Lula & Malik Holdings, LLC v Smythe Volvo, Inc.

Supreme Court, Richmond County

Decided on June 1, 2026

Index No. 152780/2025

Ronald Castorina, Jr., J.

I. Statement Pursuant to CPLR § 2219 [a]

Pursuant to CPLR § 2219 [a], the Court states that the following papers were considered on defendants' motion pursuant to CPLR § 3012 [d] compelling plaintiffs to accept defendants' untimely Answer with Affirmative Defenses and Counterclaims: Notice of Motion/Order to Show Cause (NY St Cts Filing [NYSCEF] Doc Nos. 8; 14), the affirmation of Peter S. Simonetti, Esq. (NY St Cts Filing [NYSCEF] Doc No. 9), the affidavit of defendant Kevin Flanagan (NY St Cts Filing [NYSCEF] Doc No. 11), the proposed Answer with Affirmative Defenses and Counterclaims (NY St Cts Filing [NYSCEF] Doc No. 6), the exhibits annexed thereto (NY St Cts Filing [NYSCEF] Doc No. 10), Notice of Cross-Motion (NY St Cts Filing [NYSCEF] Doc No. 18), and the pleadings and proceedings heretofore had herein.

II. Findings of Fact

This action arises from a series of commercial dealings between sophisticated parties engaged in the business of purchasing and selling motor vehicles. (NY St Cts Filing [NYSCEF] Doc No. 9 at ¶6). Plaintiffs Lula & Malik Holdings, LLC d/b/a Status Auto Group and Faisal Malik allege claims stemming from business transactions involving the sale and purchase of vehicles between themselves and defendants Smythe Volvo, Inc. d/b/a Smythe Volvo Cars and Kevin Flanagan. (see id). Defendants contend that over the course of approximately four years, the parties entered into numerous vehicle-related commercial transactions involving sums totaling millions of dollars. (see id at ¶7-¶10).

The record reflects that plaintiffs commenced this action on November 17, 2025, through the filing of a Summons and Complaint on the New York State Courts Electronic Filing system. (NY St Cts Filing [NYSCEF] Doc No. 1). Plaintiffs seek damages in the amount of $2,500,000.00, together with interest, costs, and attorneys' fees. Affidavits of service upon defendants were thereafter filed on December 8, 2025. (see id).

The submissions before the Court establish that defendant Kevin Flanagan is a resident of the State of New Jersey and that defendant Smythe Volvo, Inc. is incorporated under the laws of the State of New Jersey. Defendants aver that they had never previously been involved in litigation within the State of New York. (NY St Cts Filing [NYSCEF] Doc Nos. 9 at ¶11; ¶12; ¶16; NY St Cts Filing [NYSCEF] Doc No. 11).

Upon receipt of the pleadings, defendants did not remain inert. Rather, the evidentiary submissions establish that defendants immediately undertook an investigation into plaintiffs' claims. at (see id at ¶17; NY St Cts Filing [NYSCEF] Doc No. 11). Defendants represent that they were required to review extensive documentation pertaining to years of business transactions between the parties and to expend resources and personnel in order to evaluate the allegations asserted in the Complaint. (see id at ¶17-¶19; NY St Cts Filing [NYSCEF] Doc No. 11).

The record further demonstrates that, in December 2025, defendants contacted an attorney located in California with whom they had previously worked in order to seek guidance concerning the litigation. (see id at ¶20; NY St Cts Filing [NYSCEF] Doc No. 11). According to defendants, that attorney advised them to contact their insurance carrier to determine whether insurance [*2]coverage was available for defense and indemnification in connection with the action. (see id at ¶21; NY St Cts Filing [NYSCEF] Doc No. 11). Defendants thereafter pursued such inquiry, but were ultimately advised by their insurance representative that coverage was unavailable and that they would therefore be required to independently retain counsel at their own expense. (see id at ¶22-¶23; NY St Cts Filing [NYSCEF] Doc No. 11).

Following the denial of insurance coverage, defendants sought legal representation through a New Jersey attorney experienced in representing automobile dealerships. (see id at ¶24; NY St Cts Filing [NYSCEF] Doc No. 11). The record establishes that the New Jersey attorney lacked readily available New York counsel and referred defendants to counsel located in New York City, who in turn advised defendants that counsel situated in Richmond County would be more appropriate for the defense of the matter. (see id at ¶25-¶26; NY St Cts Filing [NYSCEF] Doc No. 11). In February 2026, defendants were ultimately referred to the law firm of Scamardella, Gervasi & Kasegrande, P.C., whereupon defendants immediately initiated contact for representation. (see id at ¶27; NY St Cts Filing [NYSCEF] Doc No. 11).

On February 23, 2026, shortly after retention discussions commenced, defendants' counsel contacted plaintiffs' counsel seeking an extension of time to answer the Complaint. (see id at ¶29; NY St Cts Filing [NYSCEF] Doc No. 11). On February 24, 2026, defendants filed a Notice of Appearance. (see id at ¶30; NY St Cts Filing [NYSCEF] Doc No. 5). Thereafter, following counsel's review of the voluminous transactional history and supporting documentation, defendants served and filed an Answer with Affirmative Defenses and Counterclaims on March 10, 2026. (see id at ¶31; NY St Cts Filing [NYSCEF] Doc No. 6). Plaintiffs rejected the Answer on March 11, 2026 by filing a Notice of Rejection. (see id at ¶32; NY St Cts Filing [NYSCEF] Doc No. 7).

The proposed Answer annexed to defendants' motion asserts numerous affirmative defenses and counterclaims. (NY St Cts Filing [NYSCEF] Doc No. 6). Defendants deny breaching any agreement with plaintiffs and allege instead that plaintiffs failed to perform under various agreements between the parties, including transactions identified as the "Montana vehicle transactions" and the "Countach transaction." (see id). Defendants further allege that plaintiffs made material misrepresentations resulting in substantial losses to defendants and that certain payments were made by plaintiffs to partially compensate defendants for such damages, albeit with alleged outstanding balances remaining unpaid. (see id).

The Court further finds from the record that defendants' delay in serving their Answer was approximately sixty days in duration and that defendants, through counsel, repeatedly attempted to resolve the issue consensually with plaintiffs' counsel prior to seeking judicial intervention.

III. Conclusions of Law

CPLR § 3012 [d] provides that "[u]pon the application of a party, the court may extend the time to appear or plead, or compel the acceptance of a pleading untimely served, upon such terms as may be just and upon a showing of reasonable excuse for delay or default." In determining whether to compel acceptance of an untimely pleading, the Court must consider whether the movant has demonstrated both a reasonable excuse for the delay and the existence of a potentially meritorious defense (see Iyageh v Iyageh, 240 AD3d 675 [2d Dept 2025]; Raphael v City of Peekskill, 237 AD3d 1232 [2d Dept 2025]). It is equally well settled that New York maintains a strong public policy favoring the resolution of cases upon their merits rather than by procedural default (see Ahmad v Aniolowiski, 28 AD3d 692 [2d Dept 2006]; Leale v New York City Health & [*3]Hosps. Corp., 69 AD2d 832 [2d Dept 1979]).

The determination of what constitutes a reasonable excuse rests within the sound discretion of the Court (see Bacova v City of New York, 229 AD3d 668 [2d Dept 2024]; Pare v Pare, 222 AD3d 765 [2d Dept 2023]). In assessing the adequacy of an excuse, courts consider such factors as the extent of the delay, the existence or absence of prejudice to the opposing party, whether the delay was willful, and the overarching public policy favoring determinations on the merits (see Bacova v City of New York, 229 AD3d 668 [2d Dept 2024]; Belches v City of New York, 191 AD3d 754 [2d Dept 2021]).

Applying those principles here, the Court finds that defendants have sufficiently demonstrated a reasonable excuse for their delay in answering. The record reflects not indifference or contumacious conduct, but rather an active and ongoing effort to investigate plaintiffs' claims, secure appropriate counsel in a foreign jurisdiction, and determine whether insurance coverage existed for the litigation. The submissions establish that defendants are New Jersey-based parties unfamiliar with litigation in New York, that they engaged in consultations with attorneys in multiple jurisdictions, and that they pursued insurance review before ultimately retaining Richmond County counsel. Such circumstances, considered in their totality, adequately explain the delay attendant to the service of the proposed Answer.

Moreover, the delay at issue, approximately sixty days, was neither extraordinary nor accompanied by evidence of willfulness. The Court further notes that defendants sought an extension from plaintiffs' counsel shortly after retaining local counsel and thereafter promptly filed a Notice of Appearance and proposed Answer. Under analogous circumstances, appellate courts have found similar delays excusable, particularly where attributable to insurance review and efforts to secure counsel (see Accetta v Simmons, 108 AD3d 1096 [4th Dept 2013]). Likewise, in Bacova v City of New York (229 AD3d 668 [2d Dept 2024]), the Appellate Division upheld the acceptance of an answer served after a delay exceeding three months where the delay was not willful and no prejudice was demonstrated.

The Court additionally finds that plaintiffs have failed to demonstrate any cognizable prejudice arising from the delay. The litigation remains in its nascent stage. No substantive discovery has occurred, no dispositive motion practice has been undertaken, and no showing has been made that plaintiffs' ability to prosecute the action has been impaired in any material respect by the late pleading. Mere delay, without more, does not constitute prejudice sufficient to defeat relief under CPLR § 3012 [d].

The Court further concludes that defendants have demonstrated potentially meritorious defenses and counterclaims. To satisfy this requirement, a movant need only make a prima facie showing of merit; the movant is not required to conclusively establish the defense as a matter of law (see State Farm Mut. Auto. Ins. Co. v Austin Diagnostic Med., P.C., 153 AD3d 576 [2d Dept 2017]; HSBC Bank USA v Pantel, 208 AD3d 643 [2d Dept 2022]; Gershman v Ahmad, 131 AD3d 1104 [2d Dept 2015]).

Here, defendants' proposed verified Answer and supporting affidavit assert that defendants fully performed their obligations under the parties' agreements, that plaintiffs themselves breached multiple agreements, that plaintiffs made material misrepresentations causing defendants substantial losses, and that defendants possess viable counterclaims arising from the parties' commercial dealings. These assertions, if proven, would constitute defenses and counterclaims of sufficient legal merit to warrant adjudication on the merits rather than foreclosure through procedural default. The Court therefore finds that defendants have satisfied the meritorious-defense prong required under [*4]CPLR 3012[d].

In view of the strong public policy favoring determinations on the merits, the relatively brief nature of the delay, the absence of demonstrated prejudice, and defendants' prima facie showing of potentially meritorious defenses and counterclaims, the Court finds that the interests of justice are best served by compelling acceptance of defendants' Answer.

IV. Conclusion and Decretal Paragraphs

Accordingly, it is hereby

ORDERED that defendants' motion pursuant to CPLR § 3012 [d] compelling plaintiffs to accept defendants' untimely Answer with Affirmative Defenses and Counterclaims is granted in its entirety; and it is further

ORDERED that plaintiffs shall accept defendants' Answer with Affirmative Defenses and Counterclaims, previously filed on NYSCEF as Document No. 6, nunc pro tunc to the date of service; and it is further

ORDERED that the Answer with Affirmative Defenses and Counterclaims shall be deemed timely served upon service of a copy of this Decision and Order with notice of entry; and it is further

ORDERED that the parties shall proceed with discovery in accordance with the CPLR and any preliminary conference order subsequently issued by the Court; and it is further

ORDERED that any relief requested but not expressly addressed herein is denied.

This constitutes the Decision and Order of the Court.

Dated: June 1, 2026

Staten Island, New York

HON. RONALD CASTORINA, JR.

JUSTICE OF THE SUPREME COURT