Examining the Wave of Motions to Amend Complaints After Fraud Allegations
I. P.L.R. § 3025(b) & Motions to Amend Answer to Assert Affirmative Defenses
Motions to amend Answer to assert affirmative defense and counterclaim for fraud pursuant to C.P.L.R. § 3025(b) are on the rise in New York. We’re going to cover several decisions from the Supreme Court in different jurisdictions that all involve or center around C.P.L.R. § 3025(b) motions. For the uninitiated, the C.P.L.R. § 3025(b) states:
(b) Amendments and supplemental pleadings by leave. 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. Leave shall be freely given upon such terms as may be just including the granting of costs and continuances. Any motion to amend or supplement pleadings shall be accompanied by the proposed amended or supplemental pleading clearly showing the changes or additions to be made to the pleading.
Briefly, C.P.L.R. § 3025(b) assureds flexibility throughout the action and allows for adjustment of the pleadings as facts develop in a case, so long as it can be done without prejudice to any of the parties. If there is no prejudice to the non-moving party, leave to amend “must be freely given,” which is stressed time and time again by the courts throughout New York. McCaskey, Davies and Associates, Inc. v. New York City Health and Hospitals Corp., 59 N.Y.2d 755, 463 N.Y.S.2d 434 (2023).
There is no stated time limit for the amendment by leave, as opposed to amendment by right found in § 3025(a), and there is no stated limitation on the number of by-leave amendments a party may have. The courts have discretion to grant C.P.L.R. § 3025(b) motions, and may deny on discretionary grounds such as “prejudice, delay, undue advantage, etc.” Siegel, N.Y. Prac. § 237 (6th ed.).
“Prejudice” to a party can arise if the motion to amend is brought for the sake of delay. For example, in McPherson v. Glenwood Estates, Inc., 208 A.D.2d 699, 617 N.Y.S.2d 526 (2d Dep’t 1994), defendant made a motion for summary judgment in a personal injury action, tendering proof that it never owned the premises where plaintiff alleged the subject incident occurred. Id. In opposition to the motion, plaintiff cross-moved, seeking to emend his complaint so as to specify that the accident occurred at a different location. The Second Department reversed the lower Court’s granting of plaintiff’s motion to amend, and granted the defendant’s motion for summary judgment, noting that plaintiff attempted to avoid summary judgment by amending his complaint to designate a different situs of the accident. Id at 700. The Second Department noted that the defendants would be prejudiced by plaintiff’s delay in seeking the amendment and that the excuse offered, essentially that plaintiff improperly framed his initial complaint, was insufficient to grant the motion to amend.
II. Why is this relevant?
Recently, there have been several filings in the federal courts in New York brought under the Racketeer Influenced and Corrupt Organizations Act (“RICO”) by insurance companies against several law firms, medical providers and individuals alleging, inter alia, a broad sweeping fraud scheme involving staged workplace accidents and resulting personal injury lawsuits. There have been several writings about the subject, which is gaining national attention, and the links to those articles are available below.
The federal filings have resulted in a flurry of activity in state court in New York, wherein defendants are seeking, at varying stages of litigation, to amend their answers to include the affirmative defense of fraud. Five (5) such decisions are featured below.
III. Recent decisions involving C.P.L.R. § 3025(b)
a. Gamboa v. Boro Park, et al., Supreme Court, Kings County – Index No. 506826/2018
In Gamboa, plaintiff alleged he was involved in a construction accident and brought suit pursuant to common-law negligence and Labor Law §§ 200, 240(1) and 241(6). Trial in this matter was scheduled for March 27, 2024, and on March 25, 2024, defendants filed emergency orders to show cause seeking to amend their answers to include the affirmative defense of fraud. Their supporting papers cite the March 1, 2024, RICO Complaint that mention Dr. Andrew Merola and Dr. Thomas Kolb, along with their respective treatment facilities. In a short form order, Judge Pamela Fisher of the Supreme Court, Kings County granted the defendants orders to show cause without issuing an opinion.
b. Carl Sanchez v. Topbuild Services Group Corp., et al., Supreme Court, Queens County – Index No. 709602/2017
In Sanchez, plaintiff alleged he was injured in a motor vehicle accident on August 20, 2016 and sustained serious physical injuries as a result. A motion filed by the defendant requests relief, inter alia, in the form of (1) permitting defendants to amend their answer and assert an affirmative defense of fraud and (2) dismissing plaintiff’s complaint as a result of “his continued willful attempts to conceal records and information related to his eight (8) motor vehicle accidents in a seven-year span.
Judge Anna Culley of Supreme Court, Queens County granted only the first branch of defendant’s motion to amend their answer and include an affirmative defense of fraud. In a relatively brief opinion, the Court found that the failure to provide information about prior accidents was not willful and plaintiff stipulated to provide further discovery regarding the additional motor vehicle accidents.
c. Walter Rodriguez v. The Langston Condominium, et al., Supreme Court, New York County – Index No. 153678/2023
In Rodriguez, plaintiff alleged he sustained personal injuries resulting from a fall from an elevated height on a scaffold at a construction site and commenced an action sounding in common law negligence and Labor Law §§ 200, 240(1) and 241(6). While discovery was ongoing, defendant made a motion pursuant to C.P.L.R. § 3025(b) to amend their answer to include the affirmative defense of fraud, as well as compel plaintiff to respond to demands regarding prior and subsequent accidents.
As to the portions of the motion that requested plaintiff respond to discovery demands, the parties evidently resolved those portions of the motion at a preliminary conference prior to the Court deciding the motion. However, the Court did grant the portions of the motion requesting leave to amend the answer, finding that the defendants had “sufficiently alleged sufficient facts to make out a colorable fraud counterclaim and affirmative defense against plaintiff.” The Court cited plaintiff’s numerous accidents which occurred the same manner, contradictory medical records, and his involvement with several medical providers who are implicated in a Federal RICO action as the basis for granting the motion.
d. Elvin Franco v. 800 E. 173 LLC., Supreme Court, Bronx County – Index No. 24580/2019E
We note at the outset that this decision is not for a motion that specifically requests to amend the defendant’s answer to add the affirmative defense of fraud, but it does seek to compel the further deposition of plaintiff on the basis that certain of his treatment providers are named in the RICO suits.
In Elvin, plaintiff alleged that he was injured as a result of a slip and fall accident on the stairwell of a building. During discovery, defendant moved for a continuing deposition of plaintiff based on the fraud allegations contained in the RICO lawsuits against plaintiff’s primary doctor and treating facilities, specifically Dr. Siddhartha Sharma, SurgiCore and Kolb Radiology, PC.
In its decision, Judge Laura G. Douglas of the Supreme Court, Bronx County held that plaintiff must submit to a further deposition since the basis for the further deposition came to light well after his original deposition and as a patient of the accused medical providers and the client of accused attorneys, “[plaintiff] is likely to possess information that would assist in a defense that his medical treatment was exaggerated or unnecessary.” The Court also noted that any information pertaining conversations with his medical care providers or attorneys regarding instruction and explanations for inflated medical treatment would be relevant and bear on the merits of plaintiff’s claims in this action. Moreover, “the attorney-client privilege cannot be invoked where the subject communications may have been in furtherance of a fraudulent scheme or other wrongful conduct.”
e. Zhou Mou Ling v. New York Presbyt./Brooklyn Methodist, Supreme Court, Bronx County – Index No. 32408/2018E
In Ling, plaintiff alleges he sustained personal injuries when he was struck by a piece of falling concrete debris while working at a construction site. Plaintiff brought suit for violations of Labor Law §§ 200, 240(1) and 241(6), as well as common-law negligence. Defendants moved pursuant to C.P.L.R. § 3025(b) for leave to amend their answer to assert an affirmative defense and counterclaim alleging fraud and to vacate the note of issue to allow discovery to continue in connection with the proposed affirmative defense.
Judge Ashlee Crawford of Supreme Court, Bronx County denied the motion, noting that the basis for the defendants’ requested relief are allegations asserted in a federal civil RICO action pending in the U.S. District Court for the Eastern District of New York. In the proposed answer, defendants alleged “that plaintiff, not Dr. Merola, acted ‘alone or with the help of other’ in making numerous false representations concerning his alleged injuries to various parties, including to his physicians, ‘to further a scheme of fraud’.” However, the defendants conceded during oral argument that that the medical records, on their face, do not provide a basis for fraud and, rather, that the proposed fraud allegations are premised on the allegations in the RICO action. The defendants also addressed their lack of an affidavit of merit to support their proposed pleading was due to the outstanding discovery necessary to explore whether the allegations of fraud are true.
The Court ultimately held that the motion for leave to assert the defendants’ proposed counterclaim and affirmative defenses fails as the pleading does not meet the particularized pleading requirement for fraud and that it is “palpably insufficient” as it is pled upon information and belief and offers only “general, conclusory, and speculative allegations.”
RICO Fraud Cases: