Opinion
2015-04502. Index No. 52607/14.
08-16-2017
FOX PAINE & COMPANY, LLC, et al., appellants v. HOUSTON CASUALTY COMPANY, et al., respondents.
Boies, Schiller & Flexner, LLP, Armonk, NY (Courtney R. Rockett, Patrick J. Rohan, Ievgenia Vatrenko, and Jeremy Vest of counsel), for appellants. Shipman & Goodwin LLP, New York, NY (Mark K. Ostrowski, pro hac vice, of counsel), for respondents Houston Casualty Company and Professional Indemnity Agency, Inc. Holland & Knight, LLP, New York, NY (Marc L. Antonecchia and James A. Riddle pro hac vice, of counsel), for respondent Equity Risk Partners, Inc.
Boies, Schiller & Flexner, LLP, Armonk, NY (Courtney R. Rockett, Patrick J. Rohan, Ievgenia Vatrenko, and Jeremy Vest of counsel), for appellants.
Shipman & Goodwin LLP, New York, NY (Mark K. Ostrowski, pro hac vice, of counsel), for respondents Houston Casualty Company and Professional Indemnity Agency, Inc.
Holland & Knight, LLP, New York, NY (Marc L. Antonecchia and James A. Riddle pro hac vice, of counsel), for respondent Equity Risk Partners, Inc.
JOHN M. LEVENTHAL, J.P., JEFFREY A. COHEN, SYLVIA O. HINDS–RADIX and FRANCESCA E. CONNOLLY, JJ.
In an action, inter alia, to recover damages for breach of contract and breach of fiduciary duty, the plaintiffs appeal from so much of an order of the Supreme Court, Westchester County (Scheinkman, J.), dated April 15, 2015, as denied those branches of their motion which were to amend the causes of action alleging fraud, breach of fiduciary duty, and aiding and abetting a breach of fiduciary duty, and to add causes of action alleging conspiracy to commit fraud and aiding and abetting fraud.
ORDERED that the order is modified, on the law and in the exercise of discretion, by deleting the provision thereof denying those branches of the plaintiffs' motion which were to amend the causes of action alleging fraud, breach of fiduciary duty, and aiding and abetting a breach of fiduciary duty, and to add a cause of action alleging aiding and abetting fraud, and substituting therefor a provision granting those branches of the motion; as so modified, the order is affirmed insofar as appealed from, without costs or disbursements.
The underlying facts are set forth in our decision and order on a related appeal from an order dated November 24, 2014 (see Fox Paine & Company, LLC v. Houston Casualty Company, 153 A.D.3d 673, 60 N.Y.S.3d 294 [Appellate Division Docket No. 2014–11903; decided herewith] ).
The plaintiffs moved, inter alia, to amend the amended complaint to add certain facts to the causes of action alleging fraud, breach of fiduciary duty, and aiding and abetting a breach of fiduciary duty, and to add causes of action alleging conspiracy to commit fraud and aiding and abetting fraud. In an order dated April 15, 2015, the Supreme Court, among other things, denied those branches of the motion.
In the absence of prejudice or surprise to the opposing party, leave to amend a pleading should be freely granted unless the proposed amendment is palpably insufficient or patently devoid of merit (see CPLR 3025[b] ; Markowits v. Friedman, 144 A.D.3d 993, 42 N.Y.S.3d 218 ; Galanova v. Safir, 127 A.D.3d 686, 4 N.Y.S.3d 538 ). The determination to permit or deny amendment is committed to the sound discretion of the trial court (see CPLR 3025[b] ; Edenwald Contr. Co. v. City of New York, 60 N.Y.2d 957, 959, 471 N.Y.S.2d 55, 459 N.E.2d 164 ).
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 causes of action alleging fraud, breach of fiduciary duty, and aiding and abetting a breach of fiduciary duty. The proposed amendments were not palpably insufficient or patently devoid of merit (see CPLR 3025[b] ; MVB Collision, Inc. v. Allstate Ins. Co., 129 A.D.3d 1041, 1043, 13 N.Y.S.3d 137 ).
The Supreme Court also improvidently exercised its discretion in denying that branch of the plaintiffs' motion which was to add a cause of action alleging aiding and abetting fraud. To recover for aiding and abetting fraud, the plaintiff must plead the existence of an underlying fraud, knowledge of the fraud by the aider and abettor, and substantial assistance by the aider and abettor in the achievement of the fraud (see Markowits v. Friedman, 144 A.D.3d 993, 42 N.Y.S.3d 218 ; Matter of Woodson, 136 A.D.3d 691, 693, 24 N.Y.S.3d 706 ; Winkler v. Battery Trading, Inc., 89 A.D.3d 1016, 1017, 934 N.Y.S.2d 199 ). "Substantial assistance" requires an affirmative act on the defendant's part (see Baron v. Galasso, 83 A.D.3d 626, 629, 921 N.Y.S.2d 100 ). In the proposed second amended complaint, the plaintiffs alleged underlying fraud, the defendants' knowledge of the fraud, and the defendants' substantial assistance in the achievement of the fraud. The Supreme Court should have granted leave to add a cause of action alleging aiding and abetting fraud, since it was not palpably insufficient or devoid of merit and there was no prejudice to the defendants.
However, the Supreme Court properly denied that branch of the motion which was to add a cause of action alleging conspiracy to commit fraud, since that proposed cause of action was duplicative of the proposed cause of action alleging aiding and abetting fraud (see Kew Gardens Hills Apt. Owners, Inc. v. Horing Welikson & Rosen, P.C., 35 A.D.3d 383, 386, 828 N.Y.S.2d 98 ; American Baptist Churches of Metro. N.Y. v. Galloway, 271 A.D.2d 92, 710 N.Y.S.2d 12 ).
Accordingly, the Supreme Court properly denied that branch of the plaintiffs' motion which was to add a cause of action alleging conspiracy to commit fraud, but should have granted those branches of the motion which were to add facts to their causes of action alleging fraud, breach of fiduciary duty, and aiding and abetting a breach of fiduciary duty, and to add a cause of action alleging aiding and abetting fraud.