On December 20, 2022, Justice Borrok of the New York County Commercial Division issued a decision in Ametek, Inc. v. Goldfarb, 2022 NY Slip Op. 51290(U), holding that questions of fact precluded dismissal of a claim for reformation, explaining:
Where a mistake in contracting is both mutual and substantial, there is an absence of the requisite meeting of the minds to the contract and relief will be provided in the form of rescission. The effect of rescission is to declare the contract void from its inception and to put or restore the parties to status quo. As discussed above, recission simply is not appropriate. The Defendants do not dispute that there was a meeting of the minds with respect to the underlying $30 million obligation. They dispute whether they are entitled to certain credits as it relates to that obligation. Thus, even taking their allegations as true, they can not disavow their acknowledged obligation entirely. At most, if true, the Defendants are entitled to reformation. Therefore, the counterclaim for rescission must be dismissed.
The Defendants’ counterclaim for reformation (second counterclaim) is not dismissed, The doctrine of laches bars the enforcement of a right where there has been an unreasonable and inexcusable delay that results in prejudice to a party, which may be demonstrated by a showing of injury, change of position, loss of evidence, or some other disadvantage resulting from the delay.
The Plaintiffs argue that the Defendants’ counterclaim for reformation is barred because the Defendants waited 14 months to assert such claim and prejudiced the Plaintiffs as they continued to expend money on certain site investigation and cleanup for which the Defendants are contractually obliged to indemnify them. In their opposition papers, the Defendants argue that dismissal based on laches is inappropriate because the Plaintiffs fail to establish (i) that they lacked knowledge that the Defendants would assert this claim, (ii) the Defendants’ unreasonable and inexcusable delay in asserting claim, and (iii) prejudice. The Defendants are correct.
On the record before the Court, it appears that the parties engaged in certain conversations during this 14 month period as it relates to this dispute such that it can not be said that there was any delay in asserting this claim. Indeed, the Defendants brought the lawsuit filed in California within one year after the parties were unable to resolve their different understanding of this dollar-for-dollar credit. More importantly, the Plaintiffs fail to show any prejudice. The fact that there was this difference in understanding does not seem to have prevented the Plaintiffs from proceeding with remedial work such that they were prejudiced. Indeed, as alleged by the Defendants, they proceeded with remedial work without approval from the Defendants and did not follow the agreed upon mechanism for resolving disputes related to that work. For clarity, it is not apparent whether Steven Goldfarb’s refusal to approve of or pay for work was a breach of the Supplemental Agreement. Steven Goldfarb also did not request that the parties follow the dispute resolution mechanism set forth in the agreement. Therefore, the Plaintiffs’ argument of laches fails.
The Plaintiffs also argue that the reformation counterclaim must be dismissed because the Defendants can not establish any justifiable reliance. Among other things, the Plaintiffs argue that the Defendants do not dispute that their attorney negotiated the Supplemental Agreement and argue that it is simply inconceivable that the Defendants never received a copy of the Supplemental Agreement which did not provide for the dollar-for-dollar credit that they now, 15 years later, indicate was supposed to be part of the Supplemental Agreement. The Plaintiffs also argue that the Defendants fail to establish justifiable reliance based on any misrepresentation allegedly made by Mr. Macdonald. The argument fails. The issue of whether reliance is justifiable is generally an issue of fact and cannot be determined on a motion to dismiss. In this case, and given that there are no documents in the record as to what the Defendants received in the way of drafts of the Supplemental Agreement or whether the attorney representing the Defendants in fact received a final copy of the executed Supplemental Agreement, dismissal is inappropriate.
(Internal citations omitted).