Preview
FILED: NASSAU COUNTY CLERK 02/02/2024 05:14 PM INDEX NO. 607197/2022
NYSCEF DOC. NO. 187 RECEIVED NYSCEF: 02/02/2024
SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NASSAU
xxxxxx xxxxxx a/k/a xxxxxxxxxx xxxxxx,
individually and derivatively on behalf of ROCKVILLE
CORP., Index No. 607197/2022
Plaintiff, Hon. Sharon M.J. Gianelli
-against- Mot. Seq. No. 008
xxxxxxx xxxxx, individually and as the executor of the
Estate of xxxx xxxxx, and as co-trustee of the disclaimer
Trust under Article “Fourth” of the Last Will and Testament
of xxxx xxxxx; MAKAN DELRAHIM, as former co-trustee
of the disclaimer Trust under Article “Fourth” of the Last
Will and Testament of xxxx xxxxx; and BAHARAK
AMIRIAN as co-trustee of the disclaimer Trust under the
Last Will and Testament of xxxx xxxxx,
Defendants,
-and-
ROCKVILLE CORP.,
Nominal Defendant.
xxxxxxx xxxxx and ROCKVILLE CORP.,
Counterclaim-Plaintiffs,
-against-
xxxxxx xxxxxx and 172 BARGAIN LIQUORS,
Counterclaim-Defendants.
COUNTERCLAIM-PLAINTIFFS’ REPLY MEMORANDUM OF LAW
IN FURTHER SUPPORT OF MOTION FOR LEAVE TO FILE
AMENDED ANSWER WITH COUNTERCLAIMS
1 of 13
FILED: NASSAU COUNTY CLERK 02/02/2024 05:14 PM INDEX NO. 607197/2022
NYSCEF DOC. NO. 187 RECEIVED NYSCEF: 02/02/2024
KASOWITZ BENSON TORRES LLP
David E. Ross
Michael C. Pecorini
1633 Broadway
New York, New York 10019
(212) 506-1700
Attorneys for Defendants/Counterclaim-Plaintiffs
2 of 13
FILED: NASSAU COUNTY CLERK 02/02/2024 05:14 PM INDEX NO. 607197/2022
NYSCEF DOC. NO. 187 RECEIVED NYSCEF: 02/02/2024
TABLE OF CONTENTS
Page
ARGUMENT .................................................................................................................................. 1
I. Counterclaim-Defendants Fail to Establish That The Proposed Amendment Is Palpably
Insufficient Or Devoid Of Merit ............................................................................................... 2
II. The Proposed Breach of Contract Counterclaim Is Properly Plead ........................................ 7
CONCLUSION ............................................................................................................................... 8
i
3 of 13
FILED: NASSAU COUNTY CLERK 02/02/2024 05:14 PM INDEX NO. 607197/2022
NYSCEF DOC. NO. 187 RECEIVED NYSCEF: 02/02/2024
TABLE OF AUTHORITIES
Page(s)
Cases
Agway Inc. v. North Clymer Farm Svc., Inc.,
291 A.D.2d 818 (4th Dep’t 2002) ..............................................................................................3
Bogoni v. Friedlander,
197 A.D.2d 281 (1st Dep’t 1994) ..........................................................................................4, 5
Deutsch v. Adler,
112 A.D.2d 1024 (2d Dep’t 1985) .............................................................................................8
Edwards v. 1234 Pac. Mgmt., LLC,
139 A.D.3d 658 (2d Dep’t 2016) ...............................................................................................4
Favia v. Harley-Davidson Motor Co.,
119 A.D.3d 836 (2d Dep’t 2014) ...............................................................................................1
FBB Asset Managers, Inc. v. Freund,
2 A.D.3d 573 (2d Dep’t 2003) ...................................................................................................7
Felice v. St. Agnes Hospital,
65 A.D.2d 388 (2d Dep’t 1978) .................................................................................................6
Gross v. O’Connor,
74 A.D.2d 633 (2d Dep’t 1980) .................................................................................................3
Hickey v. Kaufman,
156 A.D.3d 436 (1st Dep’t 2017) .............................................................................................3
Kaplan v. Ladenburg Thalmann & Co., Inc.,
2017 WL 4843010 (Sup. Ct. N.Y. Cty. Oct. 23, 2017) .........................................................3, 4
Lucido v. Mancuso,
49 A.D.3d 220 (2d Dep’t 2008) .............................................................................................2, 3
McBride v. KPMG Int'l,
135 A.D.3d 576 (1st Dep’t 2016) ..............................................................................................4
Muchnick v. Alcamo Supply & Contracting Corp.,
169 A.D.2d 711 (2d Dep’t 1991) ...............................................................................................7
Parker Waichman LLP v. Squier, Knapp & Dunn Commc'ns, Inc.,
138 A.D.3d 570 (1st Dep’t 2016) ..............................................................................................4
ii
4 of 13
FILED: NASSAU COUNTY CLERK 02/02/2024 05:14 PM INDEX NO. 607197/2022
NYSCEF DOC. NO. 187 RECEIVED NYSCEF: 02/02/2024
Rimberg v. Horowitz,
206 A.D.3d 832 (2d Dep’t 2022) ...............................................................................................7
Talking Cap. LLC v. Omanoff,
169 A.D.3d 423 (1st Dep’t 2019) ..............................................................................................5
Upfront Megatainment, Inc. v. Thiam,
215 A.D.3d 576 (1st Dep’t 2023) ..............................................................................................5
Other Authorities
CPLR 3025(b) ........................................................................................................................ passim
CPLR 3211(a)(7) .............................................................................................................................2
iii
5 of 13
FILED: NASSAU COUNTY CLERK 02/02/2024 05:14 PM INDEX NO. 607197/2022
NYSCEF DOC. NO. 187 RECEIVED NYSCEF: 02/02/2024
Counterclaim-Plaintiffs xxxxxxx xxxxx (“xxxxx”) and Rockville Corp. (“Rockville” and
together with xxxxx, “Counterclaim-Plaintiffs”) respectfully submit this reply memorandum of law
in further support of their motion for leave to file a first amended answer with counterclaims,
pursuant to CPLR 3025(b).
ARGUMENT
Counterclaim-Defendants’ opposition is heavy on rhetoric and wrong on substance.
Indeed, Counterclaim-Defendants concoct an argument that Counterclaim-Plaintiffs are
attempting to “flip the script,” “change [their] story,” “turn [their] longstanding defense theory on
its head,” and “engage in this unabashed about-face” (Opp. at 2-3) by seeking to amend their
counterclaims. That is not so. Counterclaim-Plaintiffs’ position is, and always has been, that
Plaintiff and Counterclaim-Defendant xxxxxx is not the 80% owner of Rockville and its sole asset,
the Property, as he alleges, but that Defendant and Counterclaim-Plaintiff xxxxx is the 100% owner
of Rockville. That position has not changed by virtue of seeking leave to amend the counterclaims
to seek unpaid rent due movants under a signed lease. In fact, as Counterclaim-Defendants admit
in their opposition, “[s]eeking leave to modify or amend a pleading to pursue an alternative legal
theory or to advance one that conforms to newly discovered evidence” is proper. Id. at 3. As
discussed below and in greater detail in Counterclaim-Plaintiffs’ motion for leave to amend, under
well-settled law, movants are entirely within their rights to amend their affirmative claims on the
basis of newly discovered evidence supporting those claims; indeed, permitting such amendments
is the whole point behind the CPLR’s liberal policy of allowing amendments to pleadings.
“Applications for leave to amend pleadings under CPLR 3025(b) should be freely granted
unless the proposed amendment (1) would unfairly prejudice or surprise the opposing party, or (2)
is palpably insufficient or patently devoid of merit.” Favia v. Harley-Davidson Motor Co., 119
A.D.3d 836, 836 (2d Dep’t 2014). “[I]n the case . . . of a motion for leave to amend a complaint
1
6 of 13
FILED: NASSAU COUNTY CLERK 02/02/2024 05:14 PM INDEX NO. 607197/2022
NYSCEF DOC. NO. 187 RECEIVED NYSCEF: 02/02/2024
by adding a new cause of action, the motion for leave to amend will be denied, in the absence of
prejudice or surprise, only if the new cause of action would not withstand a motion to dismiss
under CPLR 3211 (a) (7).” Lucido v. Mancuso, 49 A.D.3d 220, 229 (2d Dep’t 2008).
Counterclaim-Defendants utterly fail to carry their heavy burden of establishing as a matter of law
that the proposed amendment fails to state a claim. And, tellingly, Counterclaim-Defendants in
their opposition do not -- because they cannot -- even attempt to argue that the proposed
amendment would in any way prejudice them. Nor do Counterclaim-Defendants attempt to make
a showing that the proposed amendment fails to state a prima facie case of breach of contract.
Rather, Counterclaim-Defendants (i) argue that the proposed amendment is insufficient because
the amended allegations are purportedly contrary to prior representations and are otherwise not
supported by an affidavit explaining the need for the amendment; and (ii) raise the novel argument
that xxxxxxx does not have standing to assert the proposed counterclaims and that Rockville is not
a proper Counterclaim-Plaintiff. Counterclaim-Defendants’ arguments are specious.
I. Counterclaim-Defendants Fail to Establish That The
Proposed Amendment Is Palpably Insufficient Or Devoid Of Merit
Counterclaim-Defendants devote the bulk of their opposition to the argument that the
proposed amendment is insufficient because it is purportedly contrary to prior judicial admissions
and is otherwise not supported by an affidavit from someone with direct personal knowledge.
Thus, as Counterclaim-Defendants would have this Court believe, xxxxxxx “was either lying to the
Court previously, or intends to do so now.” Opp. at 3.
As an initial matter, Counterclaim-Defendants’ shameful argument that Counterclaim-
Plaintiffs are attempting to mislead the Court rests on their fundamental misstatement of applicable
law. Indeed, “[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
2
7 of 13
FILED: NASSAU COUNTY CLERK 02/02/2024 05:14 PM INDEX NO. 607197/2022
NYSCEF DOC. NO. 187 RECEIVED NYSCEF: 02/02/2024
be followed. No evidentiary showing of merit is required under CPLR 3025 (b).” Lucido v.
Mancuso, 49 A.D.3d 220, 229 (2d Dep’t 2008); see also Hickey v. Kaufman, 156 A.D.3d 436, 436
(1st Dep’t 2017) (“Given the Legislature's 2005 amendment of CPLR 3211(e), plaintiff was not
required to support his motion to amend the complaint with an affidavit of merit.”).
The cases Counterclaim-Defendants rely on in support of this baseless argument are all
inapposite as they apply the wrong standard and, in any event, unlike here, involve cases where a
party sought to change specific denials and admissions in the answer, not substantive allegations
in a counterclaim. For instance, in Gross v. O’Connor, 74 A.D.2d 633, 634 (2d Dep’t 1980) -- the
sole Second Department case cited in support of this argument -- the court upheld the denial of
that portion of a motion for leave to amend that “would have had the effect of changing the specific
denials and repudiating the admissions contained in her original answer” where “no affidavit of
the appellant was submitted to explain the necessity and excuse for such an amendment,” but
otherwise found that the trial court “improvidently denied leave to assert the four affirmative
defenses stated in the proposed amended answer since CPLR 3025 (b) directs that leave to amend
pleadings shall be freely given and no prejudice to plaintiff from such an amendment at this stage
of the action has been shown.” Similarly, in Agway Inc. v. North Clymer Farm Svc., Inc., 291
A.D.2d 818, 819-20 (4th Dep’t 2002), the court held that “leave was properly denied because
defendants sought to amend the original verified answer to deny facts admitted therein, without
explanation of ‘the necessity and excuse for such an amendment.’” Kaplan v. Ladenburg
Thalmann & Co., Inc., 2017 WL 4843010, at *3 (Sup. Ct. N.Y. Cty. Oct. 23, 2017), likewise dealt
with a situation where a party sought to amend its answer to change a fact admitted therein. As
Kaplan makes clear, “A party seeking to amend its answer, especially where such amendment
would have the effect of changing the specific denials and repudiating the admissions contained
3
8 of 13
FILED: NASSAU COUNTY CLERK 02/02/2024 05:14 PM INDEX NO. 607197/2022
NYSCEF DOC. NO. 187 RECEIVED NYSCEF: 02/02/2024
in [the] original answer, must submit an affidavit to explain the necessity and excuse for such an
amendment.” Id. (internal quotations omitted) (alteration in original) (emphasis added). Here,
conversely, the proposed amendment is directed solely to the affirmative allegations in the
counterclaims; the answer, and any denials or admissions contained therein, are not affected by
the amendment. See Dkt. 176 (redline of proposed amended answer with counterclaims).1
Counterclaim-Defendants also rely on Bogoni v. Friedlander, 197 A.D.2d 281, 292 (1st
Dep’t 1994), for the proposition that a party cannot amend a pleading “to alter his representation
of material facts to best suit his theory of recovery.” Opp. at 5. But Counterclaim-Defendants’
reliance on this case is mistaken for several reasons. First, as Counterclaim-Defendants admit in
their opposition, “the purpose of [CPLR 3025(b)] is to permit the plaintiff to amend his theory of
recovery to comply with the facts as they unfold . . .” Id. (quoting Bogoni, 197 A.D.2d at 292).
That is precisely what Counterclaim-Plaintiffs seek to do here based on facts obtained during
discovery. Second, and contrary to Counterclaim-Defendants’ suggestions that Counterclaim-
Plaintiffs are being duplicitous in seeking leave to amend based on information uncovered in
discovery, the claimed inconsistency between the allegations in the proposed amendment and the
existing counterclaim is not a sufficient ground to deny leave to amend, particularly where the case
is still in its early stages of discovery. As Bogoni makes clear, “While CPLR 3025 (b) furnishes a
device to relieve a party from the consequences of an admission in the sound discretion of the
court, what is significant in this case is that plaintiff did not obtain nor seek relief from his
1
Other cases Counterclaim-Defendants rely on for this argument are similarly inapposite. Parker
Waichman LLP v. Squier, Knapp & Dunn Commc'ns, Inc., 138 A.D.3d 570 (1st Dep’t 2016), and McBride v. KPMG
Int'l, 135 A.D.3d 576 (1st Dep’t 2016), both dealt with the denial of leave to replead following a motion to dismiss.
Here, this is obviously not an instance where the proposed amendment is sought to cure any defects following a
motion to dismiss -- indeed, Counterclaim-Defendants never moved to dismiss the counterclaims -- but rather the
proposed amendment conforms the counterclaims to evidence adduced during discovery. See, e.g., Edwards v. 1234
Pac. Mgmt., LLC, 139 A.D.3d 658, 659 (2d Dep’t 2016) (leave to amend complaint was properly granted where “the
plaintiff's motion was made prior to the filing of the note of issue, and was predicated on information obtained
during discovery”).
4
9 of 13
FILED: NASSAU COUNTY CLERK 02/02/2024 05:14 PM INDEX NO. 607197/2022
NYSCEF DOC. NO. 187 RECEIVED NYSCEF: 02/02/2024
admission until after the property had been conveyed in reliance on his status as a mere tenant in
common and a nonpartner.” Bogoni, 197 A.D.2d at 293 (emphasis in original); see also id. at 292
(noting plaintiff's untimely change of position) (emphasis added). No such timeliness issue exists
here when, as explained in the moving papers, Counterclaim-Plaintiffs moved to amend while this
action is still in its early stages of discovery, no depositions have been taken, and the proposed
amendment is predicated on information obtained during the initial exchange of discovery. See
Dkt. 171 at 3-4.
Second, to the extent that the allegations in the proposed amended counterclaim differ from
the existing counterclaim, that is not a basis to deny the amendment, as Counterclaim-Defendants
argue. Rather, any discrepancies are subject to further examination and discovery throughout the
pendency of the action. See Upfront Megatainment, Inc. v. Thiam, 215 A.D.3d 576, 578 (1st Dep’t
2023) (“Even if the allegations in the amended complaint contradicted the allegations in the initial
complaint, that would not be a basis for dismissal of the amended complaint as the original
allegations are simply informal judicial admissions, entitled to evidentiary weight but not
dispositive.”) (citation omitted); Talking Cap. LLC v. Omanoff, 169 A.D.3d 423, 424-25 (1st Dep’t
2019) (“The purported contradiction between the original complaint and the amended complaint
is not a basis for dismissal. Rather, the original allegations are simply informal judicial admissions,
entitled to evidentiary weight but not dispositive.”).
Third, Counterclaim-Defendants, doubling down on their argument that prior judicial
admissions bar the proposed amendment, claim that it is “utter hogwash” that the executed leases
produced during discovery should form the basis of the proposed amendment when Counterclaim-
Plaintiffs “chose to chart a litigation course that was predicated on the fact that any purported lease
for the Property is neither enforceable nor operative” despite possessing unsigned versions of the
5
10 of 13
FILED: NASSAU COUNTY CLERK 02/02/2024 05:14 PM INDEX NO. 607197/2022
NYSCEF DOC. NO. 187 RECEIVED NYSCEF: 02/02/2024
leases. Opp. at 8. As described above, however, that the proposed amendment differs in some
respects from the current operative answer with counterclaims, is no basis for denying leave to
amend.2
As further support for their argument, Counterclaim-Defendants point to an affidavit (Dkt.
183) from xxxxxxxxxxxx, Plaintiff xxxxxx’s son, and a pre-litigation text exchange purportedly
forwarding a fully executed version of the 2006 lease. Incredibly, that text exchange and the
accompanying lease (Dkt. 182) filed in opposition to the motion and referenced in xxxxx’s
affidavit, are documents that were not produced in discovery (as they bear no bates-stamp or other
identification) and contain no metadata. As such, they hardly “conclusively disprove” (Opp. at 9)
Counterclaim-Plaintiffs’ representations of not having seen previously executed versions of the
leases, including an attorney affirmation which states that “Defendants were aware of and
produced during discovery copies of leases that were not fully-executed.” Dkt. 172 ¶ 3. 3
In any event, xxxxx’s affidavit and the referenced text exchange solely reference the 2006
lease that had expired in December 2021 -- 6 months prior to Plaintiff xxxxxx commencing this
action. There is no mention in any discovery or otherwise of Counterclaim-Plaintiffs’ knowledge
of the 2007 lease, which is purportedly still in effect.
Simply put, Counterclaim-Defendants’ opposition does not raise any justifiable reason for
rejecting the proposed amendment.
2
Even assuming arguendo that the proposed additional claim for breach of a lease agreement was
inconsistent with another existing claim or defense, parties absolutely are permitted to plead inconsistent claims.
See, e.g., Felice v. St. Agnes Hospital, 65 A.D.2d 388, 394 (2d Dep’t 1978).
3
Moreover, xxxxx’s description of the referenced text exchange is not accurate. xxxxx states in his affidavit
that xxxxxx was told that he “was responsible for making mortgage payments in lieu of rental payments.” However,
that is not what the text says. The text reads: “Mortgage payments were made out of the rental payments which
were not made, but portions of rent were directed towards mortgage payments from bargain liquor.” Dkt. 182
(emphasis added). The text acknowledges that rental payments were not made, not that xxxxxx was excused from
making rental payments. At the very least, there are questions of fact concerning this document that should be
explored further in discovery.
6
11 of 13
FILED: NASSAU COUNTY CLERK 02/02/2024 05:14 PM INDEX NO. 607197/2022
NYSCEF DOC. NO. 187 RECEIVED NYSCEF: 02/02/2024
II. The Proposed Breach of Contract Counterclaim Is Properly Plead
Counterclaim-Defendants assert, for the first time in this litigation, that Rockville “is not a
properly named counterclaim-plaintiff and is without authority to interpose a counterclaim” (Opp.
at 11) because xxxxxxx is merely a minority shareholder and cannot direct Rockville’s litigation
strategy absent a derivative claim on its behalf.
Putting aside that this contention is based solely on Counterclaim-Defendants’ unsupported
side of the central dispute in this action, that of Rockville’s ownership, Counterclaim-Defendants
have waived any objection to Rockville’s capacity to sue. xxxxxxx and Rockville answered the
complaint and asserted counterclaims as of October 24, 2022. Dkt. 72. Counterclaim-Defendants
did not move to dismiss those counterclaims, and failed to raise this novel lack of standing
argument in their motion for partial summary judgment (itself filed nearly four months after the
answer with counterclaims), in which they moved “for partial summary judgment dismissing the
. . . counterclaims imposed by defendant/counterclaim-plaintiff xxxxxxx xxxxx and counterclaim-
plaintiff Rockville Corp. in their verified answer with counterclaims.” Dkt. 99 at 1 (emphasis
added). It is well-settled that where, as here, a party fails to assert a defense that a party lacks the
capacity to sue in its answer or responsive motion, such defense is waived. See Rimberg v.
Horowitz, 206 A.D.3d 832, 834 (2d Dep’t 2022) (“To the extent the defendant argues that the
plaintiff lacks standing or the capacity to sue, the defendant waived that affirmative defense by
failing to raise it in a pre-answer motion to dismiss or assert it in his answer.”); FBB Asset
Managers, Inc. v. Freund, 2 A.D.3d 573, 574 (2d Dep’t 2003) (defense that party lacked capacity
to sue was waived when it was not raised in answer or motion to dismiss made prior to answering);
Muchnick v. Alcamo Supply & Contracting Corp., 169 A.D.2d 711, 711 (2d Dep’t 1991) (“The
defendants’ claim that the plaintiff lacked the capacity to sue on the contract is untimely. By failing
7
12 of 13
FILED: NASSAU COUNTY CLERK 02/02/2024 05:14 PM INDEX NO. 607197/2022
NYSCEF DOC. NO. 187 RECEIVED NYSCEF: 02/02/2024
to assert such a defense in a motion before the service of their answer or in the answer itself, they
have waived any objection to the plaintiff's standing.”).4
CONCLUSION
For the reasons set forth above, Counterclaim-Plaintiffs respectfully request that the Court
grant their motion and permit the filing of the amended answer with counterclaims.
Dated: New York, New York
February 2, 2024
KASOWITZ BENSON TORRES LLP
By: /s/ David E. Ross
David E. Ross
(dross@kasowitz.com)
Michael C. Pecorini
(mpecorini@kasowitz.com)
1633 Broadway
New York, New York 10019
212-506-1700
Counsel for Defendants/Counterclaim-Plaintiffs
4
Counterclaim-Defendants also argue that xxxxxxx does not have standing to bring an individual claim for
breach of the lease agreements. As described above, Rockville is a properly named counterclaim-plaintiff and
Counterclaim-Defendants have waived any defense to the contrary. As xxxxxxx has consistently and unequivocally
represented throughout this action, she is, and always has been after her husband’s death, the 100% owner of
Rockville. Even using Plaintiff’s version of events, where xxxxxxx is merely a passive 20% minority shareholder,
Plaintiff admits that “to the extent xxxxxxx purports to be a shareholder of Rockville Corp. and wishes to assert a
claim for any alleged unpaid rent due to it, she must do so in her derivative capacity as a purported shareholder.”
Opp. at 12. There is thus no dispute that, at the very least, xxxxxxx possesses a valid shareholder’s derivative interest
in pursuing the breach of contract claim to collect on unpaid rent. If the Court finds that the proposed breach of
contract claim should be plead individually and derivatively on behalf of Rockville, it is a simple matter to alter the
proposed pleading to make that minor correction, especially when the proposed pleading is not yet operative. See,
e.g., Deutsch v. Adler, 112 A.D.2d 1024, 1025 (2d Dep’t 1985) (granting leave to replead derivative claim).
8
13 of 13
Preview
FILED: NASSAU COUNTY CLERK 02/02/2024 05:14 PM INDEX NO. 607197/2022 NYSCEF DOC. NO. 187 RECEIVED NYSCEF: 02/02/2024 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NASSAU xxxxxx xxxxxx a/k/a xxxxxxxxxx xxxxxx, individually and derivatively on behalf of ROCKVILLE CORP., Index No. 607197/2022 Plaintiff, Hon. Sharon M.J. Gianelli -against- Mot. Seq. No. 008 xxxxxxx xxxxx, individually and as the executor of the Estate of xxxx xxxxx, and as co-trustee of the disclaimer Trust under Article “Fourth” of the Last Will and Testament of xxxx xxxxx; MAKAN DELRAHIM, as former co-trustee of the disclaimer Trust under Article “Fourth” of the Last Will and Testament of xxxx xxxxx; and BAHARAK AMIRIAN as co-trustee of the disclaimer Trust under the Last Will and Testament of xxxx xxxxx, Defendants, -and- ROCKVILLE CORP., Nominal Defendant. xxxxxxx xxxxx and ROCKVILLE CORP., Counterclaim-Plaintiffs, -against- xxxxxx xxxxxx and 172 BARGAIN LIQUORS, Counterclaim-Defendants. COUNTERCLAIM-PLAINTIFFS’ REPLY MEMORANDUM OF LAW IN FURTHER SUPPORT OF MOTION FOR LEAVE TO FILE AMENDED ANSWER WITH COUNTERCLAIMS 1 of 13 FILED: NASSAU COUNTY CLERK 02/02/2024 05:14 PM INDEX NO. 607197/2022 NYSCEF DOC. NO. 187 RECEIVED NYSCEF: 02/02/2024 KASOWITZ BENSON TORRES LLP David E. Ross Michael C. Pecorini 1633 Broadway New York, New York 10019 (212) 506-1700 Attorneys for Defendants/Counterclaim-Plaintiffs 2 of 13 FILED: NASSAU COUNTY CLERK 02/02/2024 05:14 PM INDEX NO. 607197/2022 NYSCEF DOC. NO. 187 RECEIVED NYSCEF: 02/02/2024 TABLE OF CONTENTS Page ARGUMENT .................................................................................................................................. 1 I. Counterclaim-Defendants Fail to Establish That The Proposed Amendment Is Palpably Insufficient Or Devoid Of Merit ............................................................................................... 2 II. The Proposed Breach of Contract Counterclaim Is Properly Plead ........................................ 7 CONCLUSION ............................................................................................................................... 8 i 3 of 13 FILED: NASSAU COUNTY CLERK 02/02/2024 05:14 PM INDEX NO. 607197/2022 NYSCEF DOC. NO. 187 RECEIVED NYSCEF: 02/02/2024 TABLE OF AUTHORITIES Page(s) Cases Agway Inc. v. North Clymer Farm Svc., Inc., 291 A.D.2d 818 (4th Dep’t 2002) ..............................................................................................3 Bogoni v. Friedlander, 197 A.D.2d 281 (1st Dep’t 1994) ..........................................................................................4, 5 Deutsch v. Adler, 112 A.D.2d 1024 (2d Dep’t 1985) .............................................................................................8 Edwards v. 1234 Pac. Mgmt., LLC, 139 A.D.3d 658 (2d Dep’t 2016) ...............................................................................................4 Favia v. Harley-Davidson Motor Co., 119 A.D.3d 836 (2d Dep’t 2014) ...............................................................................................1 FBB Asset Managers, Inc. v. Freund, 2 A.D.3d 573 (2d Dep’t 2003) ...................................................................................................7 Felice v. St. Agnes Hospital, 65 A.D.2d 388 (2d Dep’t 1978) .................................................................................................6 Gross v. O’Connor, 74 A.D.2d 633 (2d Dep’t 1980) .................................................................................................3 Hickey v. Kaufman, 156 A.D.3d 436 (1st Dep’t 2017) .............................................................................................3 Kaplan v. Ladenburg Thalmann & Co., Inc., 2017 WL 4843010 (Sup. Ct. N.Y. Cty. Oct. 23, 2017) .........................................................3, 4 Lucido v. Mancuso, 49 A.D.3d 220 (2d Dep’t 2008) .............................................................................................2, 3 McBride v. KPMG Int'l, 135 A.D.3d 576 (1st Dep’t 2016) ..............................................................................................4 Muchnick v. Alcamo Supply & Contracting Corp., 169 A.D.2d 711 (2d Dep’t 1991) ...............................................................................................7 Parker Waichman LLP v. Squier, Knapp & Dunn Commc'ns, Inc., 138 A.D.3d 570 (1st Dep’t 2016) ..............................................................................................4 ii 4 of 13 FILED: NASSAU COUNTY CLERK 02/02/2024 05:14 PM INDEX NO. 607197/2022 NYSCEF DOC. NO. 187 RECEIVED NYSCEF: 02/02/2024 Rimberg v. Horowitz, 206 A.D.3d 832 (2d Dep’t 2022) ...............................................................................................7 Talking Cap. LLC v. Omanoff, 169 A.D.3d 423 (1st Dep’t 2019) ..............................................................................................5 Upfront Megatainment, Inc. v. Thiam, 215 A.D.3d 576 (1st Dep’t 2023) ..............................................................................................5 Other Authorities CPLR 3025(b) ........................................................................................................................ passim CPLR 3211(a)(7) .............................................................................................................................2 iii 5 of 13 FILED: NASSAU COUNTY CLERK 02/02/2024 05:14 PM INDEX NO. 607197/2022 NYSCEF DOC. NO. 187 RECEIVED NYSCEF: 02/02/2024 Counterclaim-Plaintiffs xxxxxxx xxxxx (“xxxxx”) and Rockville Corp. (“Rockville” and together with xxxxx, “Counterclaim-Plaintiffs”) respectfully submit this reply memorandum of law in further support of their motion for leave to file a first amended answer with counterclaims, pursuant to CPLR 3025(b). ARGUMENT Counterclaim-Defendants’ opposition is heavy on rhetoric and wrong on substance. Indeed, Counterclaim-Defendants concoct an argument that Counterclaim-Plaintiffs are attempting to “flip the script,” “change [their] story,” “turn [their] longstanding defense theory on its head,” and “engage in this unabashed about-face” (Opp. at 2-3) by seeking to amend their counterclaims. That is not so. Counterclaim-Plaintiffs’ position is, and always has been, that Plaintiff and Counterclaim-Defendant xxxxxx is not the 80% owner of Rockville and its sole asset, the Property, as he alleges, but that Defendant and Counterclaim-Plaintiff xxxxx is the 100% owner of Rockville. That position has not changed by virtue of seeking leave to amend the counterclaims to seek unpaid rent due movants under a signed lease. In fact, as Counterclaim-Defendants admit in their opposition, “[s]eeking leave to modify or amend a pleading to pursue an alternative legal theory or to advance one that conforms to newly discovered evidence” is proper. Id. at 3. As discussed below and in greater detail in Counterclaim-Plaintiffs’ motion for leave to amend, under well-settled law, movants are entirely within their rights to amend their affirmative claims on the basis of newly discovered evidence supporting those claims; indeed, permitting such amendments is the whole point behind the CPLR’s liberal policy of allowing amendments to pleadings. “Applications for leave to amend pleadings under CPLR 3025(b) should be freely granted unless the proposed amendment (1) would unfairly prejudice or surprise the opposing party, or (2) is palpably insufficient or patently devoid of merit.” Favia v. Harley-Davidson Motor Co., 119 A.D.3d 836, 836 (2d Dep’t 2014). “[I]n the case . . . of a motion for leave to amend a complaint 1 6 of 13 FILED: NASSAU COUNTY CLERK 02/02/2024 05:14 PM INDEX NO. 607197/2022 NYSCEF DOC. NO. 187 RECEIVED NYSCEF: 02/02/2024 by adding a new cause of action, the motion for leave to amend will be denied, in the absence of prejudice or surprise, only if the new cause of action would not withstand a motion to dismiss under CPLR 3211 (a) (7).” Lucido v. Mancuso, 49 A.D.3d 220, 229 (2d Dep’t 2008). Counterclaim-Defendants utterly fail to carry their heavy burden of establishing as a matter of law that the proposed amendment fails to state a claim. And, tellingly, Counterclaim-Defendants in their opposition do not -- because they cannot -- even attempt to argue that the proposed amendment would in any way prejudice them. Nor do Counterclaim-Defendants attempt to make a showing that the proposed amendment fails to state a prima facie case of breach of contract. Rather, Counterclaim-Defendants (i) argue that the proposed amendment is insufficient because the amended allegations are purportedly contrary to prior representations and are otherwise not supported by an affidavit explaining the need for the amendment; and (ii) raise the novel argument that xxxxxxx does not have standing to assert the proposed counterclaims and that Rockville is not a proper Counterclaim-Plaintiff. Counterclaim-Defendants’ arguments are specious. I. Counterclaim-Defendants Fail to Establish That The Proposed Amendment Is Palpably Insufficient Or Devoid Of Merit Counterclaim-Defendants devote the bulk of their opposition to the argument that the proposed amendment is insufficient because it is purportedly contrary to prior judicial admissions and is otherwise not supported by an affidavit from someone with direct personal knowledge. Thus, as Counterclaim-Defendants would have this Court believe, xxxxxxx “was either lying to the Court previously, or intends to do so now.” Opp. at 3. As an initial matter, Counterclaim-Defendants’ shameful argument that Counterclaim- Plaintiffs are attempting to mislead the Court rests on their fundamental misstatement of applicable law. Indeed, “[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 2 7 of 13 FILED: NASSAU COUNTY CLERK 02/02/2024 05:14 PM INDEX NO. 607197/2022 NYSCEF DOC. NO. 187 RECEIVED NYSCEF: 02/02/2024 be followed. No evidentiary showing of merit is required under CPLR 3025 (b).” Lucido v. Mancuso, 49 A.D.3d 220, 229 (2d Dep’t 2008); see also Hickey v. Kaufman, 156 A.D.3d 436, 436 (1st Dep’t 2017) (“Given the Legislature's 2005 amendment of CPLR 3211(e), plaintiff was not required to support his motion to amend the complaint with an affidavit of merit.”). The cases Counterclaim-Defendants rely on in support of this baseless argument are all inapposite as they apply the wrong standard and, in any event, unlike here, involve cases where a party sought to change specific denials and admissions in the answer, not substantive allegations in a counterclaim. For instance, in Gross v. O’Connor, 74 A.D.2d 633, 634 (2d Dep’t 1980) -- the sole Second Department case cited in support of this argument -- the court upheld the denial of that portion of a motion for leave to amend that “would have had the effect of changing the specific denials and repudiating the admissions contained in her original answer” where “no affidavit of the appellant was submitted to explain the necessity and excuse for such an amendment,” but otherwise found that the trial court “improvidently denied leave to assert the four affirmative defenses stated in the proposed amended answer since CPLR 3025 (b) directs that leave to amend pleadings shall be freely given and no prejudice to plaintiff from such an amendment at this stage of the action has been shown.” Similarly, in Agway Inc. v. North Clymer Farm Svc., Inc., 291 A.D.2d 818, 819-20 (4th Dep’t 2002), the court held that “leave was properly denied because defendants sought to amend the original verified answer to deny facts admitted therein, without explanation of ‘the necessity and excuse for such an amendment.’” Kaplan v. Ladenburg Thalmann & Co., Inc., 2017 WL 4843010, at *3 (Sup. Ct. N.Y. Cty. Oct. 23, 2017), likewise dealt with a situation where a party sought to amend its answer to change a fact admitted therein. As Kaplan makes clear, “A party seeking to amend its answer, especially where such amendment would have the effect of changing the specific denials and repudiating the admissions contained 3 8 of 13 FILED: NASSAU COUNTY CLERK 02/02/2024 05:14 PM INDEX NO. 607197/2022 NYSCEF DOC. NO. 187 RECEIVED NYSCEF: 02/02/2024 in [the] original answer, must submit an affidavit to explain the necessity and excuse for such an amendment.” Id. (internal quotations omitted) (alteration in original) (emphasis added). Here, conversely, the proposed amendment is directed solely to the affirmative allegations in the counterclaims; the answer, and any denials or admissions contained therein, are not affected by the amendment. See Dkt. 176 (redline of proposed amended answer with counterclaims).1 Counterclaim-Defendants also rely on Bogoni v. Friedlander, 197 A.D.2d 281, 292 (1st Dep’t 1994), for the proposition that a party cannot amend a pleading “to alter his representation of material facts to best suit his theory of recovery.” Opp. at 5. But Counterclaim-Defendants’ reliance on this case is mistaken for several reasons. First, as Counterclaim-Defendants admit in their opposition, “the purpose of [CPLR 3025(b)] is to permit the plaintiff to amend his theory of recovery to comply with the facts as they unfold . . .” Id. (quoting Bogoni, 197 A.D.2d at 292). That is precisely what Counterclaim-Plaintiffs seek to do here based on facts obtained during discovery. Second, and contrary to Counterclaim-Defendants’ suggestions that Counterclaim- Plaintiffs are being duplicitous in seeking leave to amend based on information uncovered in discovery, the claimed inconsistency between the allegations in the proposed amendment and the existing counterclaim is not a sufficient ground to deny leave to amend, particularly where the case is still in its early stages of discovery. As Bogoni makes clear, “While CPLR 3025 (b) furnishes a device to relieve a party from the consequences of an admission in the sound discretion of the court, what is significant in this case is that plaintiff did not obtain nor seek relief from his 1 Other cases Counterclaim-Defendants rely on for this argument are similarly inapposite. Parker Waichman LLP v. Squier, Knapp & Dunn Commc'ns, Inc., 138 A.D.3d 570 (1st Dep’t 2016), and McBride v. KPMG Int'l, 135 A.D.3d 576 (1st Dep’t 2016), both dealt with the denial of leave to replead following a motion to dismiss. Here, this is obviously not an instance where the proposed amendment is sought to cure any defects following a motion to dismiss -- indeed, Counterclaim-Defendants never moved to dismiss the counterclaims -- but rather the proposed amendment conforms the counterclaims to evidence adduced during discovery. See, e.g., Edwards v. 1234 Pac. Mgmt., LLC, 139 A.D.3d 658, 659 (2d Dep’t 2016) (leave to amend complaint was properly granted where “the plaintiff's motion was made prior to the filing of the note of issue, and was predicated on information obtained during discovery”). 4 9 of 13 FILED: NASSAU COUNTY CLERK 02/02/2024 05:14 PM INDEX NO. 607197/2022 NYSCEF DOC. NO. 187 RECEIVED NYSCEF: 02/02/2024 admission until after the property had been conveyed in reliance on his status as a mere tenant in common and a nonpartner.” Bogoni, 197 A.D.2d at 293 (emphasis in original); see also id. at 292 (noting plaintiff's untimely change of position) (emphasis added). No such timeliness issue exists here when, as explained in the moving papers, Counterclaim-Plaintiffs moved to amend while this action is still in its early stages of discovery, no depositions have been taken, and the proposed amendment is predicated on information obtained during the initial exchange of discovery. See Dkt. 171 at 3-4. Second, to the extent that the allegations in the proposed amended counterclaim differ from the existing counterclaim, that is not a basis to deny the amendment, as Counterclaim-Defendants argue. Rather, any discrepancies are subject to further examination and discovery throughout the pendency of the action. See Upfront Megatainment, Inc. v. Thiam, 215 A.D.3d 576, 578 (1st Dep’t 2023) (“Even if the allegations in the amended complaint contradicted the allegations in the initial complaint, that would not be a basis for dismissal of the amended complaint as the original allegations are simply informal judicial admissions, entitled to evidentiary weight but not dispositive.”) (citation omitted); Talking Cap. LLC v. Omanoff, 169 A.D.3d 423, 424-25 (1st Dep’t 2019) (“The purported contradiction between the original complaint and the amended complaint is not a basis for dismissal. Rather, the original allegations are simply informal judicial admissions, entitled to evidentiary weight but not dispositive.”). Third, Counterclaim-Defendants, doubling down on their argument that prior judicial admissions bar the proposed amendment, claim that it is “utter hogwash” that the executed leases produced during discovery should form the basis of the proposed amendment when Counterclaim- Plaintiffs “chose to chart a litigation course that was predicated on the fact that any purported lease for the Property is neither enforceable nor operative” despite possessing unsigned versions of the 5 10 of 13 FILED: NASSAU COUNTY CLERK 02/02/2024 05:14 PM INDEX NO. 607197/2022 NYSCEF DOC. NO. 187 RECEIVED NYSCEF: 02/02/2024 leases. Opp. at 8. As described above, however, that the proposed amendment differs in some respects from the current operative answer with counterclaims, is no basis for denying leave to amend.2 As further support for their argument, Counterclaim-Defendants point to an affidavit (Dkt. 183) from xxxxxxxxxxxx, Plaintiff xxxxxx’s son, and a pre-litigation text exchange purportedly forwarding a fully executed version of the 2006 lease. Incredibly, that text exchange and the accompanying lease (Dkt. 182) filed in opposition to the motion and referenced in xxxxx’s affidavit, are documents that were not produced in discovery (as they bear no bates-stamp or other identification) and contain no metadata. As such, they hardly “conclusively disprove” (Opp. at 9) Counterclaim-Plaintiffs’ representations of not having seen previously executed versions of the leases, including an attorney affirmation which states that “Defendants were aware of and produced during discovery copies of leases that were not fully-executed.” Dkt. 172 ¶ 3. 3 In any event, xxxxx’s affidavit and the referenced text exchange solely reference the 2006 lease that had expired in December 2021 -- 6 months prior to Plaintiff xxxxxx commencing this action. There is no mention in any discovery or otherwise of Counterclaim-Plaintiffs’ knowledge of the 2007 lease, which is purportedly still in effect. Simply put, Counterclaim-Defendants’ opposition does not raise any justifiable reason for rejecting the proposed amendment. 2 Even assuming arguendo that the proposed additional claim for breach of a lease agreement was inconsistent with another existing claim or defense, parties absolutely are permitted to plead inconsistent claims. See, e.g., Felice v. St. Agnes Hospital, 65 A.D.2d 388, 394 (2d Dep’t 1978). 3 Moreover, xxxxx’s description of the referenced text exchange is not accurate. xxxxx states in his affidavit that xxxxxx was told that he “was responsible for making mortgage payments in lieu of rental payments.” However, that is not what the text says. The text reads: “Mortgage payments were made out of the rental payments which were not made, but portions of rent were directed towards mortgage payments from bargain liquor.” Dkt. 182 (emphasis added). The text acknowledges that rental payments were not made, not that xxxxxx was excused from making rental payments. At the very least, there are questions of fact concerning this document that should be explored further in discovery. 6 11 of 13 FILED: NASSAU COUNTY CLERK 02/02/2024 05:14 PM INDEX NO. 607197/2022 NYSCEF DOC. NO. 187 RECEIVED NYSCEF: 02/02/2024 II. The Proposed Breach of Contract Counterclaim Is Properly Plead Counterclaim-Defendants assert, for the first time in this litigation, that Rockville “is not a properly named counterclaim-plaintiff and is without authority to interpose a counterclaim” (Opp. at 11) because xxxxxxx is merely a minority shareholder and cannot direct Rockville’s litigation strategy absent a derivative claim on its behalf. Putting aside that this contention is based solely on Counterclaim-Defendants’ unsupported side of the central dispute in this action, that of Rockville’s ownership, Counterclaim-Defendants have waived any objection to Rockville’s capacity to sue. xxxxxxx and Rockville answered the complaint and asserted counterclaims as of October 24, 2022. Dkt. 72. Counterclaim-Defendants did not move to dismiss those counterclaims, and failed to raise this novel lack of standing argument in their motion for partial summary judgment (itself filed nearly four months after the answer with counterclaims), in which they moved “for partial summary judgment dismissing the . . . counterclaims imposed by defendant/counterclaim-plaintiff xxxxxxx xxxxx and counterclaim- plaintiff Rockville Corp. in their verified answer with counterclaims.” Dkt. 99 at 1 (emphasis added). It is well-settled that where, as here, a party fails to assert a defense that a party lacks the capacity to sue in its answer or responsive motion, such defense is waived. See Rimberg v. Horowitz, 206 A.D.3d 832, 834 (2d Dep’t 2022) (“To the extent the defendant argues that the plaintiff lacks standing or the capacity to sue, the defendant waived that affirmative defense by failing to raise it in a pre-answer motion to dismiss or assert it in his answer.”); FBB Asset Managers, Inc. v. Freund, 2 A.D.3d 573, 574 (2d Dep’t 2003) (defense that party lacked capacity to sue was waived when it was not raised in answer or motion to dismiss made prior to answering); Muchnick v. Alcamo Supply & Contracting Corp., 169 A.D.2d 711, 711 (2d Dep’t 1991) (“The defendants’ claim that the plaintiff lacked the capacity to sue on the contract is untimely. By failing 7 12 of 13 FILED: NASSAU COUNTY CLERK 02/02/2024 05:14 PM INDEX NO. 607197/2022 NYSCEF DOC. NO. 187 RECEIVED NYSCEF: 02/02/2024 to assert such a defense in a motion before the service of their answer or in the answer itself, they have waived any objection to the plaintiff's standing.”).4 CONCLUSION For the reasons set forth above, Counterclaim-Plaintiffs respectfully request that the Court grant their motion and permit the filing of the amended answer with counterclaims. Dated: New York, New York February 2, 2024 KASOWITZ BENSON TORRES LLP By: /s/ David E. Ross David E. Ross (dross@kasowitz.com) Michael C. Pecorini (mpecorini@kasowitz.com) 1633 Broadway New York, New York 10019 212-506-1700 Counsel for Defendants/Counterclaim-Plaintiffs 4 Counterclaim-Defendants also argue that xxxxxxx does not have standing to bring an individual claim for breach of the lease agreements. As described above, Rockville is a properly named counterclaim-plaintiff and Counterclaim-Defendants have waived any defense to the contrary. As xxxxxxx has consistently and unequivocally represented throughout this action, she is, and always has been after her husband’s death, the 100% owner of Rockville. Even using Plaintiff’s version of events, where xxxxxxx is merely a passive 20% minority shareholder, Plaintiff admits that “to the extent xxxxxxx purports to be a shareholder of Rockville Corp. and wishes to assert a claim for any alleged unpaid rent due to it, she must do so in her derivative capacity as a purported shareholder.” Opp. at 12. There is thus no dispute that, at the very least, xxxxxxx possesses a valid shareholder’s derivative interest in pursuing the breach of contract claim to collect on unpaid rent. If the Court finds that the proposed breach of contract claim should be plead individually and derivatively on behalf of Rockville, it is a simple matter to alter the proposed pleading to make that minor correction, especially when the proposed pleading is not yet operative. See, e.g., Deutsch v. Adler, 112 A.D.2d 1024, 1025 (2d Dep’t 1985) (granting leave to replead derivative claim). 8 13 of 13