Motion to Sever Claims Denied Because Discovery Regarding Liability and Damages May Be Related

In an Opinion, dated April 28, 2023, in ASM Capital, LP v. Four Wood Capital Partners LLC, Index No. 657238/2019, Justice Robert R. Reed denied defendants’ motion to sever and bifurcate plaintiffs’ causes of action for purposes of pre-trial discovery and motion practice. Defendants argued that in this action, where plaintiffs allege that defendants deprived them of the benefit of a business opportunity, discovery for liability and discovery for damages require the production of significantly different evidence. Denying their motion, the Court explained:

Severance may be granted where the severing of claims will expedite the resolution of a case (Madden v Town of Greene, 27 Misc. 3d 432, 894 NYS2d 854, 856 [Sup. Ct. 2010]). That said, a separate trial should not be ordered where the nature of the damages has an important bearing on the issues of liability (Mignott v Sears, Roebuck & Co., 101 AD2d 731, 732, 475 N.Y.S.2d 44 [1^st Dept 1984]).

It is well established that in actions for breach of contract, the nonbreaching party may recover general damages that are the natural and probable consequence of the breach (Kenford Co. v Cnty. of Erie, 73 NY2d 312, 319, 537 N.E.2d 176, 540 N.Y.S.2d 1 [1989]). Thus, the facts that may support a finding of liability for contractual breach—namely, the purchase of property in contravention of contractual obligations—may also be the evidence that supports a finding of damages. Worldwide's alleged actions in acquiring the subject property, and its acquisition of new companies related to the property, may speak to the measure of recovery plaintiffs are afforded under their contractual claims. That same evidence may also either support or refute plaintiffs' entitlement to recovery on its quasi-contractual legal claims.

It is, thus, far from obvious that severance would promote the quick resolution of the claims presented here. It is not at all clear to this court, at this time, that damages are sufficiently unrelated to liability to warrant a bifurcated discovery proceedings, or trial (Mignott, 101 AD2d at 732).

The attorneys at Schlam Stone & Dolan frequently litigate discovery disputes and motions to sever or bifurcate claims. Contact our attorneys at commercialdivisionblog@schlamstone.com if you or a client have questions regarding such issues.