On February 5, 2021, Justice Cohen of the New York County Commercial Division issued a decision in Olam Corp. v. Thayer, 2021 NY Slip Op 30345(U), holding that leave to amend a complaint should be denied if the proposed complaint could not survive a motion to dismiss, explaining:
The Court supplements its oral decision to discuss in greater detail the standard for determining whether leave to amend a complaint should be denied on the ground that the proposed amendment is palpably insufficient or clearly devoid of merit. In particular, the question is whether the standards of palpable insufficiency or clear lack of merit are more lenient than the standard for determining whether the proposed amended complaint would – if approved – survive a motion to dismiss under CPLR 3211.
That question was addressed most directly in Scott v Bell Atl. Corp., 282 AD2d 180 [1st Dept 2001], affd as mod sub nom. Goshen v Mut. Life Ins. Co. of New York, 98 NY2d 314 , in which the court held that a proposed amendment that cannot survive a motion to dismiss should not be permitted. In support of that conclusion, the court cited Glenn Partition, Inc. v Trustees of Columbia Univ. in City of New York, 169 AD2d 488 [1st Dept 1991]. In that case, the court observed that although CPLR Section 3025(b) provides that leave to amend a complaint shall be freely granted, this Court has held that in determining whether to grant leave to amend the court must examine the underlying merits of the causes of action asserted therein, since, to do otherwise, would constitute a waste of judicial resources.
These cases reflect the commonsense view that it would be pointless to grant leave to file an amended complaint if the Court concludes that the complaint will, in tum, be dismissed under CPLR 3211. Federal courts, applying their own permissive standard for permitting amendment of complaints, have reached the same conclusion.
While that would seem to be the end of the matter, counsel in this and other cases before this Court have suggested that motions for leave to amend – which are to be freely granted per CPLR 3025 – should not be subject to the same scrutiny that would be applied in the context of a motion to dismiss. In support of that argument, counsel reference cases such as MBIA Ins. Corp. v Greystone & Co., Inc., 74 AD3d 499 [1st Dept 2010], which hold that on a motion for leave to amend, plaintiff need not establish the merit of its proposed new allegations, but simply show that the proffered amendment is not palpably insufficient or clearly devoid of merit. That language has been used, in whole or part, in many subsequent cases.
Notably, however, other cases have indicated that palpable insufficiency is equivalent to insufficiency as a matter of law or a failure to state prima facie a viable cause of action. Questions of sufficiency and viability as a matter of law are, of course, the guiding principles for deciding motions to dismiss under CPLR 3211.
In the end, the Court concludes that, consistent with Scott v Bell Atl. Corp., 282 AD2d at 185, leave to amend a complaint should be denied if the proposed complaint could not survive a motion to dismiss. A proposed amended complaint that would be subject to dismissal as a matter of law is, by definition, palpably insufficient or clearly devoid of merit and thus should not be permitted under CPLR 3025. Any other conclusion would lead to the waste of public and private resources – namely, amending the complaint only to have it be dismissed after a separate round of briefing, argument, and decision – that the First Department warned against in Glenn Partition, 169 AD2d at 489.
The bottom line is that the decision as to the facial sufficiency of the proposed amended complaint should be made before granting leave to amend, rather than deferring it to a later date. When the non-moving party opposes amendment on the ground of futility, the moving party should be prepared in its reply brief to defend the proposed pleading as if it were opposing a motion to dismiss.
In the instant case, the proposed claims against Mr. Anthos fail, as a matter of law, because they are barred by the applicable statutes of limitation and do not relate back to the filing date of the original complaint against other parties.
(Internal quotations and citations omitted).
In New York, the courts are very generous in allowing a party to amend its pleadings. However, there are limits to this generosity. Contact Schlam Stone & Dolan partner John Lundin at email@example.com if you or a client have a question regarding whether it is too late to amend your claims or answer.
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