Blogs

Commercial Division Blog

Current Developments in the Commercial Divisions of the
New York State Courts
Posted: November 5, 2017

Bank Not Allowed to Amended its Answer to Change Statement It Claims Was Mistaken

On October 23, 2017, Justice Masley of the New York County Commercial Division issued a decision in Kaplan v. Ladenburg Thalmann & Co., Inc., 2017 NY Slip Op. 32282(U), denying a motion to amend an answer to correct a mistaken statement, explaining:

Leave to amend shall be freely given upon such terms as may be just. A determination whether to grant such leave is within the Supreme Court’s broad discretion, and the exercise of that discretion will not be lightly disturbed. Generally speaking, the purpose of a motion to amend is not to permit a party to alter its representation of material facts to best suit its theory of recovery and thereby overcome defenses raised in opposition. 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 in the original answer, must submit an affidavit to explain the necessity and excuse for such an amendment.

Signature Bank’s application is flawed in two respects. First, it is not supported by an affidavit of a person having personal knowledge; Mr. Rosenblith’s attorney affirmation and reply affirmation are not sufficient. While Mr. Rosenblith may have personal knowledge of the circumstances of his drafting of the original answer, his affirmations do not demonstrate personal knowledge regarding the renewal of the letter of credit, or lack thereof, which facts underlie the proposed amended answer. More significantly, however, neither Mr. Rosenblith’s affirmation, nor the affirmation submitted by counsel for non-moving defendants Ladenburg, Howard M. Lorber, and Richard J. Lampen, adequately provides the requisite explanation of the necessity and excuse for the amended answer. The crux of the arguments, by all parties in favor of the cross motion for leave to amend, is that plaintiffs have seized upon a mistake in Signature Bank’s original answer to support a factually incorrect premise; namely, that the letter of credit expired in 2013, and, accordingly, the court should grant leave to amend in order to correct the record. It is not at all clear to the court, however, that plaintiffs’ interpretation of Signature Bank’s answer is correct. Indeed, plaintiffs’ interpretation ignores the rest of the sentence, specifically, that the letter of credit expired because it was exhausted. Plaintiffs’ own complaint suggests that such exhaustion occurred in 2015, when Ladenburg drew down on the letter of credit for the second time. Moreover, Signature Bank has strenuously denied plaintiffs’ allegations that renewal of the letter of credit was anything other than on its own terms. The plain language of the letter of credit, as well as plaintiffs’ own complaint, suggest that the letter of credit renewed each year automatically.

The parties remain free to argue which interpretation is better supported by the record evidence. Indeed, the parties devote a considerable amount of their briefing to arguing their respective positions regarding the letter of credit and its effect. The fact that plaintiffs proffer an interpretation that Signature Bank disagrees with, however, is not grounds to allow Signature Bank to excise its prior statement from its answer. Signature Bank does not suggest that newly revealed information requires it to retract what it has said, or provide any other satisfactory justification for allowing it to do so. Accordingly, Signature Bank’s cross motion is denied.

(Internal quotations and citations omitted).

View posts