DAVIS v. CIP4 (2025)

Order, Supreme Court, New York County (Robert R. Reed, J.), entered on or about January 17, 2025, which granted in part and denied in part plaintiff's motion for leave to file a third amended complaint (TAC), unanimously modified, on the law, to deny the motion as to the second through fifth causes of action, and otherwise affirmed, without costs.

The motion to amend the complaint for a third time should have been denied because of plaintiff's delay in making it and the ensuing prejudice to defendants.  Plaintiff brings the second through fifth causes of action as assignee of Scottish RE Group Limited, thus he stands in its shoes (see Friedman v. Nagin, 270 App.Div. 503, 505, 60 N.Y.S.2d 620 [1st Dept. 1946]), and its “knowledge is his” (id.). Scottish Re knew or should have known as early as April 14, 2011 that CIP4 Mortgage Securities, Ltd. (CIP4), an affiliate of defendant Cerberus Capital Management L.P. (Cerberus), was the entity selling the notes at issue in this action.  However, plaintiff did not move to add CIP4 and another Cerberus entity, Cerberus Institutional Partners LP (Series Four) (together with CIP4, the CIP4 Entities) as defendants until February 23, 2024 – almost 13 years later, and more than a decade after this action was commenced.

Plaintiff claims the delay was caused by the resistance of Cerberus to his discovery requests.  However, even if one were to consider only plaintiff's personal knowledge, he knew or should have known as early as May 1, 2011 that Cerberus’ affiliates would profit by selling the notes at issue.  Even if he did not know the precise identity of the affiliate, he could have added “XYZ Corp.” to his original complaint, just as he did in the TAC. In sum, “Plaintiff's excuse that [he] only learned of the new claims after the parties’ depositions was not reasonable” (Perez v. New York City Health & Hosps. Corp., 226 A.D.3d 602, 602–603, 211 N.Y.S.3d 17 [1st Dept. 2024], lv dismissed 43 N.Y.3d 985, 233 N.Y.S.3d 254, 259 N.E.3d 1121 [2025];  see also Pecora v. Pecora, 204 A.D.3d 611, 612, 168 N.Y.S.3d 26 [1st Dept. 2022];  Spence v. Bear Stearns & Co., 264 A.D.2d 601, 602, 694 N.Y.S.2d 654 [1st Dept. 1999];  Heller v. Louis Provenzano, Inc., 303 A.D.2d 20, 23, 756 N.Y.S.2d 26 [1st Dept. 2003];  Alpert v. Shea Gould Climenko & Casey, 160 A.D.2d 67, 73, 559 N.Y.S.2d 312 [1st Dept. 1990];  Oil Heat Inst. of Long Is. Trust v. RMTS Assoc., 4 A.D.3d 290, 293, 772 N.Y.S.2d 313 [1st Dept. 2004]).

With respect to plaintiff's attempt to add the CIP4 Entities and to introduce new causes of action, new factual allegations and new theories of recovery, defendants were prejudiced by plaintiff's delay because they have “already expended large sums of money defending the action as pleaded” (Perez, 226 A.D.3d at 603, 211 N.Y.S.3d 17).  Further, assertion of a new theory of liability is sufficient to deny a motion to amend, especially after a significant delay (see Heller, 303 A.D.2d at 23, 756 N.Y.S.2d 26; see also Spence, 264 A.D.2d at 602, 694 N.Y.S.2d 654).

Adding a request for punitive damages is also prejudicial because it “would involve different elements and standards of proof and potentially subject defendants to a far greater and different dimension of liability than would otherwise have been the case” (Heller, 303 A.D.2d at 23, 756 N.Y.S.2d 26).

Plaintiff is not barred from arguing for the first time on appeal that the CIP4 Entities are necessary parties under CPLR 1002(a), because “the court may, at any stage of a case and on its own motion, determine whether there is a nonjoinder of necessary parties” (Matter of Lezette v. Board of Educ., Hudson City School Dist., 35 N.Y.2d 272, 282, 360 N.Y.S.2d 869, 319 N.E.2d 189 [1974]).  Nevertheless, plaintiff's contention is unavailing on the merits.  The CIP4 Entities will not be inequitably affected by a judgment;  even if plaintiff recovers against Cerberus, it is unlikely to assert claims against its own affiliates for contribution or indemnification.  As for the first prong of CPLR 1002(a), complete relief can be accorded among the persons who are currently parties to the action even if plaintiff's recovery might be greater if the CIP4 Entities were added as defendants.

In view of the foregoing, the parties’ remaining arguments are academic.