Gama Aviation Inc. v. Sandton Capital Partners, LP

• Citation: 2013 NY Slip Op 32648
• Decision Date: 21 October 2013
• Docket Number: Motion Seq. No.: 024,Motion Seq. No.: 022,Motion Seq. No.: 020,Motion Seq. No.: 023,Index No. 651710/10,Motion Seq. No.: 021,Motion Seq. No.: 016
• Parties: GAMA AVIATION INC. and GAMA LEASING LIMITED, Plaintiffs, v. SANDTON CAPITAL PARTNERS, LP, SANDTON CAPITAL PARTNERS, LLC, SANDTON PARTNERS, LLC and KB ACQUISITION, LLC, Defendants. KB ACQUISITION, LLC, Counterclaim Plaintiff, v. GAMA AVIATION INC. and GAMA LEASING LIMITED, Counterclaim Defendant, -and- GAMA HOLDINGS, LIMITED, Additional Counterclaim Defendant.
• Court: United States State Supreme Court (New York)

2013 NY Slip Op 32648

GAMA AVIATION INC. and GAMA LEASING LIMITED, Plaintiffs,
v.
SANDTON CAPITAL PARTNERS, LP, SANDTON CAPITAL PARTNERS, LLC,
SANDTON PARTNERS, LLC and KB ACQUISITION, LLC, Defendants.
KB ACQUISITION, LLC, Counterclaim Plaintiff,
v.
GAMA AVIATION INC. and GAMA LEASING LIMITED, Counterclaim Defendant,
-and-
GAMA HOLDINGS, LIMITED, Additional Counterclaim Defendant.

Index No. 651710/10
Motion Seq. No.: 016
Motion Seq. No.: 020
Motion Seq. No.: 021
Motion Seq. No.: 022
Motion Seq. No.: 023
Motion Seq. No.: 024

SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK: PART 3

Motion Date: July 23, 20131
Motion Date: September 3, 2013
Date: October 21, 2013

BRANSTEN, J.:

Motion Sequence Nos. 016, 020, 021, 022, 023, and 024 are consolidated for disposition.

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I. Introduction

The underlying facts and procedural history of this action have been fully set forth in prior decisions of this court, and will not be repeated here, unless necessary for disposition of the instant motions.

In this action, plaintiffs Gama Aviation Inc. ("Gama Aviation") and Gama Leasing Limited ("Gama Leasing") (collectively, "Gama") seek the reformation of an alleged scrivener's error in the maturity date of certain loan documents (the "Loan Documents"), dated August 20, 2008, as between nonparty Key Equipment Finance Inc. ("KEF") and plaintiffs. Plaintiffs claim that the Promissory Note Aircraft Loan (the "Note") they executed in August 2008 in favor of KEF contained an incorrect maturity term of 24 months, even though such term is plainly stated on the face of the Note. Plaintiffs contend that the Note, which they allegedly failed to read before signing, was supposed to reflect a term of 60 months, and that it is the product of mutual mistake. Defendants Sandton Capital Partners, LP, Sandton Capital Partners, LLC, Sandton Partners LLC and KB Acquisition, LLC ("KB") (collectively, "Sandton") later acquired a portfolio of loans from KEF that included the loan to Plaintiffs. Plaintiffs allege that KEF fully disclosed the facts and circumstances surrounding the Gama loan to defendants, but that defendants dissuaded KEF from reforming the Loan Documents, and later declared the loan to be in default.

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In October 2010, plaintiffs commenced this action, asserting claims against defendants for (1) reformation of the Loan Documents based upon the mutual mistake of plaintiffs and KEF with respect to the maturity date; (2) a declaratory judgment regarding the parties' respective rights with respect to the Loan Documents and the aircraft (the "Aircraft"); and (3) tortious interference with plaintiffs' loan agreement with KEF, the original lender. Plaintiffs also seek preliminary and permanent injunctive relief barring defendants from interfering with plaintiffs' use of the Aircraft, which serves as collateral for the loan.

Since plaintiffs filed this lawsuit, the parties have conducted extensive discovery both as to each other and nonparty KEF. In October 2011, the parties filed competing motions to compel discovery, which were briefed, argued and appealed to decision. Defendants have produced more than 1500 pages of documents, plaintiffs more than 1600, and KEF more than 2000. The parties have deposed each other's principals over four days and have deposed two KEF witnesses over three days.

A. The Instant Motions

In Motion Sequence No. 016, defendants move for an award granting them summary judgment dismissing the complaint in its entirety. Defendants also move for an

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order granting summary judgment to counterclaim plaintiff KB on its first through fourth and seventh through ninth counterclaims.

In Motion Sequence No. 020, plaintiffs move for leave to file a first amended complaint.

In Motion Sequence No. 021, plaintiffs move, pursuant to CPLR 3124, for an order compelling KEF to comply with the subpoena duces tecum dated April 25, 2011 and the subpoena ad testificandum dated May 30, 2012. KEF cross-moves for a protective order restricting the subpoenas to documents that KEF previously promised to produce.

In Motion Sequence No. 022, plaintiffs move for an order compelling defendants to produce documents responsive to plaintiffs' first and second notices of discovery and inspection.

In Motion Sequence No. 023, plaintiffs move to compel accurate and complete responses to their second set of interrogatories.

In Motion Sequence No. 024, plaintiffs move for leave to file a first amended and supplemental reply to defendants' counterclaims.

For the reasons set forth below, plaintiffs' motions to amend the complaint and their reply to defendants' counterclaims are granted, and defendants' motion for summary judgment is denied as moot. Plaintiffs' motion to compel KEF to produce documents,

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and to compel defendants to produce documents responsive to the first and second document requests is denied. Plaintiffs' motion to compel responses to the second set of interrogatories is granted in part, and denied in part.

II. Discussion

A. Plaintiffs' Motion for Leave to Amend (Motion Sequence No. 016)

CPLR 3025(b) provides that a party may amend or supplement its pleading "by setting forth additional or subsequent transactions or occurrences, at any time by leave of court..." Leave to amend is "freely given" under CPLR 3025(b), '"provided the amendment is not palpably insufficient, does not prejudice or surprise the opposing party, and is not patently devoid of merit.'" Clark v. Clark, 93 A.D.3d 812, 816 (2d Dep't 2012) (citation omitted); see also Miller v. Cohen, 93 A.D.3d 424,425 (1st Dep't 2012) (stating that on a motion to amend a complaint, plaintiff "need not establish the merit of the proposed new allegations, but must 'simply show that the proffered amendment is not palpably insufficient or clearly devoid of merit'") (citation omitted); Loewentheil v. White Knight, Ltd., 71 A.D.3d 581, 581 (1st Dep't 2010) ("Leave to amend pleadings ... should be liberally granted"). Indeed, "[t]he party opposing the motion to amend must overcome a heavy presumption of validity in favor of the moving party." Otis Elevator Co. v. 1166 Ave. of Am. Condo., 166 A.D.2d 307, 307 (1st Dep't 1990).

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"'Mere lateness is not a barrier to the amendment. It must be lateness coupled with significant prejudice to the other side, the very elements of the laches doctrine.'" Edenwald Constr. Co. v. City of N.Y., 60 N.Y.2d 957, 959 (1983) (citation omitted); accord Bishop v. Maurer, 83 A.D.3d 483, 484 (1st Dep't 2011).

The proposed amended complaint contains six additional causes of action against defendants based upon or arising out of the same acts, transactions and occurrences alleged in the original complaint, as well as actions allegedly taken by defendants to harm plaintiffs since the filing of the original complaint. The additional causes of action include: breach of a 2008 refinancing agreement between plaintiffs and KEF, promissory estoppel, breach of the Loan Documents, tortious interference with prospective economic relations, conversion, and wrongful repossession of the Aircraft.

Plaintiffs' motion to amend the complaint is granted, as plaintiffs have demonstrated that the claims in the proposed amended complaint are neither devoid of merit nor palpably insufficient.

1. Breach of the 2008 Refinancing Agreement (Proposed Second Cause of Action)

The proposed second cause of action is for breach of the 2008 Refinancing Agreement. In the proposed amended complaint, plaintiffs allege that, in August 2008, KEF agreed - both before the loan closed, and again in writing after the loan closed -

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that it would search the market for an alternative long-term financing solution more favorable to plaintiffs after the loan was funded. Plaintiffs further allege that once alternate financing was found, KEF agreed that it would assist plaintiffs by placing the loan with that more favorable lending source (the "2008 Refinancing Agreement").

Plaintiffs allege that, regardless of whether the loan for the Aircraft contained a five-year or two-year maturity date, plaintiffs would not have agreed to this loan, with its unusually high fixed interest rate over the first 24 months, if not for KEF's express promise to locate a more favorable financing source for plaintiffs once the loan had closed. Plaintiffs further contend that they fully performed their contractual obligations, but that KEF breached the 2008 Refinancing Agreement when it: (1) failed to perform as promised, (2) failed to conclude its refinancing negotiations with plaintiffs in 2010, and (3) sold the Loan Documents to defendants, whom KEF knew would not perform this contractual obligation. Plaintiffs also maintain that they incurred damages as a result of this breach, including payment of an excessive rate of interest for the first 24 months of the loan, lost profits from the inability to operate the Aircraft, and devaluation of the Aircraft.

The cause of action as pleaded is not patently devoid of merit, since it alleges each of the required elements for a cause of action for breach of contract: (1) a valid contract; (2) the plaintiff's performance; (3) a breach by the defendant; and (4) damages. Morris v.

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702 E. Fifth St. HDFC, 46 A.D.3d 478, 479 (1st...