Vyas v. Taglich Brothers, Inc.

Background

Sanket Vyas brought the action as liquidating agent for and on behalf of Q3I, L.P. The first amended complaint alleged that Q3I hired Denis McEvoy, who was employed by Taglich, to administer Q3I’s affairs. Q3I later discovered that Michael Ackerman, a Q3I managing partner, had allegedly defrauded Q3I of millions of dollars. The complaint alleged that McEvoy failed to detect or report the fraud and asserted claims against Taglich for breach of fiduciary duty, gross negligence, and negligence.

The scheduling order set January 13, 2023, as the deadline to amend the pleadings. After the case was transferred to this district, Vyas moved for leave to file a second amended complaint. The proposed pleading sought to add claims for grossly negligent supervision, grossly negligent retention, negligent supervision, and negligent retention. Vyas argued that documents produced in discovery showed Taglich knew about McEvoy’s work for Q3I and that a recent New York Court of Appeals decision supported the proposed claims.

Legal standards

Under Federal Rule of Civil Procedure 16(b), a scheduling order may be changed only for good cause and with the judge’s consent. Good cause generally depends on the moving party’s diligence. If good cause exists, Rule 15(a) provides that courts should generally allow amendment when justice requires, unless there is undue delay, bad faith, prejudice, or futility. An amendment is futile when the proposed allegations would not support a legally sufficient claim.

Court’s analysis

The court first considered whether Vyas had shown good cause for seeking amendment after the deadline. It found that McEvoy’s September 2022 deposition could not support a motion filed about a year later because Vyas had the relevant testimony before the amendment deadline and gave no adequate explanation for the delay. The court also found that Taglich’s document production did not provide new information: the first amended complaint already alleged that Taglich knew about and approved McEvoy’s work for Q3I.

The court rejected the argument that the later New York Court of Appeals decision, Moore Charitable Foundation v. PJT Partners, Inc., supplied good cause. That decision clarified that a customer relationship is not required for a negligent supervision or retention claim, but the court noted that earlier cases had already allowed such claims involving non-customers. The court therefore concluded that there had been legal support for asserting the claims earlier.

The court separately held that the proposed negligent supervision and retention claims were futile. It explained that the allegations did not plausibly show that Taglich knew or should have known that McEvoy had a tendency to engage in the type of negligent conduct alleged. The court emphasized that Ackerman—not a Taglich employee—allegedly committed the fraud; that Vyas’s proposed allegations treated McEvoy’s Q3I work as outside business activity rather than Taglich work; and that the alleged facts consisted mainly of Taglich’s knowledge of the outside activity, McEvoy’s occasional use of a Taglich email address, and his lack of cryptocurrency experience. The court found these facts insufficient to establish the required notice of a propensity for negligence.

Disposition

Magistrate Judge Katharine H. Parker denied the motion to amend and directed the clerk to terminate the motion at ECF No. 158. The court directed Taglich, by January 5, 2024, to answer the first amended complaint, file a new motion to dismiss under Judge Torres’s individual practices, or refile its earlier motion to dismiss.