Lis v. Lancaster

Full title: ANDREW LIS, Plaintiff, v. JASON LANCASTER, DEBBIE LANCASTER, CECIL…

Court: Supreme Court, New York County

Date published: Jun 15, 2022

2022 N.Y. Slip Op. 31899 (N.Y. Sup. Ct. 2022)

Opinion

Index Nos. 650855/2019 595376/2019 Motion Seq. No. 007

06-15-2022

ANDREW LIS, Plaintiff, v. JASON LANCASTER, DEBBIE LANCASTER, CECIL SIMMONS, DEE CHASE-UNNO, GULF PREMIER LOGISTICS LLC, OVERLAND DISTRIBUTION CO., INC. OVERLAND EXPRESS CO., INC. JAL ENVIRONMENTAL SERVICES PROGRAMS, BANK OF AMERICA NA, JP MORGAN CHASE BANK NA, Defendant. JASON LANCASTER, JAL ENVIRONMENTAL SERVICES PROGRAMS Plaintiff, v. JAL ENVIRONMENTAL SERVICES PROGRAMS LLC Defendant.

MELISSA CRANE, J.S.C.

Unpublished Opinion

MOTION DATE 12/09/2021

DECISION + ORDER ON MOTION

MELISSA CRANE, J.S.C.

The following e-filed documents, listed by NYSCEF document number (Motion 007) 381, 382, 383, 384, 385, 386, 387, 389, 390, 391, 392, 393, 394, 395, 397, 398, 399, 400, 401, 402, 403, 404 were read on this motion to/for AMEND CAPTION/PLEADINGS

In this action involving a business dispute between plaintiff Andrew Lis and defendant Jason Lancaster (Lancaster), as well as his companies, defendants Gulf Premier Logistics LLC (Gulf Premier) and defendant/counterclaimant/third-party plaintiff JAL Environmental Services Programs d/b/a JAL Environmental Services Programs, Inc. (JAL-TX) (collectively defendants), plaintiff moves for leave to amend the first amended complaint dated April 2,2019 (the FAC), and file the proposed second amended complaint (the SAC).

For the reasons set forth below, the court grants plaintiffs motion.

FACTUAL BACKGROUND

Familiarity with the underlying facts and procedural history of this matter is presumed. The following is a brief recitation of the facts relevant to this motion. The complaint (NYSCEF Doc No. 1) was filed on February 8, 2019 and, while the case was temporarily removed to the United States District Court, plaintiff's then-counsel, Marzec Law Firm, P.C., filed and served the FAC dated April 2, 2019 (NYSCEF Doc No. 196). This is and has been the operative complaint during all relevant times (affirmation of Ihsan Dogramaci, Esq., plaintiffs counsel [NYSCEF Doc No. 383], ¶ 4).

Upon remand, on May 6, 2019, defendants filed and served their answer, counterclaims and third-party complaint (NYSCEF Doc No. 92) in response to the FAC. On July 25, 2019, the law firm of Pavia & Harcourt LLP entered its appearance and substituted in as counsel for plaintiff and third-party defendant JAL Environmental Services Programs, LLC (JAL-NY) (NYSCEF Doc No. 210).

Since that time, the parties have completed all written discovery, document productions, three party and five non-party depositions, expert disclosures and three expert depositions (affirmation of Nicole Sullivan, Esq., defendants' counsel [NYSCEF Doc No. 390], ¶ 2). The note of issue deadline was originally December 29, 2021, and dispositive motions were to be submitted soon thereafter (see 11/17/21 stipulation and order [NYSCEF Doc No. 378]). The final scheduling order was filed on April 4, 2022 (NYSCEF Doc No. 446), and the note of issue was filed on April 20, 2022 (NYSCEF Doc No. 467).

However, on April 19, 2022, this court granted plaintiffs motion to vacate paragraph 4 of the final scheduling order that prohibited plaintiff from subpoenaing Liskow & Lewis, Lancaster's former attorneys, in Louisiana. This court found that:

"At issue is whether or not the parties were partners or merely employer/employee. As the law firm that drafted the relevant agreement between the parties for Mr. Lancaster, Liskow & Lewis would have information material and necessary to this central issue. Defendant has repeatedly stated that he does not control Liskow & Lewis. Accordingly, given this lack of control, there is no way for defendant to know that the documents he has produced from Liskow & Lewis are complete"

(4/19/21 decision [NYSCEF Doc No. 491), at 2).

Consequently, this court issued an order allowing plaintiff to seek discovery from Liskow & Lewis, but "limited to the issue of whether the parties were partners or employer/employee" (id. at 3).

On May 26, 2002, this court then issued an order vacating the note of issue, requiring plaintiff to file a new note of issue by December 31, 2022, and requiring the parties' motions for summary judgment to be filed within 60 days from the filing of the note of issue (see NYSCEF Doc No. 493).

The claims against defendants Cecil Simmons, Dee Chase-Unno, Debbie Lancaster, Overland Distribution Co., Inc. and Overland Express Co., Inc., Bank of America, and JP Morgan Chase Bank have been voluntarily dismissed (see NYSCEF Doc Nos. 185, 186, 312, 379).

DISCUSSION

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." As a general proposition, leave to amend pleadings "should be freely granted" (RBP of 400 W42 St., Inc. v 400 W. 42^nd St. Realty Assoc., 27 A.D.3d 250, 250 [1^st Dept 2006]).

On a motion for leave to amend, plaintiff must establish "that the proffered amendment is not palpably insufficient or clearly devoid of merit" (MBIA Ins. Corp. v Greystone & Co., Inc., 74 A.D.3d 499, 500 [1^st Dept 2010]; see also Perotti v Becker, Glynn, Melamed & Muffly LLP, 82 A.D.3d 495, 498-499 [1^st Dept 2011]), and '"does not prejudice or surprise the opposing party'" (Clark v Clark, 93 A.D.3d 812, 816 [2d Dept 2012] [citation omitted]; see also Miller v Cohen, 93 A.D.3d 424,425 [1^st Dept 2012] [on a motion to amend a complaint, the plaintiff "need not establish the merit of the proposed new allegations, but must 'simply show that the proffered amendment is not palpably insufficient or clearly devoid of merit'"] [citation omitted]). Indeed, "[t]he party opposing the motion to amend must overcome a heavy presumption of validity in favor of the moving party" (Otis El. Co. v 1166 Ave. of Ams. Condominium, 166 A.D.2d 307, 307 [1^st Dept 1990]; see also Loewentheil v White Knight, Ltd., 71 A.D.3d 581, 581 [1^st Dept 2010] ["Leave to amend pleadings ... should be liberally granted"]).

A showing of prejudice sufficient to deny a motion to amend requires "more than 'the mere exposure of the [party] to greater liability'" (Kimso Apartments, LLC v Gandhi, 24 N.Y.3d 403,411 [2014] [citation omitted]). "Rather, 'there must be some indication that the [party] has been hindered in the preparation of [the party's] case or has been prevented from taking some measure in support of [its] position'" (id. [citation omitted]; see e.g. Henry v Split Rock Rehab. & Health Care Ctr., LLC, ___ A.D.3d, ___ 166 N.Y.S.3d 538, 538 [1^st Dept 2002] ["Plaintiffs motion was properly granted, as defendants failed to establish that they have 'been hindered in the preparation of their case or have been prevented from taking some measure in support of their position'"] [citation and alternations omitted]).

The court grants plaintiff s motion to amend the complaint. Plaintiff has demonstrated that the proposed SAC is not palpably insufficient, or devoid of merit, while defendants have failed to demonstrate that the proposed amendment will unduly prejudice them.

In support of his motion for leave to amend, plaintiff contends defendants will not be prejudiced because the proposed SAC does not contain any "new legal theories," but "[r]ather, the legal theories set forth and the causes of action asserted in the First Amended Verified Complaint have been pruned and clarified" (plaintiffs memorandum [NYSCEF Doc No. 382], at 4; see also Dogramaci affirmation, ¶ 12). According to plaintiff, this is illustrated by allegations relating to transfers of funds defendant Lancaster made from a bank account of JAL-TX, the corporate vehicle for the business at the heart of this case, to the bank account of defendant Gulf Premier, Lancaster's single-member limited liability company. Plaintiff contends that, on May 7, 2021, defendants belatedly produced numerous records from Gulf Premier's books and accounts showing that, as alleged in paragraph 55 of the proposed SAC, Lancaster "regularly transferred] funds from JAL, Inc. to Gulf Premier's account in amounts exceeding what" he should have transferred. Plaintiff contends that there is no prejudice to defendants by merely clarifying the claims based on inferences drawn from discovery.

In opposition, defendants contend that, contrary to plaintiffs contention, the proposed SAC actually contains brand-new allegations and several substantive changes that, if permitted, would cause significant surprise and prejudice to defendants, especially given that leave to file the proposed SAC is sought on the eve of filing the note of issue.

First, defendants claim to be surprised by "new allegations" that plaintiff and Lancaster were partners. According to defendants, "[o]ne of the most significant changes is plaintiffs new claim that there was a separate' [n]on-party JAL' that was a 'de facto partnership under New York law' and 'different from the partnership' of JAL-TX - a claim that, if true, was clearly known to Plaintiff well before the original pleading was drafted but never previously raised" (opposition memorandum [NYSCEF Doc No. 382], at 6).

However, contrary to this assertion, the FAC explicitly distinguishes between these two separate entities. In paragraph 9, it names as a defendant "JAL Environmental Services Programs d/b/a JAL Environmental Services Programs Inc." Then, in the following two paragraphs, it explains the difference between the "incorporated entity" and the "common law partnership":

"10. JAL Environmental Services Programs Inc. is a Texas incorporated entity with a nerve center in New York.

11. JAL Environmental Services Programs is a common law partnership between Plaintiff and Mr. Lancaster with its main office located in, and with all executive . and managerial functions directed from its New York office located at 95 Orchard Street, New York, NY."

Accordingly, these allegations cannot come as any surprise to defendants.

Defendants also claim surprise from "new allegations" of "Lis's history with his prior employer, Amlon, as well as details about his communications with them and the dispute surrounding his non-compete agreement" (opposition memorandum, at 6). However, it is undisputed that defendants knew that Amlon employed plaintiff, that they did business with Amlon for years, and that their own pleading contains various allegations with respect to Amlon (see answer [NYSCEF Doc No. 92], ¶¶ 98, 100, 110, and counterclaims, ¶¶ 14, 19, 33-30). Indeed, when defendants took plaintiffs deposition, they extensively examined him on the very matters addressed in these paragraphs of the proposed new pleading (see NYSCEF Doc No. 399 [excerpts from plaintiffs deposition in which plaintiff was examined concerning his years as an employee of Amlon, as well as the alleged "non-compete" agreement with Amlon]).

Defendants also claim that are surprised and prejudiced by "new allegations" with respect the "vague transfer of funds of an unspecified amount from JAL-TX to "at least one freight provider" ([SAC] ¶ 56)" (opposition memorandum, at 6). Paragraph 56 of the SAC alleges that "Lancaster also had funds transferred from JAL, Inc's bank account to at least one freight provider in a convoluted manner· making it difficult if not impossible to account for those withdrawals of JAL, Inc. funds."

However, this allegation should come as no surprise to defendants, as it based on documents that they themselves belatedly produced on May 21, 2021 (see 4/13/2021 order [NYSCEF Doc No. 289] [requiring defendant to produce invoices from Gulf Premier, a transportation provider, to JLK, Inc. and invoices from Pioneer Freight Ltd., and other freight carriers]). Plaintiff contends this discovery has revealed, for the first time, that Gulf Premier was secretly overcharging the Lis-Lancaster partnership (see NYSCEF Doc No. 409]). Plaintiff also contends that defendants' failure to provide a complete set of invoices from Pioneer Freight Ltd. and Overland Distribution, another freight carrier, makes it difficult to properly account for payments from the Lis-Lancaster partnership to these freight providers.

Defendants also claim to be surprised by "new allegations" of "Lancaster's purported 'refusal' to go on business trips (id. ¶¶ 74-76)" (opposition memorandum, at 6). How can defendants claim prejudice or surprise from allegations concerning what Lancaster himself did or did not do? Nevertheless, defendants can have discovery on this limited issue, which should ameliorate any prejudice that may exist.

Finally, defendants contend that they are surprised by "new allegations" of "Gulf Premier's lack of profitability and licensing (id. | 21)" (opposition memorandum, at 6). However, these allegations are based on Lancaster's own deposition testimony (see Lancaster dep [NYSCEF Doc No. 404], at 25-26 [agreeing that "Gulf Premier Logistics was not profitable" in 2015-2020]; 32 ["in 2020,1 let th[e] [freight forwarding] license or certificate go"]).

Accordingly, it is clear that defendant cannot claim surprise or prejudice from these "new" allegations, because they were either in the original pleading, or are based on defendants' own discovery (see Roberts v Liberty Lines Transit, Inc., 187 A.D.3d 617, 618 [1^st Dept 2020] ["The motion court providently exercised its discretion in permitting plaintiff to amend his complaint. . . because the facts underlying the amendment... "were known to Liberty Lines when the original complaint was filed"])

Defendants also claim that they will be prejudiced if leave is granted to file the SAC because discovery has closed, and the note of issue is about to be filed. Although it is true that courts have denied leave to amend when a plaintiff seeks to amend the pleadings on the eve of trial (see e.g. Panasia Estate, Inc. v Broche (89 A.D.3d 498,498 [1^st Dept 2011]; Chichilnisky v Trustees of Columbia Univ. in City of New York (49 A.D.3d 388, 388-89 [1^st Dept 2008]), those cases are not relevant here, as the original note of issue has been vacated, additional discovery has been ordered, and the new note of issue does not have to be filed until December 31, 2022.

This court also finds that the proposed SAC is not palpably insufficient or devoid of merit, as it simply hones the allegations and claims of the FAC, and, without asserting any new legal theories, incorporates some new factual allegations based on recent discovery (see Lavrenyuk v Life Care Servs., Inc., 198 A.D.3d 569, 570 [1^st Dept 2021] ["The proposed amendments, which consist largely of related factual allegations, are not palpably insufficient or devoid of merit on the face of this record"]; Fox Paine & Co., LLC v Houston Cas. Co., 153 A.D.3d 678, 679 [2d Dept 2017] ["Here, the Supreme Court improvidently exercised its discretion in denying those branches of the plaintiffs' motion which were for leave to amend the complaint to add factual allegations" to the existing causes of action because "(t)he proposed amendments were not palpably insufficient or patently devoid of merit"]).

Accordingly, it is

ORDERED that plaintiffs motion for leave to amend the first amended complaint herein is granted and the amended complaint in the form annexed to the moving papers shall be deemed served upon service of a copy of this order with entry thereof; and 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 service; and it is further

ORDERED that there shall be no motion practice whatsoever, without premotion conferences with the court.