Liberal Amendment and Defamation by Implication in Professional Transitions: Commentary on Armbruster Capital Management, Inc. v. Barrett

I. Introduction

The Fourth Department’s decision in Armbruster Capital Management, Inc. v. Barrett, 2025 NY Slip Op 06493 (4th Dept Nov. 21, 2025), addresses a recurring problem in modern commercial litigation: how far a firm may go in explaining a professional’s departure to clients without crossing into actionable defamation, and how generously courts should allow amendment of defamation pleadings at an early stage.

The case arises out of an asset purchase and employment relationship between two investment advisers:

Plaintiff: Armbruster Capital Management, Inc., a registered investment adviser.
Defendant Apex: Apex Wealth Advisers, LLC (formerly Apex Advisers, LLC), also a registered investment adviser.
Defendant Barrett: Elizabeth Barrett, a financial advisor and owner of Apex.

Under an asset purchase agreement (APA), Barrett sold Apex’s client list to Armbruster for installment payments and agreed to work part-time for Armbruster to help retain those clients. Less than a year later, Barrett resigned.

Armbruster sued to enforce a restrictive covenant in the APA. The defendants counterclaimed for defamation based on emails Armbruster’s chief executive officer and president sent to clients—clients who had formerly been with Apex—communicating that Barrett had left, describing the industry as “highly regulated,” referencing compliance policies meant to protect clients against conflicts of interest, and explaining that Barrett found those policies “overly burdensome.”

The key issues presented to the Appellate Division were:

Whether the defendants should have been granted leave to amend their defamation counterclaim (CPLR 3025) to plead more detail and to add as defendants the individuals who authored the allegedly defamatory emails.
Whether the proposed amended counterclaim satisfied the particularity requirement for defamation (CPLR 3016(a)).
Whether the communications could, as a matter of law, constitute:
- defamation per se of a professional, and/or
- defamation by implication, even if the core factual statements were substantially true.

The opinion does not revolutionize New York defamation law, but it meaningfully clarifies several points: the liberal standard for granting leave to amend in defamation cases, the sufficiency of attaching the actual communications to meet CPLR 3016(a), the scope of “defamation per se” in a regulated professional context, and the stringent—but survivable—standard for defamation by implication where the statements are arguably substantially true.

II. Summary of the Opinion

The Supreme Court, Monroe County, had:

Granted Armbruster’s motion to dismiss the original defamation counterclaim; and
Denied defendants’ cross-motion for leave to:
- amend the defamation counterclaim, and
- add Armbruster’s chief executive officer and president as individual counterclaim defendants.

On appeal, the defendants limited their challenge to denial of their cross-motion to amend and to add parties.

The Fourth Department unanimously:

Reversed the order “insofar as appealed from” (the denial of the cross-motion),
Held that Supreme Court had abused its discretion,
Granted leave to amend the defamation counterclaim and to add the individual authors of the emails as defendants,
Conditioned that relief on service of the amended answer within 30 days of entry of the appellate order.

In doing so, the Court held, in substance, that:

The proposed amendment complied with CPLR 3016(a) because the emails containing the allegedly defamatory language were submitted in support of the cross-motion.
The amended defamation counterclaim was not “patently lacking in merit” under the liberal standard for leave to amend.
The emails were reasonably susceptible of a defamatory meaning, especially when read in context, because they could imply that Barrett failed to adhere to ethical and legal standards in a highly regulated industry.
The statements rose to the level of defamation per se because they imputed professional incompetence or lack of integrity in Barrett’s investment advisory work.
Even assuming the factual statements were “substantially true,” the pleadings adequately alleged defamation by implication, satisfying the heightened standard articulated in Armstrong, Bisimwa, and Partridge.
Given that the amendment as to the corporation was allowed, it was also an abuse of discretion to deny leave to add the individual email authors as defendants, particularly where plaintiff did not argue that such claims were time-barred.

III. Analysis of the Court’s Reasoning

A. The Standard for Leave to Amend and “Patent Lack of Merit”

The Court grounded its amendment analysis in longstanding New York authority:

Holst v Liberatore, 105 AD3d 1374 (4th Dept 2013)
Caputo v Tubiolo, 236 AD3d 1426 (4th Dept 2025), lv denied 44 NY3d 905 (2025)
LHR, Inc. v T-Mobile USA, Inc., 88 AD3d 1301 (4th Dept 2011)
Edenwald Contr. Co. v City of New York, 60 NY2d 957 (1983)
Fusco v Hansen, 228 AD3d 1279 (4th Dept 2024)

Collectively, these cases stand for the proposition that:

Leave to amend a pleading should be freely granted in the absence of prejudice to the nonmoving party where the amendment is not patently lacking in merit, and the decision to allow or disallow amendment is committed to the court’s discretion.

The phrase “patently lacking in merit” is key. It does not require the proponent to prove the claim is likely to prevail; instead, the court asks whether, assuming the pleaded facts are true and drawing reasonable inferences in the pleader’s favor, the claim is plainly unsustainable as a matter of law.

Here, the Fourth Department held that the lower court abused its discretion because:

The defendants’ proposed amended defamation counterclaim alleged all core elements of defamation (falsity, publication, fault, and per se harm) and presented a facially viable theory of defamation by implication.
Armbruster’s attempt to defeat the amendment on a “substantial truth” defense did not establish, as a matter of law, that the claim was doomed.

Thus, Armbruster reinforces that, particularly at the amendment stage, courts should not resolve contested factual defenses (such as truth) or draw inferences against the pleader; the question is only whether the proposed pleading clears a modest plausibility threshold.

B. Pleading Particularity Under CPLR 3016(a)

CPLR 3016(a) imposes a heightened pleading requirement in defamation actions: the complaint (or counterclaim) must “set forth the particular words complained of” and state “the time, place and manner” of the publication and to whom it was made.

Plaintiff argued—on appeal as an alternative basis for affirmance under Parochial Bus Sys. v Board of Educ. of City of N.Y., 60 NY2d 539 (1983)—that the proposed amended counterclaim failed this heightened standard. The Fourth Department rejected that assertion, noting:

The defendants had submitted the actual emails containing the alleged defamatory statements in support of the cross-motion.
Attaching such documents to the motion and incorporating their contents satisfied CPLR 3016(a), consistent with:
- Accadia Site Contr., Inc. v Skurka, 129 AD3d 1453, 1454 (4th Dept 2015)
- McRedmond v Sutton Place Rest. & Bar, Inc., 48 AD3d 258, 259 (1st Dept 2008)
- Polish Am. Immigration Relief Comm. v Relax, 172 AD2d 374 (1st Dept 1991)

The Court observed that Supreme Court had implicitly agreed that the 3016(a) requirements were met. The appellate panel made that conclusion explicit: the particular words, their timing, and their recipients were all discernible from the attached emails.

This aspect of Armbruster is practically important. It confirms that:

A pleading supplemented with the actual offending communications—emails, letters, social media posts—will generally satisfy CPLR 3016(a), even if the text of the complaint itself does not quote every word in full.
A plaintiff (or counterclaimant) can meet the particularity requirement by incorporation by reference and annexation, avoiding hyper-technical dismissals in email-based defamation cases.

C. Defamation Elements and Defamation Per Se in a Professional Context

The Court recited the familiar elements of defamation, drawing from:

Fika Midwifery PLLC v Independent Health Assn., Inc., 208 AD3d 1052 (4th Dept 2022)
Miserendino v Cai, 218 AD3d 1261 (4th Dept 2023)
Accadia Site Contr., Inc. v Skurka, 129 AD3d 1453 (4th Dept 2015)

The elements are:

A false statement of fact
Published to a third party without privilege or authorization
With at least negligence as to its falsity
Causing special harm or constituting defamation per se.

The Court then focused on the category of defamation per se:

Statements “that tend to injure another in his or her trade, business or profession” constitute defamation per se.

And, quoting Miserendino (in turn drawing on Golub v Enquirer/Star Group, 89 NY2d 1074 (1997)):

“A statement imputing incompetence or dishonesty to the [party] is defamatory per se if there is some reference, direct or indirect, in the words or in the circumstances attending to their utterance, which connects the charge of incompetence or dishonesty to the particular profession or trade engaged in by [the party]. The statement must be more than a general reflection upon [the party’s] character or qualities; it must reflect on [the party’s] performance or be incompatible with the proper conduct of [their] business.”

Applied to the facts:

The emails were sent to clients about the departure of their investment adviser.
The senders emphasized that:
- The investment trading industry is “highly regulated,”
- Armbruster had “compliance policies” to protect clients against “conflicts of interest,” and
- Barrett found those policies “overly burdensome” and decided to leave.

The Court held that, for an “ordinary reader” (see James v Gannett Co., 40 NY2d 415 (1976)), this language could reasonably be understood to suggest that Barrett:

was unwilling or unable to adhere to core regulatory and ethical standards governing investment advisers, and
thus lacked the professional competence or integrity necessary to protect client interests.

The Court invoked:

Davis v Boeheim, 24 NY3d 262 (2014): courts must consider whether statements are “reasonably susceptible of a defamatory connotation.”
Armstrong v Simon & Schuster, 85 NY2d 373 (1995): the disputed language must be given a “fair reading in the context of the publication as a whole.”
James v Gannett Co., 40 NY2d 415 (1976): actionable defamation where an “ordinary reader could draw an inference” of defamatory meaning.

Taken together, the decision reaffirms that:

Communications about a professional’s departure, especially in a highly regulated field, can easily cross over into defamation per se when they imply that the professional rejected or violated compliance standards designed to protect clients.
It is not necessary for the email to say “she is dishonest” or “she is incompetent” expressly; it is sufficient that, in context, it suggests she would not play by the rules meant to protect investors.

D. Substantial Truth and Defamation by Implication

Armbruster argued that the emails were substantially true, and thus non-actionable. It submitted:

Barrett’s own email to the CEO complaining that the firm’s personal trading pre-approval and reporting requirements were “burdensome and time consuming,” and
Portions of Barrett’s deposition, in which she confirmed that characterization.

But Barrett also testified that the assertion in the client emails—that “the only way to avoid the rule was to resign”—was untrue. She maintained that she did not leave solely because of those policies and that other factors (including the CEO’s conduct) were central.

The Court concluded that:

Barrett’s admissions established only that she found the policies burdensome and time-consuming, not that she resigned because of them.
At the amendment stage, the substantial truth defense did not defeat the proposed counterclaim as a matter of law.

The Court then confronted a more nuanced issue: defamation by implication based on otherwise truthful statements. It relied on:

Armstrong v Simon & Schuster, 85 NY2d 373, 380–81 (1995)
Bisimwa v St. John Fisher Coll., 194 AD3d 1467, 1472 (4th Dept 2021)
Partridge v State of New York, 173 AD3d 86 (3d Dept 2019)

Key principles:

Defamation by implication is “premised not on direct statements but on false suggestions, impressions and implications arising from otherwise truthful statements.” (Armstrong)
There is a heightened pleading standard where the factual statements are substantially true:
1. The communication as a whole must be reasonably read to impart a defamatory inference; and
2. The “plain language of the communication itself” must affirmatively suggest that the author intended or endorsed that inference. (Partridge)

Applying that test, the Court held that defendants met the heightened standard:

According to Barrett, the emails “did not tell the whole story” of her departure.
As alleged in the answer, the CEO:
- blamed Barrett for the departure of a large client,
- said he did not trust her and believed she would “steal” all the firm’s clients, and
- threatened legal action, after which she resigned.
The client emails, by contrast, suggested that the relationship ended because Barrett found compliance rules too burdensome and chose to leave rather than follow policies protecting clients from conflicts of interest.

Thus, the Court found that:

Even if the statements were substantially true, the communications conveyed the false suggestion and impression that the only reason Barrett left was that she did not want to comply with policies in place to protect clients, and the “plain language” of the statements suggested that the authors intended that inference, in order to retain clients.

This is doctrinally significant. It underscores that:

“Substantial truth” does not insulate a speaker from liability if the omissions and framing of the communication create a misleading and defamatory impression.
Courts will scrutinize not only the literal words, but also the selective narrative offered to third parties, especially where that narrative shifts blame or suggests unethical motives.

E. Claim Against the Individual Authors and Addition of Parties

Once the Court concluded that the defamation counterclaim against Armbruster (as a corporate entity) should be allowed to proceed in amended form, it turned to the request to add the CEO and president—the authors of the emails—as additional defendants.

Having held that it was an abuse of discretion to deny amendment of the defamation claim, the Court reasoned that it was likewise an abuse to deny leave to add the individuals who actually published the statements. Critically, the Court noted:

In opposition to the cross-motion, Armbruster did not argue that the claims against the individuals were time-barred.
The opinion cites CPLR 203(f) and Buran v Coupal, 87 NY2d 173 (1995), which govern “relation back” of claims against new parties—but pointedly notes that the time-bar issue was not raised.

The implicit message is twofold:

The individual authors of allegedly defamatory communications are proper direct defendants, and plaintiffs cannot avoid that simply by suing (or being sued as) a corporate shell.
Where there is no demonstrated prejudice or statute of limitations problem, courts should lean toward allowing the addition of such individuals, particularly when the underlying claim itself is being revived by amendment.

IV. Simplifying the Key Legal Concepts

A. “Leave to Amend” and “Patently Lacking in Merit”

Leave to amend (CPLR 3025): A party can ask the court for permission to change or supplement its pleading (complaint, answer, counterclaim). The general rule in New York is that such leave “shall be freely given” unless:
- The other side would be unfairly prejudiced (e.g., surprised so late that they cannot fairly respond), or
- The proposed new claim is “patently lacking in merit”—meaning clearly unsustainable even if all facts alleged are true.
Abuse of discretion: Appellate courts defer to trial courts on procedural rulings, but will reverse if the lower court’s decision is outside the range of permissible decisions under governing law. Here, the Fourth Department found the trial court’s denial of leave to be such an abuse.

B. Defamation, Defamation Per Se, and “Ordinary Reader”

Defamation is a false factual statement about a person, published to someone else without privilege, that harms the person’s reputation.
Defamation per se refers to categories of statements so inherently damaging that the law presumes harm; one such category is statements that tend to injure the person in their trade, business, or profession—especially accusations of dishonesty or incompetence in that specific line of work.
The test is from the perspective of an ordinary reader, not a lawyer parsing words. If an average recipient could reasonably understand the statement to mean something defamatory, it may be actionable.

C. CPLR 3016(a): Particularity in Pleading Defamation

Defamation claims must be pleaded with extra detail:
- The exact words used (“particular words”),
- The time and place of publication, and
- The manner and to whom they were communicated.
This requirement is often satisfied by:
- Quoting the statements in the pleading and/or
- Attaching the actual emails, letters, or posts and incorporating them by reference, as in Armbruster.

D. “Substantial Truth” vs. “Defamation by Implication”

Substantial truth: A defense to defamation. A statement need not be 100% accurate; it is protected if it is “substantially true,” such that the “gist” or “sting” of the statement is accurate.
Defamation by implication:
- Even where each separate statement is true, the arrangement of facts and omissions can create a false and defamatory impression.
- Example (analogous to Armbruster): Telling clients only that “She left because she found our rules too burdensome,” while omitting that the employer had threatened her and expressed distrust, may falsely suggest that she left solely to avoid rules meant to protect clients.
- To plead this, a plaintiff must show both that:
  1. The overall communication can reasonably be read to convey a defamatory implication, and
  2. The text itself suggests the speaker meant to convey that implication.

E. “Reasonably Susceptible of a Defamatory Connotation”

Courts do not ask whether the speaker intended to defame, but whether the language, in context, could reasonably be understood as defamatory by an ordinary person.
If the statement can reasonably be read in both a defamatory and non-defamatory way, the court generally allows the case to go forward and leaves it to the jury to decide how it was understood.

F. Abuse of Discretion in Denying Amendment

The Fourth Department’s finding of abuse of discretion signals that:
- Denying leave to amend a facially viable defamation counterclaim—where the proponent promptly seeks to cure pleading defects and the non-movant shows no real prejudice—will often be reversible error.
- Trial courts should be particularly cautious about cutting off defamation claims at the amendment stage when the communications are concrete (emails, letters) and the defamatory meaning is plausible.

V. Doctrinal and Practical Impact

A. For Litigators in Defamation and Business Disputes

Use of Documents to Satisfy Particularity Armbruster endorses attaching the allegedly defamatory emails or letters to the pleading or to a motion to amend to meet CPLR 3016(a). Defamation claimants should:
- Annex the complete communications; and
- Explicitly incorporate key passages into the pleading.
Early Strategic Use of Cross-Motions to Amend Defendants facing motions to dismiss counterclaims should:
- Promptly cross-move for leave to amend with a fully drafted amended pleading;
- Attach all relevant communications; and
- Frame the amendment under the “freely given” standard, emphasizing that the claim is not “patently lacking in merit.”
The appellate decision underscores that such motions should ordinarily be granted.
Pleading Defamation Per Se in Professional Relationships Where a professional’s departure is at issue (financial advisors, lawyers, doctors, accountants, etc.), communications suggesting:
- Unwillingness to abide by compliance/ethical rules,
- Conflicts of interest, or
- Deficient integrity in handling client affairs
can be framed as defamation per se, avoiding the need to plead detailed special damages.
Defamation by Implication as a Parallel Theory Armbruster makes clear that defamation by implication is not a last-ditch theory but a robust one where:
- Statements are literally accurate but incomplete; and
- The narrative framed for third parties casts the subject in an unfairly negative and misleading light.
Practitioners should plead direct falsity and implication theories in the alternative where appropriate.
Adding Individual Authors as Defendants Where defamatory communications are authored by identifiable individuals (officers, employees), counsel should:
- Consider adding them as direct defendants, as Armbruster approves doing by amendment; and
- Analyze potential relation-back under CPLR 203(f) and Buran if limitations issues arise.

B. For Firms and Professionals in Regulated Industries

For investment advisers, broker-dealers, financial planners, and other regulated professionals, Armbruster carries clear operational lessons:

Departure Communications are Legally Sensitive Client-facing communications explaining why an advisor or partner left are not “safe” simply because they are framed in compliance language. Statements that:
- contrast the firm’s commitment to regulation and client protection with the departed professional’s “discomfort” with those safeguards, or
- frame the departure as driven by the professional’s aversion to rules designed to prevent conflicts of interest,
are fertile ground for defamation claims.
Truth Plus Omission Can Still Be Actionable Even where some facts are accurate (e.g., the professional complained about burdensome procedures), selective emphasis and omission of other critical facts (e.g., management’s distrust and threats) can generate a defamatory implication that the person is unethical or noncompliant.
Involving Legal/Compliance in Drafting Statements Firms should:
- Routinely route proposed departure communications through legal and compliance review;
- Ensure that explanations are:
  - factually accurate,
  - non-pejorative, and
  - do not over-attribute the cause of the departure to client-protection policies.
Consider Neutral or Minimal Explanations A neutral explanation (e.g., mutual agreement to part ways, pursuit of other opportunities, or no detailed explanation) may be safer than suggesting a professional left to avoid compliance obligations, unless that is indisputably true and fairly contextualized.

C. For Trial Courts

For the trial bench, Armbruster signals a few cautionary points:

Do Not Over-Resolve Merits at Amendment Stage In defamation cases, substantial truth, privilege, and opinion-versus-fact are often fact-intensive. Where a proposed amendment presents a colorable claim, denying leave on the theory that a defense will ultimately prevail risks reversal as an abuse of discretion.
Apply the Heightened “Implication” Standard Carefully The duty under Armstrong, Bisimwa, and Partridge is to assess whether the communication itself could reasonably be read both to convey a defamatory inference and to suggest the author intended that inference. Armbruster shows that this test can be met where the text and context aim to reassure clients by casting the departing professional in an unfavorable and arguably misleading light.

VI. Conclusion

Armbruster Capital Management, Inc. v. Barrett is a significant, though evolutionary, decision in New York defamation practice. It reinforces several core principles:

Liberal amendment: Leave to amend defamation claims should be freely granted where the pleading is not patently meritless and there is no real prejudice.
Pleading with documents: Attaching the allegedly defamatory emails or letters satisfies CPLR 3016(a)’s particularity requirement.
Professional defamation per se: Communications to clients that portray a professional as unwilling to comply with regulatory and ethical safeguards can constitute defamation per se, eliminating the need to plead special damages.
Defamation by implication persists despite “substantial truth”: Even largely accurate statements may be actionable where they are presented in a way that falsely suggests a blameworthy reason for a professional’s departure and where the communication itself signals that this implication was intended.
Individual liability: The individual authors of allegedly defamatory client communications may properly be added as defendants when a defamation claim is amended.

In the broader legal landscape, the case underscores the courts’ willingness to scrutinize how businesses explain professional departures in client communications, especially within highly regulated industries. It cautions firms to avoid weaponizing compliance rhetoric as a reputational tool and affirms litigants’ ability to pursue defamation claims that rest not only on what was said, but also on what was selectively left unsaid.

Liberal Amendment and Defamation by Implication in Professional Transitions: Commentary on Armbruster Capital Mgt., Inc. v. Barrett