United States District Court, S.D. New York
MEMORANDUM & ORDER
WILLIAM H. PAULEY III, SENIOR UNITED STATES DISTRICT JUDGE
U.S. Bank National Association (“U.S. Bank”)
moves to amend its Answer to: (1) add new mutual mistake
affirmative defenses regarding certain contractual terms and
obligations at issue in this action, and (2) bolster its
already-asserted affirmative defense of estoppel with facts
learned in discovery. Plaintiff Ambac Assurance Corporation
(“Ambac”) opposes the motion. On December 23,
2019, this Court held a conference where the parties expanded
on the arguments in their letter submissions. For the reasons
that follow, U.S. Bank's motion for leave to amend is
to amend a pleading shall be “freely give[n] . . . when
justice so requires, ” Fed.R.Civ.P. 15(a), and should
not be denied unless: (1) the movant acts in bad faith, (2)
the amendment sought will be futile, (3) the motion is filed
after undue delay, or (4) granting leave to amend would
prejudice the adverse party, Milanese v. Rust-Oleum
Corp., 244 F.3d 104, 110 (2d Cir. 2001) (citing
Foman v. Davis, 371 U.S. 178, 182 (1962)). The
decision to grant or deny is within the discretion of the
district court. Foman, 371 U.S. at 182; United
States v. Cont'l Ill. Nat'l Bank & Tr. Co. of
Chi., 889 F.2d 1248, 1254 (2d Cir. 1989).
Bank seeks to amend its Answer to add two mutual mistake
affirmative defenses. These defenses concern purported errors
made in reconstituting the Master Mortgage Loan Purchase and
Servicing Agreement (“MMLPSA”), as well as in
amending the accompanying Servicing Addendum. U.S. Bank
contends that because of these errors, the agreements-as
drafted-do not reflect the intent of the parties. (ECF No.
126, at 1-2.) Ambac does not allege bad faith on the part of
U.S. Bank in moving to plead these new affirmative defenses,
but it maintains they are futile, untimely, and prejudicial.
(Dec. 23, 2019 Conference Tr. at 15.) This Court disagrees.
contends that U.S. Bank's proposed mutual mistake
defenses are futile because reformation is the remedy for
mutual mistake in contracting. Claims for reformation under
New York law are governed by a six-year statute of
limitations, which Ambac asserts lapsed long ago. (ECF No.
128, at 1 (citing Wallace v. 600 Partners Co., 658
N.E.2d 715, 716- 17 (N.Y. 1995)).) But even “[i]n the
absence of a claim for reformation, courts may as a matter of
interpretation carry out the intention of a contract by
transporting, rejecting, or supplying words” if an
“absurdity has been identified or the contract would
otherwise be unenforceable.” Wallace, 658
N.E.2d at 717. In recognition of this point, Ambac has
clarified that its argument is that U.S. Bank-while not
temporally barred from bringing its mutual mistake
affirmative defenses-faces a heavy burden in proving them.
(Dec. 23, 2019 Conference Tr. at 10.) Be that as it may,
“[u]pon a motion to amend pleadings, defendant need not
prove that it would ultimately prevail at trial; rather,
amendment is futile where the proposed affirmative defense
could not survive on its face.” Pall Corp. v.
Entegris, Inc., 2007 WL 9709768, at *2 (E.D.N.Y. 2007);
see also In re Currency Conversion Fee Antitrust
Litig., 264 F.R.D. 100, 118 (S.D.N.Y. 2010) (“An
amendment to add an affirmative defense is futile when the
proposed affirmative defense is not a defense to liability,
that is, when the proposed affirmative defense lacks a sound
basis in law.” (quotation marks omitted)). And here,
U.S. Bank has purportedly identified specific errors in the
reconstituted MMLPSA and amended Servicing Addendum that it
claims do not align with the intentions of the parties to
those agreements. Although Ambac insists that there “is
nothing commercially unreasonable, much less absurd”
about the agreements as written, (ECF No. 128, at 2), this
Court cannot-at least at this juncture-make that
determination. Thus, Ambac fails to demonstrate futility.
also alleges undue delay because U.S. Bank could have raised
its proposed mutual mistake affirmative defenses when it
interposed an answer. To be sure, at the December 23
conference, U.S. Bank conceded that it
“[p]robably” could have pled these defenses
earlier. (Dec. 23, 2019 Conference Tr. at 17.) However,
“[t]here is no requirement that defendants must plead
all known affirmative defenses at the time of their first
answer.” Ragin v. Harry Macklowe Real Estate Co.,
Inc., 126 F.R.D. 475, 478 (S.D.N.Y. 1989). Indeed,
“[a]s long as amendment of pleadings does not prejudice
plaintiffs, defendants will not be precluded from adding
additional defenses about which they had knowledge.”
Ragin, 126 F.R.D. at 478; see State Teachers
Ret. Bd. v. Flour Corp., 654 F.2d 843, 856 (2d Cir.
1981) (“Mere delay . . . absent a showing of bad faith
or undue prejudice, does not provide a basis for a district
court to deny the right to amend.”)
Ambac claims prejudice if this Court grants U.S. Bank's
motion as to the mutual mistake affirmative defenses.
Specifically, Ambac contends that these affirmative defenses
will necessitate third-party discovery concerning the
drafting and interpretation of the agreements at issue, which
will be costly and time-consuming. (See ECF No. 128,
at 3.) Ambac's argument is unpersuasive for two reasons.
First, U.S. Bank filed its motion on December 10, 2019-over a
month before the current fact discovery deadline of January
17, 2020. (See ECF No. 118.) Second, at the December
23 conference, the parties represented that they will request
an extension of fact discovery regardless of whether
this Court grants U.S. Bank's motion to amend.
(See Dec. 23, 2019 Conference Tr. at 13, 18-19.)
Should the parties require additional time to conduct
discovery regarding these new affirmative defenses, they can
request it when seeking their extension. Thus, U.S.
Bank's proposed amendments will not unduly prejudice
Ambac. See Pall Corp., 2007 WL 9709768, at *2
(finding no undue prejudice where “[a]t the time
defendant made its motion, fact discovery had not yet
closed” and “expert discovery ha[d] not
begun”); Ragin, 126 F.R.D. at 478 (concluding
that “the proposed amendments [did] not substantially
delay either discovery or . . . trial” because
“plaintiffs had not yet commenced depositions of
defendants, and defendants had not yet completed depositions
of all plaintiffs”).
December 23 conference, Ambac conceded it would experience no
prejudice if this Court permitted U.S. Bank to amend its
Answer to supplement its already-asserted estoppel defense
with facts learned during discovery. (Dec. 23, 2019
Conference Tr. at 12 (“I'm not going to argue to
you that there's substantial prejudice to Ambac on the
estoppel point.”).) Ambac even expressed a willingness
“to stand down on th[is]” portion of its
opposition. (Dec. 23, 2019 Conference Tr. at 12.)
Accordingly, this Court grants U.S. Bank's motion to
supplement its estoppel defense.
foregoing reasons, U.S. Bank's motion to amend its Answer
is granted. The parties shall submit a proposed ...