Court Abused Discretion by Going Beyond Four Corners of Complaint to Permit Amendment with Time-Barred Claim

In a Decision, dated October 27, 2022, in 34-06 73, LLC v. Seneca Ins. Co. (2022 NY Slip Op 06029), the Court of Appeals held that the lower court abused its discretion as a matter of law when it granted plaintiffs’ motion to amend to include a time-barred claim. The Court explained:

"Applications to amend pleadings [pursuant to CPLR 3025] are within the sound discretion of the court," and exercise of such discretion "may be upset by us only for abuse as a matter of law" (Kimso Apartments, LLC v Gandhi, 24 NY3d 403, 411 [2014] [alterations omitted]). However, there is no sound basis in law to grant amendment pursuant to CPLR 3025(c) to add an untimely claim. Here, it is undisputed that when plaintiffs sought to amend their complaint the statute of limitations on the reformation claim had expired and was therefore time-barred unless it related back to the original pleading. Section 203(f) of the CPLR provides that "[a] claim asserted in an amended pleading is deemed to have been interposed at the time the claims in the original pleading were interposed, unless the original pleading does not give notice of the transactions, occurrences, or series of transactions or occurrences, to be proved pursuant to the amended pleading" (emphasis added). Thus, plaintiffs' reformation claim relates back to the original complaint—and is thus not barred by the statute of limitations—only if the complaint placed defendant on "notice of the transactions, occurrences, or series of transactions or occurrences, to be proved" in support of that claim.

As a threshold matter, [sic] Supreme Court and the Appellate Division should not have looked beyond the four corners of the original pleading to determine whether defendant was on notice of transactions or occurrences underlying plaintiffs' reformation claim. Section 203(f) requires the court to determine solely whether a plaintiff's or a defendant's original pleading gives notice of the transactions or occurrences underlying the proposed amendment (see CPLR 203[f]). Whether the same trial evidence supports both the breach of contract and reformation claims or whether defendant here failed to produce the underwriting file in a timely fashion are irrelevant to the notice issue. Similarly, matters unearthed during discovery have no bearing on whether an untimely claim relates back under section 203(f). Of course, discovery might alert the moving party that it could or must amend the complaint or answer to protect its litigation position or prevent extinguishment of a claim as time-barred, but such discovery does not shed light on whether the original pleading provides notice of transactions or occurrences to be proved in support of a new claim for recovery. While some of these observations might be relevant to consideration of prejudice under CPLR 3025, they do not inform the analysis under CPLR 203(f).

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To be clear, the transactions and occurrences underlying a breach of contract claim do not perforce give notice of the transactions or occurrences underlying a claim of reformation based on mutual mistake, and vice versa. However, consistent with our liberal pleading standards, an original pleading alleging that a party failed to perform in accordance with the written agreement might supply sufficient notice of the transactions or occurrences to be proved in support of reformation. That is not the case here, where plaintiffs' complaint foreclosed a factual or inferential basis for such notice by unqualifiedly alleging that they "complied with all of the conditions precedent and subsequent pursuant to the terms of the subject policy," which the complaint referenced explicitly as the written policy. The complaint contained no alternate theory of recovery or factual allegations based on preformation transactions or occurrences. The complaint therefore put defendant on notice of transactions or occurrences related solely to the written policy and plaintiffs' total compliance with that agreement's terms, which include the PSE's sprinkler requirement.

The attorneys at Schlam Stone & Dolan frequently litigate procedural issues relating to the statute of limitations and the right to amend a complaint. Contact our attorneys at commercialdivisionblog@schlamstone.com if you or a client have questions regarding these issues.