following e-filed documents, listed by NYSCEF document number (Motion 003) 148, 149, 150, 151, 152, 153, 154, 155, 156, 157, 158, 159, 160, 161, 162, 163 were read on this motion to/for AMEND CAPTION/PLEADINGS .
Defendant The Weeks-Lerman Group, LLC moves, pursuant to CPLR 3025, for leave to serve a second amended answer and amended counterclaims. For the reasons set forth below, the motion is denied.
On January 15, 2018, plaintiff MRC 56 Corp, commenced this action asserting two causes of action for breach of contract against defendant related to an asset purchase agreement (the "APA") the parties had executed in August 2010 (NYSCEF Doc. No. 1, complaint ¶ 1). Defendant answered the complaint on March 10, 2018 (NYSCEF Doc. No. 12) and later served an amended answer dated April 4, 2018, that asserts a single counterclaim for breach of contract (NYSCEF Doc. No. 14). Plaintiff served a reply and then an amended reply to the counterclaim (NYSCEF Doc. Nos. 15 and 18). Plaintiff then moved for summary judgment on its complaint and for summary judgment dismissing defendant's sole counterclaim asserted in the amended answer (NYSCEF Doc. No. 19). Five days after service of the motion, defendant served a second amended answer in which defendant asserted four counterclaims: (1) breach of sections 1.4 and 6.3(a) of the APA; (2) breach of a "Closing Bill of Sale, Assignment and Assumption Agreement" dated December 19, 2014 ("Closing Contract"); (3) fraudulent inducement predicated upon allegedly false representations in sections 3.10 and 3.20 of the APA, which allegedly induced defendant into entering into the APA; and (4) fraudulent inducement predicated upon allegedly false representations in sections 3.10 and 3.20 of the APA, which allegedly induced defendant into entering into the Closing Contract (NYSCEF Doc No. 35). In response, plaintiff served a notice rejecting service of the second amended answer the same day based on defendant's failure to seek leave of court or plaintiffs consent to the amendment by stipulation (NYSCEF Doc. No. 36). Two weeks later, defendant cross-moved for summary judgment on the issue of plaintiffs liability on the first and second counterclaims asserted in the second amended answer (NYSCEF Doc. No. 39). In a decision and order dated July 3, 2019, the court (Ling-Cohan, J.) denied the motion and cross-motion on the first counterclaim pleaded in the amended answer (NYSCEF Doc. No. 72 at 22). The court also noted that defendant had served a second amended answer in violation of CPLR 3025(a) and "is dismissed" (id. at 24). The court (Ling-Cohan, J.) subsequently denied defendant's motion and plaintiffs cross-motion to renew and/or reargue its July 3, 2019 decision and order (NYSCEF Doc. Nos. 142-143).
On July 18, 2019, plaintiff served and filed a notice of issue and certificate of readiness stating that discovery was complete (NYSCEF Doc. No. 76). Defendant now moves, pursuant to CPLR 3025, for leave to serve a second amended answer and amended counterclaims. Plaintiff opposes the motion.
It is well settled that '"leave to amend a pleading should be freely granted in the absence of prejudice to the nonmoving party where the amendment is not patently lacking in merit'" (Davis v South Nassau Communities Hosp., 26 N.Y.3d 563, 580 [2015] [citation omitted]) or is not "palpably insufficient" (Smith v Founders Entertainment LLC, 216 A.D.3d 417, 417 [1st Dept 2023]). "Mere lateness is not a barrier" (Edenwald Contr. Co. v City of New York, 60 N.Y.2d 957, 959 [1983] [internal citation and quotation marks omitted]). Indeed, leave to amend may be granted on the eve of, during, and even after trial (Kimso Apts., LLC v Gandhi, 24 N.Y.3d 403, 411 [2014]; Murray v New York, 43 N.Y.2d 400, 405 [1977], rearg denied 45 N.Y.2d 966 [1978]; Reyes v City of New York, 63 A.D.3d 615, 616 [1st Dept 2009], Iv denied 13 N.Y.3d 710 [2009]), so long as the opposing party is not significantly prejudiced (Edenwald Contr. Co., 60 N.Y.2d at 959]; Loomis v Civetta Corrino Constr. Corp., 54 N.Y.2d 18, 23 [1981], rearg denied 55 N.Y.2d 801 [1981] [stating that prejudice requires a showing that the party opposing the amendment "has been hindered in the preparation of [its] case or has been prevented from taking some measure in support of [its] position"]). It is within the court's discretion to grant a motion to amend (Ferrer v Go N.Y. Tours Inc., 221 A.D.3d 499, 500 [1st Dept 2023]). "Where, however, an action has long been certified as ready for trial, judicial discretion in allowing such amendments should be discrete, circumspect, prudent, and cautious" (Clarkin v Staten Is. Univ. Hosp., 242 A.D.2d 552, 552 [2d Dept 1997]).
Under these precepts, defendant's motion for leave to serve a second amended answer and amended counterclaims is denied. Defendant first attempted to serve a second amended answer pleading counterclaims for breach of contract and fraudulent inducement in May 2018. Plaintiff rejected service of the second amended answer citing defendant's failure to obtain leave of court or plaintiffs prior consent, and an amended answer served without compliance with the requirements in CPLR 3025(b) is a nullity (see Khedouri v Equinox, 73 A.D.3d 532, 533 [1st Dept 2010] [service of an amended complaint more than 20 days after the defendant's service of an answer and without leave of court deemed a nullity]; Walden v Nowinski, 63 A.D.2d 586, 586 [1st Dept 1978] ["[t]he amended answer, served without requisite leave, was a nullity"]). Undeterred, defendant cross-moved for summary judgment on the second amended answer. Even after the court's determination that defendant had failed to comply with CPLR 3025(b), defendant still did not move for leave to amend. Thus, the only operative pleading on defendant's part is its original amended answer dated April 4, 2018, in which defendant pleaded a single counterclaim for breach of contract.
"Where there has been an extended delay in moving to amend, the party seeking leave to amend must establish a reasonable excuse for the delay" (Heller v Louis Provenzano, Inc., 303 A.D.2d 20, 24 [1st Dept 2003] [internal quotation marks and citation omitted]). Here, defendant has not proffered an excuse for its years-long delay in its moving papers. Defendant has been aware of the proposed counterclaims since 2018 when it attempted to raise them in an improperly served second amended answer (see Schucht v Innovative Biodefense, Inc., 217 A.D.3d 703, 704 [2d Dept 2023] [unexplained four-year delay where the plaintiff was aware of the facts from the commencement of the action]). Defendant moved for leave to amend four years after plaintiff filed a note of issue and after discovery has been tailored to the breach of contract claims and counterclaim (see Panasia Estate, Inc. v Broche, 89 A.D.3d 498, 498 [1st 2011] [denying motion to amend where discovery had been tailored to the theories of liability asserted in the amended complaint, determinations on summary judgment motions had been made, and the filing of the note of issue was imminent]). Defendant has never moved to vacate the note of issue, nor has it claimed to have sought any discovery related to its proposed fraud counterclaims. As such, defendant has failed to proffer any explanation for its inactivity during this lengthy period (see Schelchere v Halls, 120 A.D.3d 788, 788 [2d Dept 2014] [denying motion to amend "given the plaintiffs' extensive and unexplained delay in seeking to amend their complaint based on facts that were known to them since the onset of the litigation"]; Spence v Bear Stearns & Co., 264 A.D.2d 601, 602 [1st Dept 1999] [denying motion to amend given the plaintiffs "inexcusable delay of 6 1/2 years in seeking to amend, to add the new theory of liability ... and the lack of any evidentiary showing of merit"]). More importantly, defendant's delay in moving for relief has caused significant prejudice to plaintiff in the preparation of its case (see Pecora v Pecora, 204 A.D.3d 611, 612 [1st Dept 2022]; Nationstar Mtge., LLC v Fuller, 182 A.D.3d 531, 531 [1st Dept 2020]).
Defendant, for the first time in reply, attributes its delay in moving for relief to the reassignment of the action from Justice Ling-Cohan, plaintiffs failure to "restore" the action to an unspecified "calendar" for a future appearance, and the temporary procedures implemented in Supreme Court, New York County on March 17, 2020, that restricted court filings to essential applications in response to the COVID-19 pandemic (NYSCEF Doc. No. 145; see also Admin Order of Chief Admin Judge of Cts AO/78/20). These arguments are wholly unpersuasive as filings for non-essential applications resumed on May 4, 2020 (see Admin Order of Chief Admin Judge of Cts AO/87/20). Furthermore, defendant, equally, could have requested a court conference once the matter had been reassigned upon Justice Ling-Cohan's retirement in 2020.
Moreover, defendant has failed to demonstrate the merit to the proposed counterclaims for fraudulent inducement grounded upon the special facts doctrine. Generally, "[t]he legal sufficiency or merits of a proposed amendment to a pleading will not be examined unless the insufficiency or lack of merit is clear and free from doubt" (Ferrer, 221 A.D.3d at 500). "An amendment is devoid of merit where the allegations are legally insufficient" (Reyes v BSP Realty Corp., 171 A.D.3d 504, 504 [1st Dept 2019]). As is relevant here, a cause of action for fraud requires a misrepresentation or material omission of fact that was false and known to be false by plaintiff, that plaintiff made the misrepresentation or omission to induce defendant to rely on it, defendant's justifiable reliance, and resulting damages (see Pasternack v Laboratory Corp, of Am. Holdings, 27 N.Y.3d 817, 827 [2016]). Fraud must be pleaded with particularity under CPLR 3016(b). Here, the proposed pleading fails to set forth the circumstances constituting the wrong in detail (see Davis v Siben & Siben, LLC, 211 A.D.3d 681, 682 [2d Dept 2022]; Non-Linear Trading Co. v Braddis Assocs., 243 A.D.2d 107, 116 [1st Dept 1998]; cf. A.N. Frieda Diamonds, Inc. v Kaminski, 122 A.D.3d 517, 517 [1st Dept 2014]). The proposed second amended answer contains only vague, conclusory allegations that merely recite the elements for a fraud cause of action, which is insufficient (see Meiterman v Corporate Habitat, 173 A.D.3d 593, 594 [1st Dept 2019]). In addition, the proposed amended second answer fails to plead nonconclusory facts from which fraudulent intent may be inferred (see Fried v Lehman Bros. Real Estate Assoc. Ill. L.P., 156 A.D.3d 464, 465 [1st Dept 2017], Iv denied, Iv dismissed 31 N.Y.3d 1137 [2018]). Thus, defendant has failed to demonstrate the arguable merit to its proposed second amended answer.
Furthermore, a party invoking the special facts doctrine must establish that "the material fact was information peculiarly within the knowledge of one party and that the information was not such that could have been discovered by the other party through the exercise of ordinary intelligence" (LMM Capital Partners, LLC v Mill Point Capital, LLC, 224 A.D.3d 504, 508 [1st Dept 2024] [internal quotation marks and citation omitted]). The proposed amended second answer fails to plead any nonconclusory facts from which it may be inferred that defendant could not have discovered the rate notices and negative balances issued by the Division of Unemployment Insurance of the New York State Department of Labor through the exercise of ordinary intelligence (see New York City Waterfront Dev. Fund II, LLC v. Pier A Battery Park Assocs., LLC, 206 A.D.3d 565, 567 [1st Dept 2022]).
Last, defendant failed to furnish the court with a "proposed amended or supplemental pleading clearly showing the changes or additions to be made to the pleading" (CPLR 3025[b]). The proposed pleading submitted on the application purports to show the changes made to its prior second amended answer, but as discussed earlier, service of this answer was a nullity. Because defendant has not offered a proposed amended second answer showing the changes made to its amended answer from April 2018, the motion must be denied on this ground, as well (see Wiltz v New York Univ., 217 A.D.3d 521, 522 [1st Dept 2023]). Accordingly, it is
ORDERED that the motion brought by defendant The Weeks-Lerman Group, LLC for leave to serve a second amended answer and amended counterclaims is denied; and it is further
ORDERED that, within twenty (20) days after this decision and order is uploaded to NYSCEF, counsel for plaintiff shall serve a copy of this decision and order, with notice of entry, upon defendant.
This constitutes the decision and order of the court. May 7, 2024