Amendment To Assert Counterclaims Not Barred By Possible Application Of Res Judicata

On January 31, 2025, Justice Joel M. Cohen granted in part a motion to amend by a defendant/counterclaimant challenging the enforcement of a guarantee, finding that any argument that certain of the proposed counterclaims were barred by res judicata did not support denial of amendment. JG Group Holdings LLC v. Kahlon, Index No. 652196/2020.

Justice Cohen allowed amendment to assert ten counterclaims, including three that Counter-Defendants opposed as barred by res judicata:

The Court will permit Mr. Kahlon to file the remaining proposed counterclaims as the Court does not find that they are “palpably insufficient or clearly devoid of merit” on their face. As to the Counter-Defendants’ argument that the proposed fourth [breach of fiduciary duty], eighth [conversion], and eleventh [defamation per se] counterclaims are barred by res judicata, that is a separate argument from whether those counterclaims are insufficient on their face because it entails going beyond the scope of the pleading. The res judicata argument can be tested on a motion to dismiss or for summary judgment.

JG Group Holdings, p. 3.

Leave to amend was denied as to a counterclaim under the Fair Debt Collection Practices Act because the statute does not apply to a creditor, such as plaintiff, “that seeks to enforce a debt owed directly to it”. Id., pp. 2-3 (internal citation omitted). Proposed counterclaims for civil conspiracy and to pierce the corporate veil were barred because New York does not recognize such as independent claims. Id., p. 3.

Contact the Commercial Division Blog Committee at commercialdivisionblog@schlamstone.com if you or a client have questions concerning amendment of pleadings, res judicata, or piercing the corporate veil.