This action was commenced by former employer-members of the Healthcare Industry Trust of New York ("HITNY" or "Trust"), a group self-insured trust ("GSIT") formed pursuant to Workers' Compensation Law ("WCL") § 50-a, against the persons and entities allegedly responsible for the Trust's substantial accumulated deficit. For the reasons that follow, plaintiffs' motion for leave to file and serve a third amended complaint is granted.

BACKGROUND

According to the present record, the initial summons and complaint in this action was [*2]filed on July 10, 2009, but was never served. A first amended complaint was filed on November 2, 2009. Some, but not all, of the defendants named therein were served. A second amended complaint then was filed on March 12, 2010. This complaint also was served on some, but not all, of the named defendants. The defendants that were served requested extensions of time to respond, which were granted by plaintiffs' counsel.

On March 31, 2010, Compensation Risk Managers ("CRM") applied for an order from the New York State Litigation Coordinating Panel ("LCP") coordinating certain pending actions, including this case and a related case in this Court brought by the Workers' Compensation Board ("WCB") (see Index No. 10288-09). The LCP (Freedman, J.) issued an Order to Show Cause on April 16, 2010 staying pre-trial proceedings in all of the cases that were the subject of the pending coordination application, including this case. However, a May 5, 2010 order of the LCP allowed plaintiffs to complete service. The newly served defendants also were given open-ended extensions of time to answer the second amended complaint.

The LCP ultimately granted the request for coordination on February 23, 2011, and the coordinated cases were transferred to the undersigned as Coordinating Justice. By order dated March 9, 2011, this Court scheduled an initial conference and continued the LCP's stay of proceedings pending entry of a scheduling order. However, on or about April 29, 2011, Majestic Capital Ltd. f/d/b/a CRM Holdings, Ltd. filed for federal bankruptcy protection, resulting in a bankruptcy stay with respect to the debtor defendants, including CRM. Stays remained in effect until February 14, 2013.

In the interim, on September 11, 2012, the Bankruptcy Court so-ordered a stipulation between plaintiffs, the WCB and the Liquidating Trustee pursuant to which the HITNY plaintiffs agreed to dismiss the claims asserted against CRM and the other debtor defendants. Accordingly, on April 12, 2013, plaintiffs filed a notice of discontinuance as to CRM, Majestic and several other related debtor entities (collectively "Released Parties").

Plaintiffs now seek to file and serve a third amended complaint as of right pursuant to CPLR 3025 (a). Alternatively, plaintiffs move for leave of court pursuant to CPLR 3025 (b). According to plaintiffs, the proposed amendments would: (1) remove claims against the Released Defendants; (2) add a cause of action for common-law indemnification against all defendants; (3) add a cause of action for breach of fiduciary duty against the defendants denominated as the "CRM Individual Defendants"; (4) name new parties and modify the description of certain existing parties; (5) add allegations supporting plaintiffs' claim of standing to prosecute this action; and (6) clarify, particularize and update certain factual allegations of the complaint.

The principal opposition to the motion was filed on behalf of CRM, CRM USA Holdings, Inc., Eimar, LLC and Daniel G. Hickey, Jr., of which the former three entities are Released Parties. In addition to claiming that an amendment as of right is not available, these objectors (hereinafter "CRM Objectors") argue that the proposed third amended complaint is lacking in merit. Among other things, the CRM Objectors assert that plaintiffs lack standing to sue, certain defendants were not properly served, common law indemnification is not available, and the "CRM Individuals" are not personally liable for any tortious conduct of their employer.

The WCB also filed opposition to the motion, contending principally that the claims sought to be prosecuted by plaintiffs are duplicative of the claims asserted in WCB v Compensation Risk Managers, LLC (Index No. 10288-09), a coordinated and related action [*3]pending in this Court. The WCB also questioned whether common law indemnification is available to plaintiffs in light of this Court's decision in State of NY Workers' Compensation Board v Madden (2013 NY Slip Op 50337 [U] [March 1, 2013]), which rejected the WCB's attempt to assert such a cause of action. However, on August 28, 2013, the WCB and most (but not all) of the plaintiffs in this action entered into a joint stipulation intended to assign the bulk of the claims in this action to the WCB. As a result of the stipulation, the WCB has withdrawn its opposition to the instant motion.

Hickey-Finn & Co., Inc. ("Hickey-Finn") also has filed opposition to the motion, arguing that amendment as of right is not available, and the proposed amended pleading is devoid of specific factual allegations relating to its role in the alleged misconduct. Similar objections are raised by Rampart Agency, Inc.

The Reis Group, Shel-Bern Assoc., Spain Agency, Inc. and Vanner Insurance Agency oppose the branch of the motion seeking amendment as of right, but do not oppose plaintiffs' request for leave to amend pursuant to CPLR 3025 (b).

Finally, SGRisk, LLC and UHY, LLC do not oppose the requested relief.

ANALYSIS

A.Amendment as of Right or By Stipulation

"A party may amend his pleading once without leave of court within twenty days after its service, or at any time before the period for responding to it expires, or within twenty days after service of a pleading responding to it" (CPLR 3025 [a]). Further, an amended pleading may be filed and served "by stipulation of all parties" (id. [b]).

As an initial matter, the Court rejects plaintiffs' contention that they may file and serve a third amended complaint as of right. Plaintiffs acknowledge that a first amended complaint was filed on November 2, 2009, about four months after the filing of the original complaint. While the original complaint may not have been served upon the named defendants, plaintiffs cite no legal authority for the proposition that this pre-service amendment did not exhaust their authority to amend the complaint "once without leave of court".

Further, plaintiffs' claim that an amended pleading may be filed and served pursuant to stipulation is not adequately supported by a written stipulation, confirming letters or other documentation, and it is controverted by the affirmations of opposing counsel.

Finally, the Court rejects the contention that anything in the ex parte orders of this Court or the LCP extending plaintiffs' time to complete service of any of the complaints filed herein had the effect of granting leave to serve a third amended complaint.

B.Amendment By Leave of Court

Where amendment as of right is not available and all parties have not stipulated to accept an amended pleading, a party must seek leave of court (CPLR 3025 [b]). A motion for leave to amend a pleading shall be freely granted, providing that there is no prejudice to the nonmoving party and the amendment is not plainly lacking in merit (Smith v Haggerty, 16 AD3d 967, 967-968 [3d Dept 2005]).

Given that this case remains in its earliest stages due to the stay imposed by the LCP, the automatic stay associated with the Majestic bankruptcy and the stay imposed by this Court in deference to the ongoing Bankruptcy Court proceedings and negotiations, there is no claim that [*4]the motion to amend is untimely or the product of unreasonable delay on the part of plaintiffs. Rather, the objectors argue that the proposed amendments to the complaint patently lack merit.

With respect to the new cause of action for implied indemnification, this Court held in State of NY Workers' Compensation Board v Madden (2013 NY Slip Op 50337 [U] [March 1, 2013] ["Madden"]), that the WCB cannot maintain a claim for implied indemnity in its capacity as successor in interest to the Trust or as the government agency charged with administration of the Workers' Compensation Law. However, Madden did not address an indemnification claim by a former employer-member of a GSIT, and the Appellate Division, Third Department's recent decision in Murray Bresky Consultants, Ltd v New York Compensation Manager's Inc. (106 AD3d 1255, 1258-1259 [3d Dept 2013]), forecloses the contention that such a claim palpably is lacking in merit.

Further, while the CRM Objectors challenge the standing of the employer-plaintiffs to maintain this action, the present record does not conclusively establish that all of the claims sought to be raised by plaintiffs in the proposed complaint and all of the relief sought thereupon are derivative of rights possessed by the Trust (see generally Inter-Community Mem. Hosp. of Newfane v Hamilton Wharton Group, Inc., 93 AD3d 1176 [4th Dept 2012]). Moreover, even if plaintiffs' motion to file and serve a third amended complaint were denied, the issue of plaintiffs' standing to sue the present parties on the present claims necessarily would have to be adjudicated in the context of a CPLR 3211 motion to dismiss the second amended complaint. Under the circumstances, the Court adheres to its previously expressed view that the instant motion to amend the complaint is not an efficacious vehicle for adjudicating whether and to what extent the former Trust members may pursue direct recoveries.

Finally, the Court has considered the remaining arguments raised in opposition to the motion — including the contention that the proposed breach of fiduciary duty claim against the CRM Individual Defendants fails to state a cause of action, various defendants' desire for additional particularization and service-related issues — but finds any alleged defects or insufficiencies are not so "clear and free from doubt" as to preclude the requested amendments (Dygert v Leonard, 138 AD2d 793, 794 [3d Dept 1988]).

CONCLUSION

Accordingly, it is

ORDERED that plaintiffs' motion to amend to file and serve a third amended complaint is granted; and it is further

ORDERED that plaintiffs' counsel shall forthwith transmit copies of this Decision & Order to all parties who have appeared in this action.

This constitutes the Decision and Order of the Court. This Decision and Order is being transmitted to plaintiffs' counsel for filing and service. The signing of this Decision and Order shall not constitute entry or filing under CPLR Rule 2220, and counsel is not relieved from the applicable provisions of that Rule respecting filing, entry and Notice of Entry.

Dated: Albany, New York

October 1, 2013

[*5]

RICHARD M. PLATKIN

A.J.S.C.

Papers Considered:

Notice of Motion, dated March 15, 2013;

Affidavit of Linda J. Clark, Esq., sworn to March 15, 2013, with attached exhibits A-N;

Plaintiffs' Memorandum of Law, dated March 15, 2013;

Notice of Discontinuance, dated April 12, 2013;

Revised Proposed Third Amended Complaint;

Affirmation of Lloyd J. Herman, Esq., dated April 23, 2013;

Affirmation of Kenneth R. Rothschild, Esq., dated April 23, 2013, with attached exhibit A;

Affidavit of John T. Maloney, Esq., sworn to April 25, 2013, with attached exhibits A-F;

Affidavit of Panagiota K. Hyde, Esq., sworn to April 25, 2013, with attached exhibit A;

Affidavit of James J. Scardino, sworn to April 25, 2013, with attached exhibit A;

Affidavit of Louis J. Viglotti, sworn to April 25, 2013, with attached exhibit A;

Affirmation of Kathleen A. Barclay, Esq., dated April 25, 2013;

Defendants' Memorandum of Law, dated April 26, 2013, with attachment;

Affidavit of Michael Papa, Esq., sworn to April 25, 2013, with attached exhibits A-D;

Memorandum of Law of WCB, dated April 26, 2013;

Correspondence of SGRisk, LLC, dated April 26, 2013;

Correspondence of UHY LLP, dated April 26, 2013;

Reply Affirmation of Joseph A. Murphy, Esq,. dated May 24, 2013, with attached exhibits A-E;

Plaintiffs' Reply Memorandum of Law, dated May 24, 2013.