FILED: KINGS COUNTY CLERK 08/31/2015 11:40 AM INDEX NO. 022785/2012 NYSCEF DOC. NO. 33 RECEIVED NYSCEF: 08/31/2015 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF KINGS ASH BROKERAGE CORPORATION, -against- Plaintiff, Index No. 22785/2012 MOSHE LIEBERMAN; BLACKSTONE GROUP BROKERAGE, LLC; METROPOLIS AGENCY LLC; and TZVI KATZ, Defendants. MEMORANDUM OF LAW IN OPPOSITION TO PLAINTIFF S MOTION FOR LEAVE TO AMEND LIPSIUS-BENHAIM LAW, LLP 80-02 Kew Gardens Road, Suite 1030 Kew Gardens, New York 11415 Telephone: 212-981-8440 Fax: 888-442-0284 Attorneys for Defendants Of counsel: Ira S. Lipsius Phillip M. Manela
TABLE OF CONTENTS PRELIMINARY STATEMENT 1 FACTS 2 LEGAL ARGUMENT...6 I. ASH S NEW CLAIMS ARE BARRED BY THE STATUTE OF LIMITATIONS...6 a. ASH s New Claims Accrued in August 2008, More Than Six Years Ago......6 b. The Two Year Limitations Period for Newly Discovered Fraud Does Not Apply, Because ASH Was at All Times Aware of Illowitz s Role.7 II. THE RELATION BACK DOCTRINE DOES NOT APPLY.8 a. There Was No Mistake 9 i. Yaakov Ilowitz......12 ii. Hadassah Ilowitz...13 b. The Illowitzs Are Not United in Interest With the Named Defendants 14 III. ALTERNATIVELY, THE COURT SHOULD EXERCISE ITS DISCRETION AND DENY LEAVE TO AMEND...16 IV. ASH HAS NO CAUSE OF ACTION AGAINST SHAYA ILOWITZ 19 a. ASH Has Not Alleged Fraud with Particularity...19 b. ASH s Claim for Negligence is Legally Deficient...20 CONCLUSION.20 i
TABLE OF AUTHORITIES CASES Abdell v. City of New York, 2006 U.S. Dist. LEXIS 65222, 2006 WL 2620927 (S.D.N.Y. 2012). 12 Arsell v Mass One LLC, 73 A.D.3d 668 (2d Dep t 2010).. 8, 13 Baratta v. ABF Real Estate Co., 215 A.D.2d 518 (2d Dep t 1995). 7 Barclay Arms, Inc. v. Barclay Arms Assocs., 74 N.Y.2d 644 (1989).. 19 Brooks v. Robinson, 56 A.D.3d 406 (2d Dep t 2008) 6, 16 Brunetti v. Musallam, 59 A.D.3d 220 (1st Dep t 2009). 17 Buran v. Coupal, 87 N.Y.2d 173 (1995). 9, 14 Capital Dimensions, Inc. v. Samuel Oberman Co., 104 A.D.2d 432 (2d Dep t 1984). 15 Cardamone v. Ricotta, 47 A.D.3d 659 (2d Dep t 2008).. 8, 9 Clarkin v. Staten Island Univ. Hosp., 242 A.D.2d 552 (2d Dep t 1997). 17 Connell v. Hayden, 83 A.D.2d 30 (2d Dep t 1981). 15 Contos v. Mahoney, 36 A.D.3d 646 (2d Dep t 2007)... 9 Dart Direct, Inc. v Urban Express/NJ LLC, Index No. 652838/11, 2015 N.Y. Misc. LEXIS 1831 (Sup. Ct. N.Y. Co. Feb. 24, 2015) 18 De Fabio v. Nadler Rental Serv., 27 A.D.2d 931 (2d Dep t 1967) 18 Desiderio v. Rubin, 234 A.D.2d 581 (2d Dep t 1996). 14 ii
Excelsior Insurance Company v. Antretter Contracting Corp., 262 A.D.2d 124 (1st Dep t 1999) 18 Fandy Corp. v. Lung-Fong Chen, 262 A.D.2d 352 (2d Dep t 1999). 7 F.G.L. Knitting Mills, Inc. v. 1087 Flushing Property, Inc., 191 A.D.2d 533 (2d Dep t 1993) 16 Garza v. VICO Utilities, Inc., 150 A.D.2d 520 (2d Dep t 1989). 17 GFRE, Inc. v U.S. Bank, N.A., 130 A.D.3d 569 (2d Dep t 2015).. 19 Goldberg v. Boatmax, Inc., 41 A.D.3d 255 (1st Dep t 2007).. 10 Greater NY Mut. Ins. Co. v. Coach, Inc., Index No. 106354/08, 2012 N.Y. Misc. LEXIS 3389 (Sup. Ct. N.Y. Co. June 29, 2012) 11 Greater N.Y. Mut. Ins. Co. v. Coach, Inc., 112 A.D.3d 438 (1st Dep t 2013). 11 Hall v. Rao, 26 A.D.3d 694 (3d Dep t 2006).. 10 Hampton Bays Connections, Inc. v. Duffy, 212 F.R.D. 119 (E.D.N.Y. 2003). 12 Hirsh v. Perlmutter, 53 A.D.3d 597, 599 (2d Dep t 2008) 8 House of Spices (India), Inc. v. SMJ Servs., Inc., 103 A.D.3d 848 (2d Dep t. 2013). 7 Ingrami v. Rovner, 45 A.D.3d 806, 808 (2d Dep t 2007) 7 James-Smith v. Rottenberg, 32 A.D.2d 792 (2d Dep t 1962) 18 Jenal v. Brown, 80 A.D.3d 727 (2d Dep t 2011) 6, 19 Jiminez v Shahid, 83 A.D.3d 900 (2d Dep t 2011).. 20 iii
LeBlanc v Skinner, 103 A.D.3d 202 (2d Dep t 2012). 15 Lind v. Greenspan, 78 A.D.3d 555 (1st Dep t 2010).. 17 Lord Day & Lord, Barrett, Smith v Broadwall Mngt. Corp., 301 A.D.2d 362 (1st Dep t 2003). 14 Losner v. Cashline, L.P., 303 A.D.2d 647 (2d Dep t 2003).. 14 Mandarin Trading Ltd. v. Wildenstein, 16 N.Y.3d 173 (2011).. 20 McGowan v. RPC Realty Corp., 46 A.D.3d 771 (2d Dep t 2007) 17 Mondello v. New York Blood Ctr., 80 N.Y.2d 219 (1992).. 14 Monir v. Khandakar, 30 A.D.3d 487 (2d Dep t 2006) 8 Mortgage Elec. Registration Sys., Inc. v. Reid, 85 A.D.3d 880 (2d Dep t 2011) 6 Nani v Gould, 39 A.D.3d 508 (2d Dep t 2007) 10 Napoli v. Canada Dry Bottling Co. of New York, Inc., 166 A.D.2d 696 (2d Dep t 1990). 17 Nisari v. Ramjohn, 85 A.D.3d 987 (2d Dep t 2011) 6 Oil Heat Institute of Long Island Insurance Trust v. RMTS Associates, LLC, 4 A.D.3d 290 (1st Dep t 2004). 17 Pape v. Bd. of Educ. of the Wappingers Cent. Sch. Dist., 07-cv-8828 (KMK), 2009 U.S. Dist. LEXIS 91738 (S.D.N.Y. 2009). 11 Percoco v. Lesnak, 24 A.D.3d 427 (2d Dep t 2005) 7 Sloane v. Town of Greenburgh, 01-cv-11551 (MBM), 2005 U.S. Dist. LEXIS 16107, 2005 WL 1837441 (S.D.N.Y. 2005) 12 iv
Spaulding v. Mt. Vernon Hosp., 283 A.D.2d 634, 635 (2d Dep t 2001). 8 Steinhardt Group, Inc. v. Citicorp, 303 A.D.2d 326 (1st Dep t 2003). 6, 17 Tucker v. Lorieo, 291 A.D.2d 261 (1st Dep t 2002). 10 Wallach v R&J Constr. Corp., 128 A.D.3d 566 (1st Dep t 2015). 11, 14 Wassfam L.L.C. v. Palacios, 107 A.D.3d 493 (1st Dep t 2013). 17 STATUTES CPLR 203... 8, 14 CPLR 213 7 CPLR 3013.. 19 CPLR 3016.. 19 v
PRELIMINARY STATEMENT After more than two and a half years of litigation, including document discovery and depositions, plaintiff now seeks to add new defendants (primarily Yaakov Ilowitz), whom plaintiff knew of and communicated with already in 2007, many years before filing this lawsuit in November of 2012. Plaintiff s own documents and correspondence, produced in discovery, conclusively show that at all relevant times, and as far back as March 2007, plaintiff knew of, communicated with, and took direction from Ilowitz concerning the transactions at issue in this litigation. Further, in February 2013, defendants pled, as an affirmative defense, that plaintiff failed to name necessary parties. In March 2014, defendants prior counsel recused himself because the interests of Blackstone (Ilowitzs company) was not aligned with the interests of the named individual defendants. Plaintiff either deliberately chose to omit the Ilowitz from this lawsuit or, at best, plaintiff was grossly negligent in failing to name him. Even if plaintiff were allowed to name the Ilowitzs today, any claims against them would be barred by the statute of limitations. The fraudulent acts complained of all took place in 2007, and the monies that plaintiff seeks returned were paid to defendants by August 2008. The relation back doctrine cannot save these claims because plaintiff s inexcusable delay was not a mistake and the Ilowitzs reasonably believed that plaintiff was deliberately not suing them. Further, the Ilowitzs do not stand or fall together with the existing defendants. Even if the existing defendants are liable, plaintiff must still pierce the corporate veil in order to hold Ilowitz liable. Allowing plaintiff to amend, after years of litigating this action, would prejudice defendants by reopening discovery already completed, and raising new issues to be defended 1
against (including piercing the corporate veil with respect to Ilowitz). As asserted by prior counsel, the Ilowitzs are not aligned with the existing individual defendants, who will likely seek to retain new counsel. FACTS In November 2012, Plaintiff ASH Brokerage Corporation ( ASH ) commenced this action seeking the return/refund of commissions associated with two life insurance policies issued in 2007 by AXA Equitable Life Insurance Company ( AXA ) on the life of Henry Chera (the Chera Policies ). 6/24/15 Affirmation in Support of ASH s counsel, Sanford F. Young, Esq. ( Young Aff. ) 9; Complaint, annexed as Exhibit C to Young Aff. ASH s complaint named four defendants: Moshe Lieberman; Blackstone Group Brokerage, LLC; Metropolis Agency LLC; and Tzvi Katz (collectively, the Named Defendants ). (Id.) Years into this litigation, however, ASH now seeks to add three new defendants: Yaakov Ilowitz ( Yaakov ), Hadassah Ilowitz, and Shaya Ilowitz (collectively, the Ilowitzs ). ASH s counsel alleges that the Illowitzs involvement in the fraud was not discovered and could not have been discovered, in the exercise of due diligence, until [March 2015]. Young Aff. 37 (emphasis supplied). Notably, ASH did not submit any party affirmation attesting to this, or to any of the facts stated by ASH s counsel in support of this motion. However, prior to the application and issuance of the Chera Policies in 2007, and for years thereafter, ASH communicated directly with Yaakov Ilowitz concerning the Chera Applications. Indeed, the documents that ASH has produced in discovery confirm as much. (See documents annexed as Exhibit A to the Affirmation of Phillip Manela ( Manela Aff. ), all of which were produced by ASH in discovery.) By way of example: 2
On March 6, 2007, ASH s employee, Regina Ross, sent an email regarding Henry Chera to Moshe Lieberman, Tzvi Katz and Yaakov Ilowitz, at their respective blackstonebrokerage.com email addresses. Ms. Ross inquired if we are moving forward with the AXA application or if we need to close this case out. Yaakov Ilowitz responded We will move forward. The agent is getting the app shortly. Id. document bates stamped ASH 1043. On June 20, 2007, ASH s employee, Nicholas Ross, sent an email regarding Chera Trust Issues to Moshe Lieberman, Tzvi Katz and Yaakov Ilowitz, at their respective blackstonebrokerage.com email addresses. Id. ASH 712-713. On that same date, a case note was entered in ASH s records, under the caption Chera, Henry, with the subject Trust Info Needed, stating Sent the message from AXA over to [Tzvi Katz] and Yaakov [Ilowitz] to review. Id. ASH 308. On July 20, 2007, Nicholas Ross from ASH sent an email to Moshe [Lieberman] and Yaakov [Ilowitz] with the subject line Cohen and Chera SPECIAL UPDATE. Mr. Ross forwarded an email from ASH s CEO, Tim Ash, to AXA stating that he would convey AXA s message to the broker on the [Chera] case. Mr. Ross then asks Ilowitz and Lieberman to reply back with an I agree statement. Id. ASH 505. ASH s communications with Yaakov Ilowitz continued for years thereafter concerning the Chera Case (ASH 791, 797); Yaakov/Blackstone (ASH 403); Blackstone s licensing; and whether ASH should pay Blackstone s commissions directly to Yaakov Ilowitz (ASH 396, 412-13, 471-72). Id. Yaakov Ilowitz, of Blackstone, and Nicholas Ross, of ASH, were friends who engaged in social activities and went on trips together. Affirmation of Yaakov Ilowitz submitted herewith ( Ilowitz Aff. ) 3; Manela Aff. Ex. A [ASH 784-85, 381-83, 366-68]. Yaakov Ilowitz had reason to believe that ASH did not name him or his family members as defendants in this lawsuit because: a) Ilowitz was friends with Ross; 3
b) Ilowitz was likely to put up a stronger defense than the Named Defendants; and c) ASH feared that Ilowitz is in possession of information concerning ASH s involvement in STOLI policies, and that Ilowitz would use such information in his defense and to show ASH s unclean hands, including conducting discovery concerning ASH s illegal activities involving life insurance companies, which information may greatly damage ASH s relationships with insurance companies. Ilowitz Aff. 3. ASH alleges that, in March 2007, defendants submitted the Chera applications to ASH, and ASH, as general agent of AXA, submitted the applications to AXA. (Young Aff. 9.) After the Chera Policies were issued, AXA paid approximately $600,000 to ASH in commissions. ASH then paid, as of August 1, 2008, approximately $460,000 of those commissions to Blackstone pursuant to a long standing agreement. (Manela Aff. Ex. B [ASH 1320]; Young Aff 4.) By letter dated November 14, 2011, however, AXA demanded that ASH return the Chera commissions due to a contestable death claim. (Young Aff. Ex. E (emphasis omitted).) ASH, in turn, brought suit a year later against the Named Defendants seeking the return of the commissions it paid to Blackstone and/or reimbursement of the commissions it refunded to AXA. ASH alleged nine separate causes of action sounding in, inter alia, breach of contract, unjust enrichment, fraud, and negligence. The Named Defendants answered the complaint and pled an affirmative defense that ASH had failed to name or obtain jurisdiction over all necessary parties. (Young Aff. Ex. D, 39.) On March 27, 2014, the Named Defendants prior counsel filed a motion to withdraw as counsel with respect to Blackstone only, stating that Blackstone s interest was not aligned with the interests of defendants Lieberman and Katz, and that there was a potential conflict of interest 4
between Blackstone and Lieberman/Katz. (Young Aff. Ex. M, 3/27/14 Affirmation of Simcha D. Schoenfeld, Esq. 9-11.) Document discovery has been completed in this case, and the parties have already conducted numerous depositions. On October 31, 2013, ASH served its First Set of Interrogatories to All Defendants. On October 22, 2014, ASH served its Second Set of Interrogatories to All Defendants. Manela Aff. Ex. C. ASH did not request in either set of interrogatories that the defendants identify Blackstone s members or principals. (Id.) The Named Defendants have deposed ASH s corporate designee, who openly testified that I ve seen [Yaakov Ilowitz s] name in the preparation for this lawsuit. (Manela Aff. Ex. D.) ASH has deposed defendants Moshe Lieberman, Tzvi Katz, and Blackstone s corporate designee. Prior to December 22, 2014, defendants counsel advised ASH s counsel that Yaakov Ilowitz would be the corporate designee to testify on behalf of Blackstone. (Manela Aff. 7.) On December 22, 2014, ASH s counsel confirmed to defense counsel, in writing, that Yaakov Ilowitz would be deposed as Blackstone s corporate designee. (Manela Aff. Ex. E.) Nonetheless, ASH s counsel now alleges that the first hint that Yaakov Ilowitz was an owner/member of Blackstone came on March 16, 2015. (Young Aff. 19.) Notably, ASH has not submitted any party affidavit substantiating such claim. ASH s counsel further alleges that prior to March 2015, ASH was unaware, and with the exercise of due diligence could not have been aware, of Ilowitz s involvement (Young Aff. 37), even though, as far back as March 2007, ASH communicated extensively with, and took direction from, Ilowitz concerning the Chera Policies, and ASH s counsel was explicitly told of Ilowitz s role prior to December 22, 2014. 5
Having known about Illowitz s involvement with Blackstone and the Chera Policies, and having strategically chosen not to sue Ilowitz, ASH should not be allowed now after years of litigation go back and amend its pleadings to join the Illowitzs as parties. ASH s motion for leave to amend should be denied. LEGAL ARGUMENT I. ASH S NEW CLAIMS ARE BARRED BY THE STATUTE OF LIMITATIONS While leave to serve an amended pleading should be freely given upon such terms as are just, leave should not be granted where the proposed amendment is palpably insufficient as a matter of law or is totally devoid of merit. Jenal v. Brown, 80 A.D.3d 727, 728 (2d Dep t 2011) (citations omitted; holding that the proposed amendment was clearly without merit as the plaintiffs motion was made nearly one year after the statute of limitations had expired ). See also Nisari v. Ramjohn, 85 A.D.3d 987, 990 (2d Dep t 2011); Mortgage Elec. Registration Sys., Inc. v. Reid, 85 A.D.3d 880, 881 (2d Dep t 2011); Brooks v. Robinson, 56 A.D.3d 406, 406-407 (2d Dep t 2008); Steinhardt Group, Inc. v. Citicorp, 303 A.D.2d 326, 327 (1st Dep t 2003) (leave to amend the complaint properly denied where claims were plainly unavailing, the statute of limitations period applicable to such claims having run ). a. ASH s New Claims Accrued in August 2008, More Than Six Years Ago ASH seeks the return of approximately $460,000 in commissions that ASH had paid out by August 1, 2008, in alleged reliance upon the Ilowitzs acts in March 2007. (Manela Aff. Ex. B (ASH 1320); Young Aff. 4.) A fraud cause of action must be interposed within the greater of six years from the date the cause of action accrued, or two years from the time the plaintiff discovered, or with reasonable 6
diligence could have discovered, the fraud. House of Spices (India), Inc. v. SMJ Servs., Inc., 103 A.D.3d 848, 849 (2d Dep t. 2013) see also CPLR 213(8). Accordingly, ASH s cause of action accrued by March 2007 (Illowitzs fraudulent acts), or at the latest in August 2008 (ASH s payments in reliance upon fraud). See Ingrami v. Rovner, 45 A.D.3d 806, 808 (2d Dep t 2007) ( the causes of action accrued in February 2001 when the plaintiff transferred the money in reliance upon the defendants allegedly false representations ); Fandy Corp. v. Lung-Fong Chen, 262 A.D.2d 352, 353 (2d Dep t 1999) ( A cause of action based on negligent misrepresentation accrues on the date of the alleged misrepresentation which is relied upon by the plaintiff. [T]he period of limitations for purposes of this cause of action began to run from the date of the closing in 1989 since that is the date on which the plaintiff relied upon the alleged misrepresentation [and] were properly dismissed as time-barred. ) (internal citation omitted). Thus, ASH s cause of action is barred by the six year statute of limitations. b. The Two Year Limitations Period for Newly Discovered Fraud Does Not Apply, Because ASH Was At All Times Aware of Ilowitz s Role New York law holds that the time a plaintiff could with reasonable diligence have discovered the alleged fraud is the time from which it conclusively appears that the plaintiff has knowledge of facts which should have caused [him or] her to inquire and discover the alleged fraud. Baratta v. ABF Real Estate Co., 215 A.D.2d 518, 519 (2d Dep t 1995) (emphasis supplied). The burden of establishing that the fraud could not have been discovered during the twoyear period before the commencement of the action rests on the plaintiff, who seeks the benefit of the discovery exception to the six-year statute of limitations. Percoco v. Lesnak, 24 A.D.3d 427, 427-28 (2d Dep t 2005). 7
In this case, ASH has produced through discovery its own communications with Yaakov Ilowitz going back to at least March 2007, conclusively establishing that ASH was aware of Yaakov s role and involvement with Blackstone and the Chera Policies. (See, e.g., ASH 308, 396, 403, 412-13, 471-72, 712-13, 791 and 797.) Further, ASH took direction and instruction from Yaakov in processing and submitting the Chera applications. (See, e.g., ASH 505, 1043.) Notably, ASH did not (and cannot) submit a party affidavit to support its contention that it was unaware of Ilowitz when ASH filed suit in 2012. Since ASH was aware of Ilowitz s involvement before, during, and after the accrual of ASH s cause of action, ASH s claims against the Ilowitzs are time barred by the six year statute of limitations. II. THE RELATION BACK DOCTRINE DOES NOT APPLY ASH argues that New York s Relation Back Doctrine should save the new claims against the Ilowitzs, even though the statute of limitations has passed. ASH is wrong. ASH bears the burden to prove that the Relation Back Doctrine applies. See CPLR 203(f); Hirsh v. Perlmutter, 53 A.D.3d 597, 599 (2d Dep t 2008); Rivera v Fishkin, 48 A.D.3d 663 (2d Dep t 2008); Cardamone v. Ricotta, 47 A.D.3d 659 (2d Dep t 2008); Spaulding v. Mt. Vernon Hosp., 283 A.D.2d 634, 635 (2d Dep t 2001); Monir v. Khandakar, 30 A.D.3d 487 (2d Dep t 2006). In order for a claim asserted against a new defendant to relate back to the date the claim was filed against another defendant, the plaintiff must establish that (1) both claims arose out of [the] same conduct, transaction, or occurrence, (2) the new defendant is united in interest with the original defendant, and (3) the new defendant knew or should have known that, but for a mistake by the plaintiff as to the identity of the proper parties, the action would have been brought against 8
him as well. Arsell v Mass One LLC, 73 A.D.3d 668, 669-70 (2d Dep t 2010) (emphasis supplied). The Relation Back Doctrine cannot be applied with respect to the Ilowitzs because ASH cannot satisfy its burden to prove (a) mistake, or (b) unity of interest. a. There Was No Mistake In order to apply the Relation Back Doctrine, ASH has the burden to prove that failed to name the Illowitzs in its original complaint because it made a mistake in the identity of the proper defendants. Id. While the Court of Appeals held, in Buran v. Coupal, 87 N.Y.2d 173, 179-181 (1995), that a plaintiff need not show that its mistake was excusable, the Court did not eliminate the mistake requirement from the test. Accordingly, the Appellate Division has repeatedly and consistently held that, where a plaintiff knew or with proper due diligence should have known the existence of a potential defendant at the onset of an action, it has not made a mistake as to the identity of the correct defendant. See: Cardamone v. Ricotta, 47 A.D.3d 659, 660-61 (2d Dep t 2008) (emphasis supplied) ( plaintiff s failure to timely bring the action against the [new parties] was the product of [her] failure to make a timely and genuine attempt to ascertain [their] identity, rather than the result of a mistake... there was no sworn allegation by plaintiff that [documents referencing the new parties were] not available to plaintiff before the statute[s] of limitations expired ); Contos v. Mahoney, 36 A.D.3d 646, 647 (2d Dep t 2007) (declining to apply the relation-back doctrine where plaintiff failed to sue the defendant lessor in a timely 9
manner, despite receiving a copy of a lease termination statement identifying Nissan as the lessor prior to the expiration of the limitations period); Nani v Gould, 39 A.D.3d 508, 510 (2d Dep t 2007) ( [P]laintiffs knew from the outset that the decedent had been treated by Gould immediately prior to her admission to the hospital. Thus, the failure to include Gould as a defendant in the timely commenced original suit was not the result of a mistake as to the identity of the correct defendant. ); Hall v. Rao, 26 A.D.3d 694, 695-96 (3d Dep t 2006) (precluding application of the relation back doctrine because plaintiffs failure to identify [the new party] prior to commencing this action was not the result of any mistake but, rather, was the product of their failure to make a timely and genuine attempt to ascertain [the new party] s identity ); Goldberg v. Boatmax, Inc., 41 A.D.3d 255, 256 (1st Dep t 2007) ( While the claims against the intended defendants arise out of the same transaction as the claims against the corporate defendant, and the intended defendants are united in interest with that defendant, plaintiff knew the identities of the intended defendants and their role in the alleged wrongful disposition of property nearly one year before he sought to add them to the action, and, accordingly, his failure to name them earlier cannot be characterized as a mistake for relation-back purposes. ); Tucker v. Lorieo, 291 A.D.2d 261, 262 (1st Dep t 2002) ( [T]he failure to identify [the new party] was due to plaintiff s failure to timely request the hospital record and ascertain [the new party] s identity. Subsequent to commencement, plaintiff did not 10
diligently attempt to ascertain [the new party] s actual identity even though a generous tolling period was available. ); Wallach v. R&J Constr. Corp., 128 A.D.3d 566 (1st Dep t 2015) (plaintiff s failure to name property owner as a defendant was not a mistake because, inter alia, the ownership of the property in question is a matter of public record). In Greater NY Mut. Ins. Co. v. Coach, Inc., Index No. 106354/08, 2012 N.Y. Misc. LEXIS 3389, at *14-16 (Sup. Ct. N.Y. Co. June 29, 2012), the court held that the plaintiff s failure to name the new party cannot be characterized as a mistake for purposes of the third prong of the relation back doctrine because plaintiff had received discovery containing numerous documents referencing the new party, and, therefore, plaintiff s mistake in failing to name the new party as a defendant earlier was the result of lack of due diligence. The Appellate Division affirmed Greater N.Y. Mut. Ins. Co. v. Coach, Inc., 112 A.D.3d 438 (1st Dep t 2013), where the court similarly held that [g]iven the numerous statements and evidentiary items plaintiff received that indicated nonparty LJG performed work on the job in question, plaintiff s failure to make diligent inquiry into LJG s role precludes the application of the relation back doctrine here. This rule most certainly applies here, where ASH produced its own records establishing ASH s knowledge of Ilowitz s role years before ASH filed the complaint. ASH s failure to name the Ilowitzs was, at best, due to a gross lack of due diligence. Federal cases applying New York law hold the same. See Pape v. Bd. of Educ. of the Wappingers Cent. Sch. Dist., 07-cv-8828 (KMK), 2009 U.S. Dist. LEXIS 91738, at *51-53 (S.D.N.Y. 2009) ( [W]here a plaintiff had an opportunity to identify the proper defendant and failed to do so, a court will not find that a mistake was made for relation-back purposes under New 11
York law and, accordingly, will not permit even a party united in interest to be added in a later amended complaint even where there is no indication that plaintiff acted in bad faith in omitting the new defendant from the original complaint); Sloane v. Town of Greenburgh, 01-cv-11551 (MBM), 2005 U.S. Dist. LEXIS 16107, 2005 WL 1837441, at *4 (S.D.N.Y. 2005) (declining to find, under New York law, that plaintiff made a mistake when he failed to timely request records which could have identified the proper parties; Hampton Bays Connections, Inc. v. Duffy, 212 F.R.D. 119, 125 (E.D.N.Y. 2003) ( Nowhere in the record does it indicate that the plaintiffs made diligent efforts to identify the [newly named defendants]. ); Abdell v. City of New York, 2006 U.S. Dist. LEXIS 65222, 2006 WL 2620927, at *7 (S.D.N.Y. 2012) ( Where a plaintiff fails to timely sue a potentially liable party despite incriminating disclosures made within the statute of limitations, the Court cannot find that a mistake was made for relation back purposes ). i. Yaakov Ilowitz In this case, ASH did not need to obtain external records to discover Ilowitz s identity. ASH s own documents establish that ASH was at all times aware of, communicated with, and took direction from, Ilowitz concerning Blackstone and the Chera applications. In fact, ASH s corporate designee testified that he had seen Yaakov Ilowitz s name in the preparation for this lawsuit. (Manela Aff. Ex. D.) Further, in February 2013 (prior to expiration of the statute of limitations) defendants pled, as an affirmative defense, that plaintiff failed to name necessary parties. In March 2014 (prior to expiration of the statute of limitations), defendants prior counsel recused himself because the interests of Blackstone (Ilowitzs company) was not aligned with the interests of the named individual defendants. 12
In order to apply the Relation Back Doctrine, ASH must prove that Ilowitz knew or should have known that, but for a mistake by the plaintiff as to the identity of the proper parties, the action would have been brought against him as well. Arsell, 73 A.D.3d at 670. Given ASH s overwhelming knowledge concerning Ilowitz, it was reasonable for Ilowitz to conclude that ASH did not name him as a defendant because: (a) Yaakov Ilowitz was friends with Nick Ross, (b) ASH feared that Ilowitz possessed information concerning ASH s involvement in STOLI policies, and that Ilowitz would use such information to ASH s detriment, including conducting discovery concerning ASH s illegal activities involving life insurance companies, which would damage ASH s relationships with insurance companies, and (c) Ilowitz was likely to put up a stronger defense than the Lieberman and Katz. Ilowitz Aff. 3. ASH s failure to name Ilowitz was either a strategic decision, or gross negligence in failing to utilize information it ASH s own possession concerning Ilowitz. It was not a mistake and Ilowitz had every reason to believe that ASH chose not to sue him for good reason. ii. Hadassah Ilowitz ASH does not make any specific allegations concerning Hadassah Ilowitz. ASH s claims against Hadassah are, presumably, premised on her alleged 5% ownership interest in Blackstone, together with her husband, Yaakov, who allegedly owns the remaining 95%. As set forth above, ASH was constructively aware of Yaakov Ilowitz s role in Blackstone, and, with reasonable due diligence, ASH would have learned of Hadassah s 5% interest prior to filing the complaint. As noted, ASH s first and second interrogatories did not even ask Blackstone to identify who its members were. As such, for the reasons set forth above with respect to Yaakov, ASH s purported failure to determine Hadassa s interest in Blackstone was not a mistake for the purpose of applying the Relation Back Doctrine. 13
b. The Ilowitzs Are Not United In Interest With the Named Defendants In order to apply the Relation Back Doctrine, ASH has the burden to prove that the Illowitzs are united in interest with the Named Defendants. Buran v. Coupal, 87 N.Y.2d 173, 177-78 (1995); CPLR 203(b). The relevant inquiry is whether the interest of the parties in the subject-matter is such that they stand or fall together and that judgment against one will similarly affect the other. Mondello v. New York Blood Ctr., 80 N.Y.2d 219, 226 (1992); Losner v. Cashline, L.P., 303 A.D.2d 647, 648 (2d Dep t 2003); Monir v. Khandakar, 30 A.D.3d 487 (2d Dep t 2006). In other words, the Illowitzs and the Named Defendants must necessarily have the same defenses to the plaintiff s claim. Lord Day & Lord, Barrett, Smith v Broadwall Mngt. Corp., 301 A.D.2d 362, 363 (1st Dep t 2003). Defendants are not united in interest even if there is only the mere possibility that the new party could have a different defense than the original party. Desiderio v. Rubin, 234 A.D.2d 581, 583 (2d Dep t 1996) ( If the relationship between the parties is such that one may have a defense not available to the other, they are not united in interest. ); Wallach v R&J Constr. Corp., 128 A.D.3d 566 (1st Dep t 2015) (no unity of interest where proposed defendant and named defendants had different potential defenses to plaintiff s claims). As explained by the Second Department: Where one defendant may have a defense which is not available to the other, they cannot be said to be united in interest. The mere possibility that a defendant who was served late could have such a different defense is all that is required because, the statute having run, it is now too late for him to conduct an investigation into the viability of that defense. To determine unity of interest, therefore, one looks not to whether the two defendants will assert different defenses but rather whether they could assert such different defenses. 14
Connell v. Hayden, 83 A.D.2d 30, 41-42 (2d Dep t 1981) (emphasis supplied; citations omitted). In cases like this one, where ASH seeks to introduce the Ilowitzs as new tort-feasors, New York courts consistently hold that there is no unity of interest. LeBlanc v Skinner, 103 A.D.3d 202, 210 (2d Dep t 2012) ( joint tortfeasors are generally not united in interest, since they frequently have different defenses, in that one tortfeasor usually will seek to show that he or she is not at fault, but that it was the other tortfeasor who is liable ); Capital Dimensions, Inc. v. Samuel Oberman Co., 104 A.D.2d 432, 433 (2d Dep t 1984) ( [I]f the only relationship between the original parties and the parties sought to be added is that of joint tort-feasors, the parties are not united in interest because each tort-feasor, acting independently, is liable to the plaintiff only because of his own fault; the fault of his codefendant is not imputed to him. In such circumstances, neither codefendant is responsible for the acts or omissions of the other. ). As the Second Department explained in Connell, 83 A.D.2d at 44-45 (citations omitted): With respect to persons whose only relationship is that of joint tortfeasors, the courts have held that they are not united in interest. The reason for this rule is that where the proximate cause of an injury is the concurring wrongful acts or omissions of two or more persons acting independently, each is liable to plaintiff for the full amount of his damage, but the liability is only because of his own negligence and the fault of his codefendant is not imputed to him (41 NY Jur, Negligence, 35). Although the liability of joint tort-feasors is joint and several, neither is responsible for the acts or omissions of the other. Either defendant could be held legally liable or not liable without a like finding as to the other defendant. In such a case the defendants interests are not united because each will seek to show that he was not at fault and that it was the other who caused the injury. 15
Accordingly, Yaakov, Hadassah and Shaya Ilowitz are not united in interest with the Named Defendants with respect to ASH s causes of actions in tort (fraud, negligence, etc.), and the Relation Back Doctrine will not apply. ASH s claims seeking to pierce Blackstone s corporate veil with respect to Yaakov and Hadassah similarly fails because, by definition, Yaakov and Hadassah will not stand or fall together with Blackstone. Even if ASH succeeds in its causes of action against Blackstone, ASH must then prove the elements for piercing the corporate veil to reach Yaakov and Hadassah. As such, Yaakov and Hadassah have a potential defense not available to the Named Defendants, barring application of the Relation Back Doctrine. III. ALTERNATIVELY, THE COURT SHOULD EXERCISE ITS DISCRETION AND DENY LEAVE TO AMEND Even if the statute of limitations had not expired (it did), and even if the Relation Back Doctrine applied (it does not), leave to amend should be denied because of ASH s gross delay in asserting the amendment. This court has consistently maintained that while leave to amend a pleading shall be freely granted, a motion to amend is committed to the broad discretion of the trial court, and the resulting determination will not lightly be set aside. In reviewing the exercise of its discretion, we look to those factors which the Supreme Court must consider in rendering its determination. The court must consider whether there has been a gross delay in asserting the amendment... Furthermore, the court will also note how long the amending party was aware of the facts upon which the motion was predicated, and whether it offers a reasonable excuse for its lengthy delay. In this case... the lease provision upon which the prospective affirmative defense is based has been known to the appellant since the very inception of this action. Significantly, the appellant has failed to proffer an acceptable excuse for this delay. 16
F.G.L. Knitting Mills, Inc. v. 1087 Flushing Property, Inc., 191 A.D.2d 533 (2d Dep t 1993) (citations omitted). See also Brooks v. Robinson, 56 A.D.3d 406, 406-407 (2d Dep t 2008) (leave to amend denied where proponent failed to offer a reasonable excuse for his delay ); McGowan v. RPC Realty Corp., 46 A.D.3d 771, 772 (2d Dep t 2007) ( plaintiffs... failed to provide a reasonable excuse for the delay in making the motion [to amend] ); Wassfam L.L.C. v. Palacios, 107 A.D.3d 493 (1st Dep t 2013) (no reasonable excuse for extended delay in moving to amend); Van Damme v. Gelber, 111 A.D.3d 408 (1st Dep t 2013) (same); Lind v. Greenspan, 78 A.D.3d 555 (1st Dep t 2010) (no excuse for long delay in moving to amend); Brunetti v. Musallam, 59 A.D.3d 220 (1st Dep t 2009) (no valid reason for waiting); Oil Heat Institute of Long Island Insurance Trust v. RMTS Associates, LLC, 4 A.D.3d 290, 293 (1st Dep t 2004) (where there has been an extended delay in moving to amend, the party seeking leave to amend must establish a reasonable excuse for the delay); Steinhardt Group, Inc. v. Citicorp, 303 A.D.2d 326, 327 (1st Dep t 2003) ( inexcusable delay in seeking to add [party] ). Here, ASH was actually or constructively aware of Ilowitz s role since at least 2007, years before ASH filed its original complaint in 2012. Further, in December 2014, ASH s counsel acknowledged that Yaakov Ilowitz was the corporate designee of Blackstone. ASH has no reasonable excuse for delaying until now in seeking to add the Ilowitzs as defendants. See Clarkin v. Staten Island Univ. Hosp., 242 A.D.2d 552 (2d Dep t 1997) ( proposed amendment was based upon factual circumstances known at the time the action was commenced approximately four years prior thereto, and the defendant failed to show a reasonable excuse for its inordinate delay in moving to amend ); Garza v. VICO Utilities, Inc., 150 A.D.2d 520, 521-22 (2d Dep t 1989) (citations omitted) (party seeking amendment was in possession of a document from which it could have determined proper party, but waited for over a year before seeking leave 17
... without a reasonable explanation, until after the Statute of Limitations had expired ); Napoli v. Canada Dry Bottling Co. of New York, Inc., 166 A.D.2d 696, 697 (2d Dep t 1990) (plaintiffs permitted almost four years to elapse, during which discovery proceeded on the original legal theories, before they sought leave to serve a second amended complaint); De Fabio v. Nadler Rental Serv., 27 A.D.2d 931 (2d Dep t 1967) (emphasis supplied; citations omitted) ( Where the party who wishes to amend has or should have knowledge of the facts which he wishes to put in his later pleadings, but refrains from moving to amend for an inexcusably long period of time, his motion will be denied because of gross laches ); James-Smith v. Rottenberg, 32 A.D.2d 792 (2d Dep t 1962) (emphasis supplied) (facts which might form the basis of amended pleading were or should have been known to respondent at least by the time the complaint was served ); Excelsior Insurance Company v. Antretter Contracting Corp., 262 A.D.2d 124 (1st Dep t 1999) (where amending party should have been aware but gave no reasonable excuse for waiting, amendment should be denied); Dart Direct, Inc. v Urban Express/NJ LLC, Index No. 652838/11, 2015 N.Y. Misc. LEXIS 1831, at *5-8 (Sup. Ct. N.Y. Co. Feb. 24, 2015) ( no valid reason [offered] for the lengthy delay in moving to amend the pleading... The contracts that are at the epicenter of this litigation were entered into by the parties more than six years ago ). This Court should exercise its discretion and prohibit plaintiff, after sitting on its hands during years of litigation, from naming new defendants. Allowing this amendment would prejudice defendants by reopening discovery already completed and raising new issues to be defended against (including piercing the corporate veil with respect to Ilowitz). Moreover, the existing individual defendants may need to retain new counsel, since, as asserted by prior counsel, Lieberman s and Katz s interests are not aligned with Ilowitz. 18
IV. ASH HAS NO CAUSE OF ACTION AGAINST SHAYA ILOWITZ ASH s sole allegation against Shaya Ilowitz is that, in September and November of 2007, Shaya notarized a form of resignation of trustee for the Chera trusts. (Proposed Amended Complaint 117 (a) and (c).) In addition to being barred by the statute of limitations, leave to amend should be denied because this allegation fails to state a cause of action and is palpably insufficient as a matter of law [and] totally devoid of merit. Jenal v. Brown, 80 A.D.3d 727, 728 (2d Dep t 2011). a. Fraud The elements of a cause of action sounding in fraud are a material misrepresentation of an existing fact, made with knowledge of the falsity, an intent to induce reliance thereon, justifiable reliance upon the misrepresentation, and damages. All of the elements of a fraud claim must be supported by factual allegations containing the details constituting the wrong in order to satisfy the pleading requirements of CPLR 3016(b). GFRE, Inc. v U.S. Bank, N.A., 130 A.D.3d 569 (2d Dep t 2015) (citations omitted). See also Barclay Arms, Inc. v. Barclay Arms Assocs., 74 N.Y.2d 644, 646-47 (1989) ( complaint did not allege the essential elements of a fraud claim, misrepresentation of a material fact, falsity, scienter and thus failed to satisfy the specificity and particularity requirements of CPLR 3013 and 3016 ). ASH has not alleged with particularity that Shaya, a notary public, had knowledge of the alleged fraud when he notarized trust documents in September and November of 2007. ASH has not alleged with particularity that Shaya notarized trust documents with an intent to induce ASH s reliance thereon. ASH has not alleged with particularity that it relied upon (or was even aware of) the resignation of the Chera trustee. ASH has not alleged with particularity how it was damaged by the Chera trustee s resignation. 19
b. Negligence The elements of a negligence cause of action are a duty owed by the defendant to the plaintiff, a breach of that duty, and an injury proximately resulting therefrom. Jiminez v Shahid, 83 A.D.3d 900, 901 (2d Dep t 2011); Mandarin Trading Ltd. v. Wildenstein, 16 N.Y.3d 173 (2011) (citations omitted) ( It is well settled that [a] claim for negligent misrepresentation requires the plaintiff to demonstrate (1) the existence of a special or privity-like relationship imposing a duty on the defendant to impart correct information to the plaintiff; (2) that the information was incorrect; and (3) reasonable reliance on the information ). ASH does not and cannot allege any basis for a duty of care owed by Shaya Ilowitz to ASH. Jiminez, 83 A.D.3d at 901 ( plaintiffs failed to sufficiently allege any valid basis for the imposition of a duty of care ). ASH has also not alleged how the Chera trustee s resignation, which ASH was not even aware of, proximately caused ASH s injuries. Thus, ASH s cause of action against Shaya Ilowitz is similarly deficient as a matter of law, and ASH s motion for leave to amend must be denied. CONCLUSION For all the above-mentioned reasons, defendants respectfully request that the Court deny ASH s motion for leave to amend its complaint. Dated: Kew Gardens, New York August 28, 2015 LIPSIUS-BENHAIM LAW, LLP Attorneys for Defendants By: Ira S. Lipsius Phillip M. Manela 80-02 Kew Gardens Road, Suite 1030 Kew Gardens, New York 11415 (212) 981-8440 20
To: Sanford F. Young, Esq. LAW OFFICES OF SANFORD F. YOUNG, P.C. Attorneys for Plaintiff 225 Broadway, Suite 2008 New York, New York 10007 (212) 227-9755 21