### Benhar v 5 Star Legal Funding, LLC 2024 NY Slip Op 31915(U) June 3, 2024 Supreme Court, New York County Docket Number: Index No. 657390/2020 Judge: Joel M. Cohen Cases posted with a "30000" identifier, i.e., 2013 NY Slip

Op 30001(U), are republished from various New York State and local government sources, including the New

York State Unified Court System's eCourts Service. This opinion is uncorrected and not selected for official publication.

### [FILED: NEW YORK COUNTY CLERK 06/03/2024 04:41 P~ NYSCEF DOC. NO. 83


### SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK: COMMERCIAL DIVISION PART 03M

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MARK BENHAR, MITCHELL HOROWITZ, ALAN PERL, IRENE PERL, ALAN SEFF, KAREN RUBIN, RICHARD BODIAN, FIVE STAR LEGAL ADVANCES FUND IV, L.P., Plaintiffs, INDEX NO. MOTION DATE INDEX NO. 657390/2020 RECEIVED NYSCEF: 06/03/2024

657390/2020

07/31/2023 MOTION SEQ. NO. 003

- V - 5 STAR LEGAL FUNDING, LLC,5 STAR LEGAL FUNDING Ill GP, LLC,5 STAR LEGAL FUNDING IV GP, LLC, ROBERT GENTILI, JAY KOBAK, CHRISTOPHER MOLLICA, JASON MILLER, FIVE STAR LEGAL ADVANCES FUND Ill, L.P., FIVE STAR LEGAL ADVANCES FUND IV, L.P. Defendants. DECISION+ ORDERON MOTION

-----------------------------------------------------------------------------------X HON. JOEL M. COHEN: The following e-filed documents, listed by NYSCEF document number (Motion 003) 60, 61, 62, 63, 64, 65, 66, 67, 68, 69, 70, 71, 72, 73, 74, 75, 76, 77, 78, 79, 80, 82 were read on this motion to AMEND PLEADINGS Plaintiffs Mark Benhar, Mitchell Horowitz, Alan Perl, Irene Perl, Allan Seff, Karen Rubin, as Co-Executor ofthe Estate ofJoan Seff, and Richard Bodian, individually, and derivatively on behalfofFive Star Legal Advances Fund III, L.P. ("Fund III") andFive Star Legal Advances FundIV, L.P. ("Fund IV") (collectively referredto as "Plaintiffs") move for leave to file a second amended complaint (NYSCEF 62 [Proposed SecondAmended Complaint ("PSCA")]). Forthe following reasons, Plaintiffs' motion is granted. As relevanthere, in December2020, Plaintiffs filed their original Complaint against Defendants asserting claims for Breach ofContract, Breach ofthe Implied Covenant ofGood Faith and Fair Dealing, Breach ofFiduciary Duty, Breach ofthe Duty ofLoyalty, Fraudulent Conveyance, Conversion, Inspection ofBooks and Records, Corporate Waste and

657390/2020 BENHAR, MARK vs. 5 STAR LEGAL FUNDING, LLC Motion No. 003
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### [FILED: NEW YORK COUNTY CLERK 06/03/2024 04:41 P~ NYSCEF DOC. NO. 83 INDEX NO. 657390/2020 RECEIVED NYSCEF: 06/03/2024 Mismanagement, Constructive Trust, Appointment ofa Receiver, and Civil RICO. Plaintiffs, who invested in certain litigation funds and advances as limitedpartners, alleged that Defendants have engaged in a pattern and practice ofmismanagement, misuse, misappropriation, and diversion ofthose funds. Defendants movedto dismiss the Complaint, and in response Plaintiffs filed their Amended Complaint on February 22, 2021 (NYSCEF 20). Defendants elected to proceedwith theirmotion to dismiss based on their original memorandum oflaw, and after supplemental briefing, oral argumentwas held on December24, 2021. The Court granted in part and denied in partthe motion, noting that "there may be viable claims" in the Complaintbut that it could not ascertain the same "because oflack ofinformation." (NYSCEF 41 at 28; NYSCEF 38). As a result, the Courtpermittedthe breach ofcontract claimto move forward, and directed Plaintiffs to proceed with discovery and "request the information that is relevant to [that] claim, and I suspect that that information is requesting to roll into amending your complaint, and which I'll give leave to do." (id. at 29). After a stay ofthis action following the death oftwo namedplaintiffs,1 on July 19, 2022, Defendants filed their Answer to Plaintiffs' First Amended Complaint. The parties thereafter engaged in discovery and Plaintiffs now move for leave to file the SecondAmended Complaint. CPLR 3025(b) provides that "[a] party may amend his orher pleading, or supplement it by setting forth additional or subsequent transactions or occurrences, at any time byleave of

1 On January 5, 2022, the Parties informedthe Court viajointletter that two ofthe named Plaintiffs, Joseph Perl and Joan Seff, hadpassed away (NYSCEF 42). The Courtthus stayed this action until the personal representative for those plaintiffs' estates couldbe appointed or a proper substitution couldbe made (NYSCEF 43). ByDecision and Order dated June 2, 2022, this Court grantedPlaintiffs' motion to vacate the stay (NYSCEF 50).

657390/2020 BENHAR, MARK vs. 5 STAR LEGAL FUNDING, LLC Motion No. 003

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### [FILED: NEW YORK COUNTY CLERK 06/03/2024 04:41 P~ NYSCEF DOC. NO. 83 INDEX NO. 657390/2020 RECEIVED NYSCEF: 06/03/2024

court ...." "Motions for leave to amend should be freely granted, absentprejudice or surprise ..

.unless the proposed amendment is palpably insufficient orpatently devoid ofmerit" (MBIA Ins. Corp. v Greystone & Co., Inc., 74 AD3d 499,499 [1st Dept 2010]). Courts have held that prejudice "ariseswhen a party incurs a change in position or is hindered in the preparation ofits case orhas been prevented from taking some measure in support ofits position" (Valdes v Marbrose Realty, 289 AD2d 28, 29 [1st Dept2001];Anoun v City of New York, 85 AD3d 694, 694 [1st Dept 2011]). A party opposing leave to amend "must overcome a heavy presumption of validity in favor of [permitting amendment]." (CIFGAssur. N. Am., Inc. v JP. Morgan Sec. LLC, 146 AD3d 60, 65 [1st Dept2010]). Here, Plaintiffs argue that theirproposed amendments arise, at least in part, from documents produced by Defendants pursuantto Court order. Plaintiffs added allegations to their claims for breach ofcontract, breach ofthe implied covenant, breach offiduciary duty, breach of loyalty, corporate waste and mismanagement, and constructive trust. 2 Defendants' arguments as to the merits ofthe proposed claims
- as to which the Court expresses no view at this time
- do not warrant denial ofthe motion to amend, and there is no assertion ofprejudice. Accordingly, itis ORDERED that the motion by Plaintiffs for leave to file the proposed SecondAmended Complaint is GRANTED; it is further ORDERED that Plaintiffs shall file the proposed Second Amended Complaint on NYSCEF within 5 business days ofthe date ofthis Order; it is further

2 Plaintiffhas removed its Civil RICO claim and Inspection ofBooks and Records claim.

657390/2020 BENHAR, MARKvs. 5 STAR LEGAL FUNDING, LLC Motion No. 003
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### !FILED: NEW YORK COUNTY CLERK 06/03/2024 04 :41 PM! NYSCEF DOC. NO. 83 INDEX NO. 657390/2020 RECEIVED NYSCEF: 06/03/2024
ORDERED that Defendants shall serve an answer or otherwise respond to the Second Amended Complaint within 20 days from the date offiling; itis further ORDEREDthattheparties are directedto contactthe General Clerk's Office (Room 119) in orderto have this case restored as active; anditis further ORDERED that the parties meet and confer and submit a revised discovery schedule to the Court within 20 days following the filing ofthe Answer. This constitutes the decision and order ofthe Court.

6/3/2024

DATE CHECK ONE: APPLICATION: CHECK IF APPROPRIATE: CASE DISPOSED GRANTED**□** DENIED SETTLE ORDER INCLUDES TRANSFER/REASSIGN

657390/2020 BENHAR, MARK vs. 5 STAR LEGAL FUNDING, LLC Motion No. 003

4 of 4 JOEL M. COHEN, J.S.C. NON-FINAL DISPOSITION GRANTED IN PART SUBMIT ORDER FIDUCIARY APPOINTMENT

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