| BGC Partners, Inc. v Refco Sec., LLC |
| 2012 NY Slip Op 05069 [96 AD3d 601] |
| June 21, 2012 |
| Appellate Division, First Department |
| BGC Partners, Inc., Respondent, v Refco Securities, LLC,Appellant. |
—[*1] Saul Ewing LLP, New York (Francis X. Riley III of counsel), for respondent.
Orders, Supreme Court, New York County (Bernard J. Fried, J.), entered June 28, 2011 andJuly 20, 2011, which, respectively, granted plaintiff's motion to confirm a Special Referee'sreport denying defendant's discovery requests and denied defendant's cross motion to reject thereport, and denied defendant's motion for leave to amend its answer to include the affirmativedefense of patent invalidity, unanimously affirmed, with costs.
Pursuant to the parties' "Master Software License, Maintenance and Service Agreement,"defendant had the right to the use of certain software and equipment and to maintenance andsupport services, in exchange for the payment to plaintiff of an annual licensing fee and amonthly maintenance fee (the Fixed Fees). Defendant also agreed to share with plaintiff portionsof any commissions it received as a result of trading activity by its clients. The Fixed Fees wererequired to be paid through the six-year term of the agreement and could be declared due andpayable immediately in the event of a default by defendant.
Approximately four years into the term of the agreement, defendant ceased doing business,and ceased paying the Fixed Fees. Plaintiff negotiated new commission contracts, which did notinclude payment of the Fixed Fees, with former clients of defendant. After plaintiff commencedthis action to recover the remainder of the Fixed Fees, defendant sought discovery of the newcommission contracts on the ground that plaintiff's ability to collect the full commissions reducedits claim. The court denied defendant's request, finding that the new commission contracts wereirrelevant to plaintiff's right to the Fixed Fees and therefore not necessary in the defense of theaction (see CPLR 3101). We agree.
The license agreement clearly and unambiguously entitled plaintiff to an annual license feeand a monthly maintenance fee for the entire term of the agreement and, upon defendant'sdefault, to all fees owing through the remainder of the term. The agreement also provided thatplaintiff's right to the Fixed Fees was not tied to any other remedy available to it. Thus, accordingto the plain meaning of the agreement's terms, the Fixed Fees were not intended to act as"substitute revenues" for the commissions, as defendant claims (see Greenfield v PhillesRecords, 98 NY2d 562, 569 [2002]).
The court also properly denied defendant's motion to amend its answer to include theaffirmative defense of patent invalidity. "The decision to allow or disallow the amendment is[*2]committed to the court's discretion" (Edenwald Contr. Co.v City of New York, 60 NY2d 957, 959 [1983]). Furthermore, leave to amend should bedenied when the proposed amendment is patently lacking in merit (Board of Mgrs. ofAlexandria Condominium v Broadway/72nd Assoc., 285 AD2d 422, 423 [2001]). Thedefense of patent invalidity was premised on the assertion that the agreement was actually apatent license. This position is frivolous. The claim was made for the first time nine years afterthe execution of the agreement, more than four years after the filing of the complaint in thisaction, and more than five years after the patent alleged to be a part of the agreement wasdeclared invalid. The agreement contains no indicia whatsoever that it was intended to be apatent license. The word "patent" appears nowhere in the agreement, and, in fact, the disputedpatent was not issued until two years after the agreement was executed. Indeed, Refco admittedthat it only learned of the "580 Patent" in 2010. Again, this was nine years after the originalagreement was executed.
We have considered defendant's remaining arguments and find them unavailing.Concur—Mazzarelli, J.P., Saxe, Catterson, Acosta and Román, JJ.