IDT Corp. v. Morgan Stanley Dean Witter & Co., 2010 NY Slip Op 50335(U) (N.Y. Sup. Ct. 3/8/2010), 603710-2004.

CourtUnited States State Supreme Court (New York)
Writing for the CourtJames A. Yates
Citation2010 NY Slip Op 50335
Decision Date08 March 2010
Docket Number603710-2004.

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2010 NY Slip Op 50335(U)
Supreme Court, New York County.
Decided March 8, 2010.

Bracewell & Giuliani LLP, New York City and Houston (Michael D. Hess and Glenn A. Ballard, Jr. of counsel), for IDT Corporation, plaintiff.

Patterson Belknap Webb & Tyler, New York City (Stephen P. Younger of counsel), for IDT Corporation, plaintiff.

Davis Polk & Wardwell LLP, New York City (Guy Miller Struve of counsel), for Morgan Stanley Dean Witter & Co. and Morgan Stanley & Co., Inc., defendants.


In August 1999, plaintiff IDT Corporation (IDT) and Telefonica Internacional, S.A. (Telefonica) entered into a Memorandum of Understanding (MOU) regarding a large scale telecommunications project. The project did not go forward as planned; IDT was effectively replaced by a competing entity in June 2000. Defendants Morgan Stanley Dean Witter & Co. and Morgan Stanley & Co, Inc., (collectively, Morgan Stanley) had acted as investment banker to Telefonica for the project and had acted as financial advisor to IDT, before and afterwards, in other communications projects. IDT claimed breach of contract against Telefonica in an arbitration proceeding in 2001, and was awarded $16.8 million with interest.

In November 2004, IDT commenced this action against Morgan Stanley for misuse of information and position which, allegedly, caused Telefonica to breach the MOU and to replace IDT in the project with another customer of Morgan Stanley.1 On March 26, 2009, the Court of

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Appeals dismissed the five causes of action pleaded in the original complaint for (1) breach of fiduciary duty, (2) intentional interference with existing contract, (3) intentional interference with prospective business relations, (4) misappropriation of confidential and propriety business information, and (5) unjust enrichment. The Court held that all five causes were either time-barred or failed to state a cause of action.

While the decision on a motion to dismiss the original complaint was pending appeal in the Appellate Division, on July 10, 2007, IDT was granted leave to amend the complaint. The amendment added a sixth and seventh cause of action, alleging fraudulent misrepresentation and fraudulent concealment in that Morgan Stanley had improperly withheld information which they were required to produce at the arbitration proceeding against Telefonica. The Supreme Court dismissed the added claims, but on June 25, 2009, the Appellate Division reinstated IDT's sixth and seventh causes of action (IDT Corp. v Morgan Stanley Dean Witter & Co., 63 AD3d 583 [2009], lv denied M-3455 [Oct. 27, 2009]). Accordingly, on November 17, 2009, this Court granted in part and denied in part Morgan Stanley's motion to enforce remittitur (motion sequence 011), dismissing IDT's first, second, third, fourth, and fifth causes of action, in accordance with the decision of the Court of Appeals, and reinstating IDT's sixth and seventh causes of action, in accordance with the decision of the Appellate Division.

IDT now moves for leave to amend its complaint a second time pursuant to CPLR 3025 (b) and (c). Five years after the action was commenced, and following one appeal to the Court of Appeals, and a second appeal to the Appellate Division, which denied leave to appeal, IDT seeks to add two additional causes of action: (1) common law fraud, and (2) fraudulent concealment by a fiduciary. Unlike the surviving sixth and seventh causes which relate solely to the alleged suppression of evidence at the IDT-Telefonica arbitration in 2001, the proposed new causes would relate back to the original breach of the MOU in 1999-2000, but, theoretically, would not be time-barred as was the bulk of the original complaint, since the proposed causes carry a six-year statute of limitations.

For the following reasons, IDT's motion is granted.


Leave to amend a pleading should be "freely given" (CPLR 3025 [b]) "as a matter of discretion in the absence of prejudice or surprise" (Stroock & Stroock & Lavan v Beltramini, 157 AD2d 590, 591 [1st Dept 1990]). "Where there has been an extended delay in moving to amend, the party seeking leave to amend must establish a reasonable excuse for the delay" (Heller v Louis Provenzano, Inc., 303 AD2d 20, 24 [1st Dept 2003] [internal quotation marks omitted]). However, "[m]ere 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 Contracting Co. v New York, 60 NY2d 957, 959 [1983].)

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"[T]o conserve judicial resources, an examination of the underlying merits of the proposed causes of action is warranted" (Megaris Furs, Inc. v Gimbel Bros., Inc., 172 AD2d 209, 209 [1st Dept 1991]). "[A] motion for leave to amend a pleading must be supported by an affidavit of merits and evidentiary proof that could be considered upon a motion for summary judgment" (Zaid Theatre Corp. v Sona Realty Co., 18 AD3d 352, 355 [1st Dept 2005] [internal quotation marks omitted]). "[L]eave may not be granted where the amended pleading plainly fails to state a cause of action and, thus, lacks merit" (Stroock, 157 AD2d at 591). Thus, the issues before this Court are (1) whether IDT's delay in seeking to leave to amend is an "extended delay," and if so, whether IDT provided a "reasonable excuse" for that delay, (2) if there is a delay, whether IDT's motion for leave to amend the complaint would significantly prejudice Morgan Stanley, and (3) whether IDT's proposed claims have any merit.

IDT alleges that delay is not extensive in light of the pre-discovery litigation (see transcript at 9 [Feb. 19, 2010] ["And the cases [Morgan Stanley] cite[s] are all distinguishable because they're all further along."]), and that the delay is due to the facts it uncovered during discovery, which enhanced its ability to support the merits of its proposed amendments. IDT claims it "did not know when it filed its Original Complaint that Morgan Stanley assigned individual bankers to work both sides of the SAm-1 transaction. Nor did IDT know that those bankers received confidential information related to both clients. IDT certainly did not...

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