Commercial Division Blog

Posted: May 27, 2015 / Categories Commercial, Court Rules/Procedures

Court Permits Amendment To Complaint That Contradicts Admissions in Original Complaint

On May 12, 2015, Justice Demarest of the Kings County Commercial Division issued a decision in Avigdor v. Rosenstock, 2015 NY Slip Op. 50721(U), granting a plaintiff's motion to amend the complaint.

The decision in Avigdor is instructive in two respects: (1) first, the motion was unnecessary as a procedural matter, because, as Justice Demarest pointed out, a complaint may be amended once, as of right, at any time prior to the service of an answer, and (2) the Court permitted the amendment even though it contradicted the original complaint on a dispositive factual issue.

The plaintiff in Avigdor claimed that he was a co-owner of a company called Doctors on Call, and accused the defendant, who was running the company, of failing to give the plaintiff "profit draws" to which he was entitled and otherwise not treating the plaintiff fairly as an owner. In his complaint, the plaintiff alleged that "Doctors on Call . . . provides in-home medical care in the New York City area." That allegation was problematic because, under New York Education Law § 6509-a, the plaintiff, who is not a physician, cannot be a party to a "fee splitting" arrangement with a doctor. As Justice Demarest noted, citing ample Second Department authority, such agreements "will not be enforced by the court." The defendant moved to dismiss on this ground, and the plaintiff cross-moved to amend the complaint to state that when he and the defendant purchased Doctors on Call, "its primary business was to provide administrative, management and other support services for doctors who provide in-home medical care in the New York City area." That amendment would take the parties' agreement outside the scope of the Education Law prohibition on fee-splitting, but arguably contradicted plaintiff’s prior pleading admission as to the company's business.

As an initial matter, Justice Demarest noted that the plaintiff need not have moved for leave to amend his complaint, since, under CPLR 3025(a), he was still entitled to an amendment as of right. See CPLR 3025(a) ("A party may amend his pleading once without leave of court within twenty days after its service, or at any time before the period for responding to it expires, or within twenty days after service of a pleading responding to it."). Here, the defendant did not file a responsive "pleading," but rather filed a CPLR 3211 motion to dismiss. Thus, the plaintiff was still free to amend the complaint once without leave of court.

The court went on to hold that "insofar as [plaintiff] seeks leave of the court for his proposed amendment, he would be entitled to the granting of such leave" because (1) "the proposed amendment is not palpably insufficient or patently devoid of merit"; and (2) there was no prejudice to the defendant in that the amendment was made "only four months after [plaintiff] filed his complaint and before defendants served their answer, and there has been no discovery."

Finally, Justice Demarest rejected the defendant’s argument that the amendment should not be permitted because it contradicts plaintiff's prior allegation in the original complaint concerning the business of Doctors on Call, as well as a similar statement in a sworn affidavit submitted in support of an order to show cause. The court explained:

The purpose of an amendment of pleadings pursuant to CPLR 3025 is to permit the plaintiff to amend his or her theory of recovery to comply with the facts as they unfold, not to permit the plaintiff to alter his representation of material facts to best suit his or her theory of recovery and thereby overcome defenses raised in opposition. The amendment of pleadings is not a vehicle that can be utilized to relieve a party from the consequences of prevarication.

However, here, plaintiff is entitled to amend his complaint as of right, and, as discussed above, there is also no prejudice resulting to defendants from such amendment. While allegations in a complaint constitute a formal judicial admission once a complaint is amended, any formal judicial admission deleted by the amendment is relegated to the status of an informal judicial admission which, although not conclusive, constitutes evidence of the proposition alleged. Thus, an admission of fact in an original pleading does not lose its effect as an admission of fact because the pleading has been superceded as such by an amended pleading. As a result, admissions in an original pleading superceded by an amended pleading are still evidence of the facts admitted. The circumstances surrounding the original admissions and the amendment may be explained at trial, however, and the weight afforded the original admissions is to be determined by the factfinder.

(Citations omitted) (emphasis added).