DECISION ORDER ON MOTION This dispute arises out of an agreement (“the Agreement”) between Plaintiff ZEF Records, LLC (“ZEF”) and Defendant BMG Rights Management (US), LLC (“BMG”). Pursuant to the Agreement, ZEF granted BMG an exclusive license to distribute, license, rent, lease, sell, copy, manufacture, market, promote, and/or otherwise exploit and permit the public performance of a newly recorded album featuring musical artists Watkin Tudor Jones (“Jones”) and Anri du Toit (“du Toit”), who are collectively professionally known as the group Die Antwoord (“the Group”). See Complaint, NYSCEF Doc. No. 1. Plaintiff brings a single cause of action for breach of the Agreement, alleging that Defendant failed to pay Plaintiff certain monetary advances as required under the Agreement. Before the Court is Defendant’s motion sequence 001 to amend its Answer to assert Counterclaims. Defendant seeks to add two counterclaims, (1) fraudulent inducement, and in the alternative, (2) breach of the implied covenant of good faith and fair dealing. Defendant requests to add allegations that Defendant was fraudulently induced to enter into the Agreement with Plaintiff because Plaintiff withheld information that, had it been known to Defendant, would have caused Defendant not to enter into the Agreement. Specifically, Defendant alleges that following the execution of the Agreement, Defendant discovered public videos seeming to show members of the Group engaged in racist, homophobic and violent acts. Defendant alleges these videos were known to Plaintiff prior to the execution of the Agreement and Plaintiff did not disclose the existence of the videos despite an obligation to do so. Under CPLR 3025(b) leave to amend should be freely given, absent surprise or prejudice resulting from the delay. On a motion for leave to amend a pleading, the “movant need not establish the merit of the proposed new allegations but must simply show that the proffered amendment is not palpably insufficient or clearly devoid of merit”. See Cruz v. Brown, 129 A.D.3d 455 (2015) citing Miller v. Cohen, 93 A.D.3d 424 (1st Dept.2012). See also §237 Amendment by Leave, Siegel, N.Y. Prac. §237 (6th ed.) (“[o]n a motion to amend, the court will not ordinarily consider the merits of the proposed new matter unless it is so obviously lacking in merit as to have no chance of success whatever, in which case the motion may be denied on that ground”).1 Leave to amend will be denied where the proposed pleadings fail to state a claim or are otherwise “palpably insufficient as a matter of law…” Davis & Davis. v. Morson, 286 AD2d 584, 585 (1st Dep’t 2001) (citations omitted). Here, Defendant correctly asserts that there can be no surprise or prejudice resulting from the proposed amendments. The parties discussed the proposed amendments before this motion was filed, including at the recent preliminary conference with the Court in January 2020. Defendant also alleges in the proposed Amended Answer and Counterclaims that there were contemporaneous discussions about the conduct at issue immediately following the execution of the Agreement. Additionally, this case is in the very beginning stage of discovery and thus Plaintiff will have ample time to respond and conduct discovery on the counterclaims. In opposition, Plaintiff argues that the proposed counterclaims are meritless. Specifically, Plaintiff argues that Defendant cannot state a claim for fraudulent inducement because Plaintiff owed no duty to Defendant, Defendant has not alleged justifiable reliance, and Defendant has not alleged fraudulent intent. Plaintiff argues that the Agreement was an arms-length transaction between sophisticated parties, no fiduciary relationship exists, and Defendant should have performed due diligence prior to executing the Agreement. Plaintiff states that the videos described in the proposed amendments were public before the Agreement was executed and that Plaintiff had no obligation to disclose publicly available information. Where a party alleges fraud (or fraudulent inducement) based on an omission of information, rather than an affirmative misrepresentation, typically a special relationship is required to state a claim. However, in the absence of a special relationship, a party may still properly allege fraud where there are special facts such that one party had superior knowledge of certain information, not readily available to the other party. See P.T. Bank Central Asia v. ABN AMRO Bank N.V., 301 A.D.2d 373 (1st Dep’t 2003) (citing cases). Plaintiff is correct that there is no fiduciary or other special relationship between the parties to give rise to a duty to disclose the relevant information. Nevertheless, the Court finds that Defendant has alleged sufficient facts in the proposed Amended Answer and Counterclaims to proceed under the special facts doctrine. In particular, the proposed Amended Answer and Counterclaims allege at
