Fezzani v. Bear, Stearns & Co.
- James Cott
- 1:99-cv-00793
- U.S. District Court · Southern District of New York
- 10
In Fezzani v. Bear, Stearns & Co., Judge Cott denied adding a release defense, allowed Dweck response changes, and denied plaintiffs’ sur-reply request as moot.
The Dweck and Wolfson Defendants could not add the proposed release defense. The Dweck Defendants could supplement and modify certain responses in their answer. The plaintiffs’ sur-reply request and sanctions request were denied.
What happened
In Fezzani v. Bear, Stearns & Company, Inc., et al. v. Bear, Stearns & Company, Inc., et al., the Dweck and Wolfson Defendants asked to amend their answers in a securities-fraud lawsuit. Both sought to add a defense based on releases issued in bankruptcy proceedings; the Dweck Defendants also sought to update some responses to the complaint. Plaintiffs opposed the requests and sought permission to file a further reply.
The court rejected the proposed release defense as legally futile. Earlier rulings in this case had found that a 2000 side letter permanently assigned the claim at issue to the plaintiffs, so the trustee no longer controlled that claim and could not later release it. The court found no sufficient showing that the defendants acted in bad faith, and it did not address whether the proposed defense was timely or would unfairly harm the plaintiffs.
Judge Cott denied the requests to add the release defense, but granted the Dweck Defendants permission to supplement and modify their responses as requested by plaintiffs. He also denied plaintiffs’ request to file a sur-reply as moot and denied their request for sanctions.
The detailed version
- Fezzani v. Bear, Stearns & Co. · No. 1:99-cv-00793
- James Cott
- Mar. 15, 2022
Background
The Dweck and Wolfson Defendants moved under Rule 15 of the Federal Rules of Civil Procedure for permission to amend their answers to the amended complaint. The plaintiffs allege that the defendants participated in a coordinated securities fraud. Both groups of defendants sought to add an affirmative defense based on a release. An affirmative defense is a defense that a defendant raises in its answer to avoid liability even if the complaint’s allegations are accepted. The Dweck Defendants separately sought permission to supplement and modify certain responses in their answer.
The plaintiffs opposed the motions and argued that they were futile, frivolous, and intended to annoy, harass, or delay. The plaintiffs also sought sanctions and later moved for permission to file a sur-reply. The court noted that the defendants had separately filed motions to dismiss for lack of subject-matter jurisdiction, but decided the amendment motions rather than hold them in abeyance.
Proposed Release Defense
The Dweck Defendants proposed asserting that, to the extent the plaintiffs pursued a claim on behalf of the Securities Investor Protection Corporation trustee, the trustee had released that claim in a 2003 settlement. The Wolfson Defendants proposed a similar defense based on a release given by the trustee for the liquidation of A.R. Baron & Co., Inc.’s business.
The court held that adding the release defense would be futile. In earlier rulings in this litigation, the court had determined that a 2000 side letter permanently assigned the claim at issue—described in the opinion as the plaintiffs’ claim for $3.8 million—to the plaintiffs. Because the assignment was irrevocable, the trustee no longer controlled the claim. The court therefore concluded that the trustee could not later release the claim through the 2003 settlement agreements. The proposed defense consequently had no legal basis and could not succeed as a matter of law.
The court rejected the plaintiffs’ argument that the defendants acted in bad faith. It found no indication, beyond the plaintiffs’ unsupported assertion, that the motions were filed to annoy, harass, or delay. Because the court denied the amendment requests on futility grounds, it did not decide whether they were timely or whether granting them would prejudice the plaintiffs.
Other Proposed Amendments
The Dweck Defendants explained that their proposed supplemental and modified responses were intended to provide substantive answers to certain allegations, including where they had knowledge or lacked enough information to respond fully. The plaintiffs had requested these changes and did not argue that the Dweck Defendants acted in bad faith or that the changes would unfairly harm them. The court therefore granted permission for the Dweck Defendants to make the proposed response changes, except for the proposed release defense.
Disposition
The court denied the motions to amend to add the release defense. It granted the Dweck Defendants’ request to supplement and modify their responses. The conclusion states that Docket No. 296 was denied and that Docket No. 287 was denied in part and granted in part. The court denied the plaintiffs’ motion for leave to file a sur-reply as moot. It also denied the plaintiffs’ request for sanctions because the request did not satisfy the procedural requirements for a sanctions motion and did not provide supporting authority under the provisions cited by the court.
Read the full 10-page opinion on CourtListener, the free public archive maintained by the Free Law Project.