year 1983, other than the conclusory statements contained in
the complaint that the defendant was advised of the IRS
disallowance sometime in 1984. This is insufficient to create
a genuine issue of material fact, especially since the
plaintiffs' own Complaint and affidavits indicate otherwise.
Accordingly, based upon the foregoing, the plaintiffs' claim
of professional accounting malpractice based on the alleged
negligence of the defendant is time barred as a matter of law
under CPLR 214(6) and count IV is dismissed.
2. DEFENDANT'S MOTION FOR SUMMARY JUDGMENT:
Because of the disposition set forth above, the Court need
not make a determination on the defendant's motion for summary
judgment, since the Court finds that as a matter of pleading,
the plaintiffs have failed to state a claim for relief under
either the federal securities laws or the common law of New
York. Therefore, the defendant's motion for summary judgment is
denied, except as to count IV, which the Court grants.
3. PLAINTIFFS' MOTION TO AMEND:
The plaintiffs move pursuant to Fed.R.Civ.P. 15(a), for leave
to amend the complaint to withdraw count III of the complaint
and also to increase the amount alleged in the ad damnum
Pursuant to Fed.R.Civ.P. 15(a), "leave shall be freely given
when justice so requires" (emphasis supplied). Only "`undue
delay, bad faith, futility of amendment, and perhaps, most
important, the resulting prejudice to the opposing party'"
should provide reason for denial of such a motion (Richardson
Greenshields Sec., Inc. v. Mui-Hin Lau, 825 F.2d 647, 653 n. 6
[2d Cir. 1987], quoting State Teachers Retirement Bd. v. Fluor
Corp., 654 F.2d 843, 856 [2d Cir. 1981]; see also State Trading
Corp. of India, Ltd. v. Assuranceforeningen Skuld, 921 F.2d 409
[2d Cir. 1990], quoting Foman v. Davis, 371 U.S. 178, 182,
83 S.Ct. 227, 230, 9 L.Ed.2d 222 ). However, where there
is simply "no merit in the proposed amendments, leave to amend
should be denied" (Health-Chem Corp. v. Baker, 915 F.2d 805 [2d
Cir. 1990]). Of course, "refusal to grant leave must be based
on a valid ground" (Ronzani v. Sanofi S.A., 899 F.2d 195, 198
[2d Cir. 1990], citing Foman v. Davis, supra).
In determining whether a proposed amendment is frivolous on
its face, the Court applies the same test that is used to
assess the legal sufficiency of a pleading under Fed.R.Civ.P.
12(b)(6) (see 3 Moore's Federal Practice ¶ 15.08, at pp.
15-80 to 15-82 [2d ed. 1990]), by assuming the truth of the
allegations contained in the pleading.
As stated above, the plaintiffs' motion for leave to withdraw
count III alleging violation of the Martin Act, is granted.
As to the request for leave to amend the complaint to
increase the amount of the ad damnum clause, "[s]uch amendments
are to be liberally permitted unless there is prejudice to a
party" (Greenspon v. Supermarkets General Corp., 744 F. Supp. 77,
78 [S.D.N.Y. 1990] [citations omitted]; cf. Crown Coat
Front Co. v. United States, 395 F.2d 160, 164 [2d Cir.]
[upholding district court's denial of leave to amend to
increase amount of damages], cert. denied, 393 U.S. 853, 89
S.Ct. 123, 21 L.Ed.2d 122 ). Not having demonstrated any
possible prejudice, the plaintiff's motion for leave to
increase the amount alleged in the ad damnum clause is granted.
Based upon the foregoing, the motion of the defendant for
judgment on the pleadings pursuant to Fed.R.Civ.P. 12(c) as to
counts I and II, is granted, with leave to replead (see Ronzani
v. Sanofi S.A., supra, 899 F.2d at p. 198 [2d Cir. 1990]
[quoting 2A Moore & Lucas, Moore's Federal Practice ¶ 12.14 at
12-99 [2d ed. 1989] ["[w]hen a motion to dismiss is granted,
`the usual practice is to grant leave to amend the complaint' .
. . [and] refusal to grant leave must be based on a valid
ground"]). The motion of the defendant for summary judgment on
counts III and IV, is granted. Accordingly, counts III
and IV are dismissed as a matter of law, with prejudice.
The plaintiffs' cross-motion to amend the complaint pursuant
to Fed.R.Civ.P. 15(a) to withdraw count III and to increase the
ad damnum clause, is granted in its entirety. The plaintiffs
are granted leave to amend the complaint consistent with this
opinion by repleading counts I and II, and shall serve and file
the amended complaint within thirty (30) days.