On March 21, 2025, Justice Chan of the New York County Commercial Division issued a decision in Katzoff v. BSP Agency, LLC, 2025 NY Slip Op 30946(U), holding that delay without prejudice was an insufficient reason to deny a motion to amend, explaining:
Whether to grant an amendment is committed to the discretion of the court. Leave to
amend should be freely given, so long as there is no surprise or prejudice resulting from the delay to the opposing party and the proposed amendment is not palpably insufficient or patently devoid of merit. At the same time, the legal sufficiency or merits of a proposed amendment to a pleading will not be examined unless the insufficiency or lack of merit is clear and free from doubt. The kind of prejudice or surprise from delay must be some special right lost in the interim, some change of position or some significant trouble or expense that could have been avoided had the original pleading contained what the amended one wants to add. The burden of establishing prejudice is on the party opposing the amendment. A party opposing leave to amend must overcome a heavy presumption of validity in favor of permitting amendment.Defendants oppose the motion to amend on several grounds. First, they argue that plaintiffs failed to explain their undue delayed in adding most of these claims, causing defendants’ prejudice. Defendants also allege they have been prejudiced by the loss of several sources of discovery . . . .
Much like last time, the court once again rejects defendants’ arguments that leave to amend should be denied based on prejudice or lack of reasonable excuse for delay. First, there was no extended delay here, and so plaintiffs do not need to explain any delay. Defendants point out that this case has been pending for four years, much longer than several cases they cite in support. While defendants are correct to point out the age of this case, none of the cases they cite are solely focused on the amount of time since filing. Instead, each one is focused on the amount of time in conjunction with the status of discovery.
For instance, the First Department rejected amendment in B.B. CF.D., S.A. v Bank Julius Baer & Co. Ltd. because doing so would have effectively resurrected two cases that, after many years of litigation, were close to being resolved. In Oil Heat Inst. of Long Is. Ins. Tr. v RMTS Assoc., LLC, the First Department similarly rejected an amendment made after depositions were conducted. And defendants’ last case, Perez v New York City Health and Hasps. Corp., involved a ten year filing delay that came after depositions and after discovery on the originals claims had been closed.
Here, there is no undue delay because party depositions have not taken place, the note of issue has not been filed, and no dispositive motions have been decided. Defendants respond that plaintiffs should not be permitted to leverage the status of discovery because plaintiffs’ prior amendment and discovery obstruction caused a delay in discovery. Notably, it is not clear that plaintiff was the sole perpetrator of any discovery delays. Therefore, no reasonable excuse for delay is necessary here.
Defendants’ other bases for prejudice are unavailing. Defendants argue that prejudice can arise where there is a significant expansion of the claims. However, leave to amend is freely granted even if the amendment substantially alters the theory of recovery.
Moreover, neither of defendants’ cited cases is on point. Khan did not merely involve an expansion of the claims but also discovery that had been completed over two years earlier Khan also does not cite any First Department case law for the proposition that a significant expansion of the claims can result in prejudice. Weston similarly involved an amendment after significant discovery including depositions and disclosure such that the new allegations would essentially start the action over again. The expansion of claims is not, on its own, enough given the early stages of discovery.
Defendants next argue that many sources of discovery have already been lost. Each of these arguments fails. Defendants claim that plaintiffs’ new claims rest on transactions as early as 2015 but that plaintiffs also allege bank retention policies are only as short as seven years. Defendants also argue that the general passage of time creates prejudice by impacting witness recollections which will be crucial for Plaintiffs’ new claims.
Both arguments must fail because defendants do not allege any specific records have been destroyed or memories that have deteriorated. Moreover, it is unclear if bank records will even be at issue given plaintiffs’ allegations that many of the Loan Transaction payments are not reflected in GFB’s bank statements because Galligan siphoned millions of dollars from GE’s credit card receivables.
Defendants finally argue that they will be unable to depose Bob Murphy, the CEO of EPS who died in 2022 and who is repeatedly referenced in the Galligan Loan Transaction Claims. While true, there are other sources for the same information. Plaintiffs alleged that Murphy was Galligan’s brother-in-law and that the Loan Transaction scheme was a result of that relationship. Plaintiffs further allege that Theresa Murphy, Galligan’s sister and Bob’s widow, had or still have a direct or indirect interest in BDG Family. Defendants could therefore depose Galligan or his sister for the same information, or indeed some of EPS’s employees. Additionally, as shown below, the EPS claims fail on the merits, making Bob’s availability a non-issue.
(Internal quotations and citations omitted).