Court Opinion

ID: 9942825
Source: CourtListenerOpinion
Date Created: 2024-02-21 21:09:05.173368+00
Date Added: 2024-06-11T13:44:45.264358
License: Public Domain

Gallagher v Crotty
               2024 NY Slip Op 30514(U)
                   February 15, 2024
           Supreme Court, New York County
        Docket Number: Index No. 651498/2015
                 Judge: David B. 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.
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                       publication.
                                                                                                                     INDEX NO. 651498/2015
  NYSCEF DOC. NO. 400                                                                                          RECEIVED NYSCEF: 02/15/2024

                                   SUPREME COURT OF THE STATE OF NEW YORK
                                             NEW YORK COUNTY
            PRESENT:             HON. DAVID B. COHEN                                             PART                              58
                                                                                      Justice
            ---------------------------------------------------------------------------------X   INDEX NO.          651498/2015
             KEVIN P. GALLAGHER,
                                                                                                 MOTION DATE         10/13/2023
                                                         Plaintiff,
                                                                                                 MOTION SEQ. NO.         007
                                                 -v-
             JOHN CROTTY, JOHN WARREN, JOHN FITZGERALD                                             DECISION + ORDER ON
                                                                                                         MOTION
                                                         Defendants.
            ---------------------------------------------------------------------------------X

            The following e-filed documents, listed by NYSCEF document number (Motion 007) 329, 330, 331, 332,
            333, 334, 335, 336, 337, 338, 339, 342, 345, 346, 347, 348, 349, 350, 351, 352, 353, 354, 355, 356, 357,
            358, 359, 360, 361, 362, 363, 364, 365, 366, 367, 368, 369, 370, 371, 372, 373, 374, 375, 376, 377, 378,
            379, 380, 381, 382, 383, 384, 385, 386, 387, 388, 389, 390, 391, 392, 393
            were read on this motion to/for                                               AMEND CAPTION/PLEADINGS                  .

                      In this commercial partnership dispute, plaintiff moves for leave to file and serve a

            second amended and supplemental complaint.

                                                              I.         BACKGROUND

                      Plaintiff alleges that defendants’ misconduct deprived him of profits, information,

            participation, and opportunities arising out of their partnership, Work Force Housing Advisors

            (WFHA) (NYSCEF 330). Defendants dispute that WFHA ever existed (NYSCEF 346).

                      By decision and order dated August 3, 2017, another justice of this court granted

            plaintiff’s motion for partial summary judgment seeking an accounting and denied defendants’

            cross-motion for summary judgment (NYSCEF 95). Plaintiff later moved to amend the

            complaint to add claims for attorney fees and expand his breach of contract claim, which was

            granted on October 28, 2020, with the First Amended and Supplemental Complaint becoming

            the operative pleading (NYSCEF 193).

             651498/2015 GALLAGHER, KEVIN P. vs. CROTTY, JOHN                                                        Page 1 of 4
             Motion No. 007

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                                                                                                 INDEX NO. 651498/2015
  NYSCEF DOC. NO. 400                                                                    RECEIVED NYSCEF: 02/15/2024

                   In March 2022, plaintiff moved for partial summary judgment on his breach of contract

            claim, alleging that defendants impermissibly amended certain operating agreements, and shortly

            thereafter, he served a subpoena on non-party J Cubed Residential LLC (J Cubed), a company

            alleged to be owned and operated by defendants (NYSCEF 204, 230). Defendants cross-moved

            for summary judgment and to quash the subpoena (NYSCEF 231, 233).

                   In March 2023 while these motions were sub judice, plaintiff alleges that an accounting

            review of “records for WFHA’s various entities” was conducted (NYSCEF 330).

                   By decision and order dated May 2, 2023, this court granted plaintiff’s motion for partial

            summary judgment on his breach of contract claim, and denied defendants’ cross-motion for

            summary judgment and to quash the subpoena (NYSCEF 318, 319).

                   Plaintiff now seeks leave to serve and file a Second Amended and Supplemental

            Complaint to add J Cubed and MHR Management, Inc. (MHR) as defendants, and to add claims

            and allegations based on the March 2023 forensic accounting review and discovery exchanged in

            this case (NYSCEF 330, 338). A note of issue has not yet been filed.

                                                    II.     ANALYSIS

                   Pursuant to CPLR 3025(b) “[a] party may amend his or her pleading or supplement it by

            setting forth additional or subsequent transactions or occurrences, at any time by leave of court

            or by stipulation of all parties.” Absent surprise or prejudice, leave to amend or supplement a

            pleading should be freely granted where the proposed amendment is not palpably insufficient or

            devoid of merit (MBIA Ins. Corp. v Greystone & Co., Inc., 74 AD3d 499 [1st Dept 2010]; see

            also Miller v Cohen, 93 AD3d 424, 425 [1st Dept 2012] [“movant need not establish the merit of

            the proposed new allegations, but must simply show that the proffered amendment is not

             651498/2015 GALLAGHER, KEVIN P. vs. CROTTY, JOHN                                    Page 2 of 4
             Motion No. 007

                                                           2 of 4
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                                                                                                    INDEX NO. 651498/2015
  NYSCEF DOC. NO. 400                                                                       RECEIVED NYSCEF: 02/15/2024

            palpably insufficient or clearly devoid of merit"] [internal citations and quotation marks

            omitted]).

                     “A party opposing leave to amend must overcome a heavy presumption of validity in

            favor of [permitting amendment]. Prejudice to warrant denial of leave to amend requires some

            indication that the defendant[s] ha[ve] been hindered in the preparation of [their] case or [have]

            been prevented from taking some measure in support of [their] position” (McGhee v Odell, 96

            AD3d 449, 450 [1st Dept 2012] [internal citations and quotation marks omitted]).

                     In support of his motion, plaintiff argues that the proposed amendments pertain to the

            results of the March 2023 forensic accounting review, which revealed that defendants are

            improperly utilizing interest-free loans from entities in which plaintiff has an interest as funding

            mechanisms for various companies and investments, including J Cubed and MHR. The new

            allegations also update or clarify existing allegations based on facts gleaned from discovery.

                     In opposition, defendants contend that plaintiff’s claims related to the interest-free loans

            are contrived, baseless, and belied by documentary evidence. Other claims related to WFHA are

            either time-barred or meritless, they allege, and, moreover, the amendments are unfairly

            prejudicial because discovery is complete and the “new” information has been available for

            years.

                     Here, plaintiff’s proposed claims state a viable cause of action. While defendants

            challenge plaintiff’s analysis and description of the results of the accounting review, they have

            not shown them to be meritless. In any event, whether or not plaintiff will ultimately be able to

            prevail on the claims is not dispositive here (see Pier 59 Studios, L.P. v Chelsea Piers, L.P., 40

            AD3d 363, 366 [1st Dept 2007] ["the court should examine, but need not decide, the merits of

            the proposed new pleading unless it is patently insufficient on its face. Once a prima facie basis

             651498/2015 GALLAGHER, KEVIN P. vs. CROTTY, JOHN                                       Page 3 of 4
             Motion No. 007

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                                                                                                       INDEX NO. 651498/2015
  NYSCEF DOC. NO. 400                                                                            RECEIVED NYSCEF: 02/15/2024

            for the amendment has been established, that should end the inquiry, even in the face of a

            rebuttal that might provide the ground for a subsequent motion for summary judgment"]).

                    Furthermore, certain claims are not time-barred as they were raised in the earlier

            complaints, and the court already rejected defendants’ arguments as to WFHA in prior decisions

            (see JPMorgan Chase Bank, N.A. v Low Cost Bearings NY Inc., 107 AD3d 643, 644 [1st Dept

            2013] [“[t]he sufficiency of plaintiff's proposed amendments was implicitly recognized by the

            court in denying the defendant-owner's motion for summary judgment dismissing the

            complaint”).

                    Defendants’ contention that discovery has ended is disputed by plaintiff, and a note of

            issue has not been filed yet. In any event, “the need for additional discovery does not constitute

            prejudice sufficient to justify denial of an amendment” (Jacobson v Croman, 107 AD3d 644, 645

            [1st Dept 2013] [internal citation omitted]).

                    Accordingly, it is hereby

                    ORDERED, that plaintiff’s motion for leave to amend the complaint herein is granted, and

            the amended complaint in the proposed form annexed to the moving papers shall be deemed served

            upon service of a copy of this order with notice of entry thereof; it is further

                    ORDERED, that defendants shall serve an answer to the amended complaint or otherwise

            respond thereto within 20 days from the date of said service; and it is further

                    ORDERED, that the parties appear for a status conference on March 26, 2024 at 10 am.

                    2/15/2024
                      DATE                                                           DAVID B. COHEN, J.S.C.
             CHECK ONE:                   CASE DISPOSED                  X   NON-FINAL DISPOSITION

                                      X   GRANTED               DENIED       GRANTED IN PART             OTHER

             APPLICATION:                 SETTLE ORDER                       SUBMIT ORDER

             CHECK IF APPROPRIATE:        INCLUDES TRANSFER/REASSIGN         FIDUCIARY APPOINTMENT       REFERENCE

             651498/2015 GALLAGHER, KEVIN P. vs. CROTTY, JOHN                                          Page 4 of 4
             Motion No. 007

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