Wade Clark Mulcahy LLP

In its recent decision on Kyung Hee Moon v. Herzel Owadeyah, et al., the Second Department clarified the standard for granting plaintiffs leave to amend complaints pursuant to CPLR 3025(b).  See generally Kyung Hee Moon v. Herzel Owadeyah, 2024 NY Slip Op 00300 (2nd Dept. 2024).

Plaintiff was allegedly injured when a scaffold he was working on collapsed at a construction project.  See Moon, 2024 NY Slip Op 00300, at 1.  He sued the general contractor and its principal, Herzel Owadeyah.  In response to defendants’ motions for summary judgment, plaintiff cross-moved to amend to add allegations that Owadeyah should be held personally liable for piercing the corporate veil.  Id.

New York courts have long held that leave to amend “shall be freely given absent prejudice or surprise resulting directly from the delay unless the proposed amendment is palpably insufficient or patently devoid of merit.”  Ruland v. Leibowitz, 209 A.D.3d 1051, 1052 (2nd Dept. 2022).  For a plaintiff to pierce the corporate veil, they must “allege facts that, if proved, indicate that the shareholder exercised complete domination and control over the corporation and abused the privilege of doing business in the corporate form to perpetrate a wrong or injustice.”  East Hampton Union Free School Dist. v Sandpebble Bldrs., Inc., 16 N.Y.3d 775, 776 (2011).

The Court determined that “[t]he proposed amendments failed to adequately allege that Owadeyah abused the privilege of doing business in the corporate form in such a manner as to cause injury to [the Plaintiff].”  See Moon, 2024 NY Slip Op 00300, at 2.  While granting leave would not have resulted in surprise or prejudice, the Court held that the proposed amendments were “palpably insufficient” or “patently devoid of merit.”  Id.  The takeaway for practitioners is simple: in assessing motions for leave to amend, appellate courts will scrutinize the facts rigorously and deny leave if it appears that the new allegations will be meritless.