YOON JUNG KIM, HAE WON BANG, OLYMPIAD SCHOOL, INC., SCTA LIMITED LIABILITY COMPANY, SSOA LIMITED LIABILITY COMPANY and OA CONSULTING GROUP CORP., Plaintiffs,
GAHEE AN, CHANGTAE SEO, ASIA CULTURE EXCHANGE ORGANIZATION, INC. and SG INTERNATIONAL, INC., Defendants. Index No. 652757/2012
RECEIVED NYSCEF: 08/27/2013
DECISION AND ORDER
O. PETER SHERWOOD, J.
Defendants move pursuant to CPLR 2221 (e) and 3025 (b) for leave to renew their prior motion for leave to amend their answer and counterclaims. In a decision and order dated May 16, 2013, the Court denied without prejudice defendants' prior motion for leave to amend for failure to comply with CPLR 3025 (b)'s requirement that "[a]ny motion to amend . . . pleadings shall be accompanied by the proposed amended ... pleading clearly showing the changes or additions to be made to the pleading" (CPLR 3025 [b]). Defendants have now complied with that requirement. For the reasons that follow, the motion for leave to renew is granted, and upon renewal, the Court adheres to its May 16, 2013 decision and order denying the motion for leave to amend the answer with counterclaims.
Defendants' verified answer, filed with the Court on October 3, 2012, contains six counterclaims: (1) rescission of mortgage and mortgage note on grounds of unconscionability; (2) rescission of mortgage note on grounds of usury; (3) defamation against plaintiffs Yoon Jung Kim and Hae Won Bang; (4) intentional infliction of emotional distress against plaintiff Yoon Jung Kim; (5) attorney's fees; and (6) punitive damages. In their proposed amended answer, defendants make several changes including, inter alia, adding new factual allegations to their counterclaims and adding a counterclaim for rescission of mortgage, mortgage note and interest agreement on grounds of duress.
I. CPLR 3025 (b) Standard
"Motions for leave to amend pleadings should be freely granted . . . absent prejudice or surprise resulting therefrom ..., unless the proposed amendment is palpably insufficient or patently devoid of merit. . . . [Defendants] need not establish the merit of [their] proposed new allegations ..., but simply show that the proffered amendment is not palpably insufficient or clearly devoid of merit" (MBIA Ins. Corp. v Greystone & Co., Inc., 74 A.D.3d 499, 499-500 [1st Dept 2010]; CPLR 3025 [b]). Prejudice in this context is shown where the nonmoving party is "hindered in the preparation of his case or has been prevented from taking some measure in support of his position" (Lootnis v Civetta Corinno Constr. Corp., 54 N.Y.2d 18, 23 ). A delay in seeking leave to amend is not grounds for denial of the motion except where the delay would cause prejudice or surprise (see Lucido v Mancuso, 49 A.D.3d 220, 229 [2d Dept 2008]). Although leave to amend should be freely granted, an examination of the underlying merits of the proposed causes of action is warranted in order to conserve judicial resources (see Eighth Ave. Garage Corp. v H.K.L. Rlty, Corp., 60 A.D.3d 404, 405 [1st Dept 2009]). Whether to permit amendment is within the sound discretion of the court (see Pellegrino v NYC Transit Auth, 177 A.D.2d 554, 557 [2d Dept 1991]).
II. Affidavit of Merit
Plaintiffs contend that the motion must be denied because defendants have not provided an affidavit of merit with their motion papers. CPLR 3025 (b) does not explicitly require an affidavit of merit, but the Appellate Division, First Department has held that "a motion for leave to amend a pleading 'must be supported by an affidavit of merits and evidentiary proof that could be considered upon a motion for summary judgment'" (Non-Linear Trading Co. v
Braddis Assoc., 243 A.D.2d 107, 116 [1st Dept 1998], citing Nab-Tern Constructors v City of New York, 123 A.D.2d 571 [1st Dept 1986] [emphasis added]). It appears, however, that this standard no longer controls. The Appellate Division, Second Department recently examined the history of CPLR 3025 (b) jurisprudence, and found that courts were requiring too much proof on the merits (see Lucido v Mancuso, 49 A.D.3d 220 [2d Dept 2008]). In Lucido, the court noted that for years, many courts, including the Second Department itself, were "mentioning the absence of an affidavit of merit as a factor to be considered in support of denying a motion pursuant to CPLR 3025 (b) for leave to amend a complaint" (id. at 229). The court then rejected this standard, holding that "[c]ases involving CPLR 3025(b) that place a burden on the pleader to establish the merit of the proposed amendment erroneously state the applicable standard and are no longer to be followed. No evidentiary showing of merit is required under CPLR 3025(b)" (id.)
As this Court recognized in Schron v Grunstein (39 Misc.3d 1213(A), 2013 WL 1688929, *4 [Sup Ct, NY County, Apr. 9, 2013, Sherwood, J.]), the First Department appears to have impliedly adopted the thrust of Lucido in MBIA Ins. Corp. (74 A.D.3d at 499), at least to the extent that an affidavit of merit is no longer required. Citing Lucido, the MBIA Ins. Corp. court held that "[o]n a motion for leave to amend, plaintiff need not establish the merit of its proposed new allegations ... but simply show that the proffered amendment is not palpably insufficient or clearly devoid of merit" (id. at 500). Indeed, the defendant in that case raised and the court rejected the same argument plaintiffs raise here regarding an affidavit of merit. The court held that "the proposed amendment was supported by a sufficient showing of merit through the submission of an affirmation by counsel, along with a transcript of relevant deposition testimony" (id.)
Although an affidavit of merit is no longer required, unlike the Second Department's standard as articulated in Lucido, MBIA Ins. Corp. indicates that the First Department continues to require some minimal "show[ing] that the proffered amendment is not palpably insufficient or clearly devoid of merit, " beyond a bare bones attorney's affirmation (MBIA Ins. Corp., 74 A.D.3d at 500). Thus, in Schron, this Court granted the plaintiffs' motion for leave to amend their complaint despite the lack of an affidavit of merit, because plaintiffs provided an affirmation of counsel along with exhibits containing relevant documents supporting their new allegations (Schron, 2013 WL 1688929 at *4).
Here, however, defendants have submitted only a bare bones affirmation of counsel, stating that "[t]he amendments to the Answer and Counterclaim have all been verified by defendant, An and there exists sufficient documentary and testamentary evidence to be produced throughout the course of discovery to support such claims" (Churgin Affirm. U 11). Contrary to this statement, the proposed amended answer has not been verified. Beyond this singular statement in the attorney's affirmation, defendants have made no "show[ing] that the proffered amendment is not palpably insufficient or clearly devoid of merit" (MBIA Ins. Corp., 74 A.D.3d at 500). Indeed, the ...