Avigdor v. Rosenstock, Index No. 505789/2014, 5/12/2015 (Demarest, J.)

Complaint; amendment; as of right; CPLR 3025(a); material facts; superseding complaint; judicial admission.

By Mena Beshay | Staff Writer

Plaintiff is an attorney. He and Defendant 1, a doctor, purchased an in-home medical service company together. Plaintiff agreed to let Defendant 1 handle the day-to-day operations of the business. The Operating Agreement outlined the manner in which each partner would be paid, which was conditioned on the business generating a positive “cash flow.” Years later, Defendant 1 regularly told plaintiff that the business was not profitable. Plaintiff alleged in the original verified complaint that Defendant 1, and/or unknown persons have created other legal entities, which he has been using to improperly conceal the company’s true finances. He alleged that profits from their shared company were being siphoned into other companies owned by Defendant 1 and/or others to conceal the company’s actual profitability. Defendants moved to dismiss the complaint on grounds that the Operating Agreement was illegal and unenforceable pursuant to Education Law § 6509-a and 8 NYCRR 29.1 (b)(4), which prohibit a medical provider from splitting fees with a non- medical professional. Defendants asserted that the business provides medical services to patients in their homes. Plaintiff contended the prohibition does not apply because the business only provided administrative and management support services for doctors who provide in-home medical care. However, the complaint stated that the business provides in-home medical care in the New York City area. The court denied Defendants’ motion to dismiss because the nature of the business was an issue of fact. Plaintiff cross moved and sought leave to amend his complaint. Defendants argued the court should not allow plaintiff to amend his complaint because the proposed amendment contradicted his prior sworn assertions in the original verified complaint. The court held pursuant to CPLR 3025(a), a party may amend his or her pleading once without leave of the court within 20 days after its service, at any time before the period to respond expires, or within 20 days after a pleading in response is served. Here, defendants did not serve an answer. The court further explained that even if a plaintiff is entitled to amend her/his complaint as of right, a court may refuse if there is (1) prejudice or surprise resulting from the delay, or (2) the amendment is palpably insufficient or patently devoid of merit. The court concluded that there was no evidence of either in this case. Therefore, the court held the plaintiff was entitled to amend his complaint as a matter of right. Additionally, the court noted that a pleading cannot be amended to permit the plaintiff to change his representation of material facts to best fit his theory of recovery. The court explained that this is not the case here, since the allegations in the original complaint constituted a formal judicial admission. Thus, an admission of fact in an original pleading is still an admission even if superseded by an amended pleading. The court concluded that plaintiff’s original complaint remains admissible as an informal judicial admission, which may be explained at trial, the weight of which must be determined by the factfinder. The court granted plaintiff’s motion to seek leave to amend his complaint, although he was entitled to amend it as of right pursuant to CPLR 3025(a).

Avigdor v. Rosenstock, Index No. 505789/2014, 5/12/2015 (Demarest, J.).

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