McLearn v. Cowen & Co., 60 N.Y.2d 686 (1983)
A motion to dismiss based on res judicata that is found to be without merit cannot be used as a basis for the court to consider dismissal for failure to state a cause of action, as this deprives the plaintiff of the opportunity to seek leave to replead.
Summary
This case addresses the procedural issue of raising a failure to state a cause of action defense. The Court of Appeals held that where a motion to dismiss is expressly based on res judicata and that motion is denied, the appellate division cannot then dismiss the case based on failure to state a cause of action. The Court reasoned that the plaintiff was prejudiced because they were not afforded an opportunity to replead, as required by CPLR 3211(e). However, the court clarified that the defense of failure to state a cause of action is not waived and can be raised in a different manner, outside of a CPLR 3211 motion.
Facts
The plaintiff, McLearn, initially filed a lawsuit in federal court including both federal and state law claims. The federal court dismissed the state law claim. Subsequently, McLearn pursued the state law claim in state court. The defendant, Cowen & Co. (later Merrill Lynch), moved to dismiss the state court action based on res judicata, arguing the federal court dismissal precluded the state claim.
Procedural History
The Supreme Court denied the defendant’s motion to dismiss. The Appellate Division reversed and granted the motion to dismiss, not only on res judicata grounds but also, sua sponte, on the ground that the complaint failed to state a cause of action. The Court of Appeals initially heard the case and then, after clarification from the federal court regarding its dismissal order, reheard the case. The Court of Appeals reversed the Appellate Division’s order, reinstating the Supreme Court’s denial of the motion to dismiss.
Issue(s)
- Whether the Appellate Division erred in granting a motion to dismiss based on failure to state a cause of action when the original motion was based solely on res judicata.
Holding
- Yes, because the plaintiff was not afforded the opportunity to seek leave to replead as prescribed by CPLR 3211(e), resulting in substantial prejudice.
Court’s Reasoning
The Court of Appeals reasoned that the defendant’s motion was explicitly based on res judicata. Because the motion was not predicated on a failure to state a cause of action, the plaintiff was never given the chance to seek leave to replead, a right afforded under CPLR 3211(e). This denial of opportunity constituted substantial prejudice to the plaintiff. The court emphasized that the defense of failure to state a cause of action is not waived and can be raised later in another form, outside of a CPLR 3211 motion, citing Rich v Lefkovits, 56 NY2d 276, 281-282.
The Court stated, “Inasmuch as the motion to dismiss was not predicated on a claimed failure to state a cause of action plaintiff was never afforded an opportunity to seek leave to replead within the prescriptions of CPLR 3211 (subd [e]). Deprivation of that opportunity worked substantial prejudice to her. It was, therefore, error on the part of the Appellate Division to have granted the motion on the alternative ground.”