Plaintiff Northeast Capital & Advisory, Inc. ("Northeast") moves for an order: (a) granting summary judgment on its first cause of action for declaratory judgment and dismissing the second counterclaim of defendant Delaware Bancshares, Inc. ("Delaware") seeking a contrary declaration; (b) granting partial summary judgment as to liability on its second cause of action for breach of contract; and (c) dismissing Delaware's first counterclaim for breach of contract. Delaware opposes the motion and cross-moves for summary judgment on its counterclaims and for the dismissal of plaintiff's complaint. Northeast opposes Delaware's cross motion and cross-moves to amend the caption and complaint nunc pro tunc to substitute "Norwood Financial Corp., successor by merger to Delaware," as the defendant in this action. Delaware opposes [*2]Northeast's cross motion.

Northeast is a registered broker dealer that provides investment banking services to community and regional banks across the Northeast and mid-Atlantic regions of the United States. Prior to 2016, Delaware was a community bank that operated branches in Delaware County, New York.

The parties' business relationship began in or about 2006, when Northeast was engaged to provide investment banking services to Delaware in connection with the acquisition of Stamford Bank Corp. (see Loomis Aff., Exs. 2 & 3). Northeast continued to render financial advisory services to Delaware pursuant to various engagements through at least 2014 (see id., Exs. 4-7).

On March 10, 2016, Norwood Financial Corp. ("Norwood") agreed to acquire Delaware in a stock and cash transaction. Effective July 31, 2016, Delaware was acquired by, and merged into, Norwood (see Fenlon Aff., Ex. L). As the surviving corporation, Norwood is "responsible and liable for all of the liabilities and obligations of [Delaware]" (id.).

On or about October 14, 2013, Northeast, Delaware and Delaware's wholly-owed subsidiary, The National Bank of Delaware County ("NBDC"), entered into a letter agreement whereby Northeast was retained as Delaware's exclusive agent in connection with a proposed private placement of approximately $12 million in capital securities ("Securities") (Loomis Aff., Ex. 8 ["Letter Agreement"]). The parties expressly contemplated that net proceeds from the placement of Securities would be "downstreamed as equity to NBDC, the purpose of which will allow [Delaware] to acquire the Sullivan County branches and related deposits of Bank of America" (id., ¶ 2).

As Delaware's exclusive placement agent, Northeast was obliged "to assist [Delaware] and its counsel in drafting the Offering Material . . . and act as [Delaware's] exclusive agent in connection with the proposed placement . . . of the Securities . . ." (id., ¶ 1).^[FN1] In consideration for Northeast's investment banking services, Delaware agreed to pay a cash success-fee at the closing of the successful capital-raising transaction (see id., ¶ 3). Delaware also agreed to accord Northeast a five-year right of first refusal as a further form of incentive compensation:

In addition, in the event of a successful capital-raising transaction or firm commitment by investors to purchase the Securities on a stand by or other pending basis acceptable to [Delaware] and the relevant regulatory agencies, Northeast . . . will also receive the right of first refusal for any investment banking services required by [Delaware], including the placement of any securities whether private or public, merger and acquisition services, valuations or other advisory services for a period of five years from the closing date, provided that such assignment is within Northeast['s] . . . expertise and ability and that the fee charged for such investment banking services is comparable to the rates proposed to [Delaware] for such services by other registered broker dealers (id.).

Delaware had the right to terminate the Letter Agreement without cause (see id., ¶ 7). Any such termination

shall be without liability or continuing obligations on the part of [Delaware] except that (i) the continuing obligation set forth in item 2 hereof; (ii) any compensation or reimbursement of expenses to be paid to Northeast . . . pursuant to item 3 hereof; (iii) the indemnity and expense reimbursement provisions contained in item 6 hereof; and (iv) the confidentiality requirements of item 5 hereof, shall remain operative and in full force and effect (id.).

Finally, the Letter Agreement requires Delaware to indemnify and hold harmless Northeast from any and all losses, claims, damages or expenses arising out of the engagement, and it exonerates Northeast from any liability to Delaware, except to the extent that such liability resulted from Northeast's bad faith, gross negligence, reckless misconduct or willful misconduct (see id., ¶ 6).

Northeast submits proof that it assisted Delaware and its counsel in preparing the Offering Materials and in soliciting potential investors for the $12 million capital raise (see Loomis Aff., ¶¶ 43-69 and referenced exhibits). On March 27, 2014, Community Bank, N.A. ("Community Bank") committed to issue a loan to Delaware in the principal sum of $12 million, of which at least $10 million was to be contributed to NBDC as equity to support the acquisition of six Bank of America ("BOA") branches in Sullivan County (see Fenlon Aff., Ex. C). Northeast provided analytical and consulting services to Delaware in connection with the proposal, and Delaware approved the transaction on March 31, 2014 (see id., Ex. D).

The Community Bank loan closed on April 30, 2014. Northeast invoiced Delaware in September 2014 for the cash success-fee due pursuant to paragraph 3 of the Letter Agreement, which was promptly paid in full (see Loomis Aff., ¶¶ 73-74; Ex. 17).

In December 2014, Delaware retained Wallenhorst Associates, Ltd. ("Wallenhorst") to provide strategic planning services (see Fenlon Aff., Exs. F & G). Northeast claims that the services provided by Wallenhorst "are investment banking services that Northeast regularly provides" (MOL, p. 6; cf. Loomis Aff., ¶ 77 ["The strategic planning services provided by Wallenhorst to Delaware are services that Northeast regularly provides."]).

Northeast's principal, Arthur Loomis, and Delaware's chief executive, James Stracuzzi, continued to engage in email correspondence regarding certain business matters following the retention of Wallenhorst. In an April 16, 2015 email, Loomis offered to have a Northeast employee call upon Delaware to follow-up on a cost-accounting project, and Stracuzzi replied as follows: "I cannot have [your employee] come here [as] the board was very upset with the last two bills and has instructed me not to do business with your firm going forward" (Loomis Aff., Ex. 19).

On October 14, 2015, Delaware engaged Sandler O'Neill & Partners, L.P. ("Sandler O'Neill") to act as an independent financial advisor to Delaware's board of directors in connection with the company's "ongoing strategic planning and the Board's consideration of alternative strategies to continue to enhance long-term shareholder value, including . . . consideration of a possible Business Combination" or other "strategic alternative" involving [*3]Delaware and a third-party (Fenlon Aff., Ex. J).^[FN2] Sandler O'Neill rendered services to Delaware from October 2015 through March 2016, for which it was paid about $325,000 (see id., Ex. K). Delaware did not notify Northeast of its intention to retain Sandler O'Neill or provide Northeast with an opportunity to exercise the alleged right of first refusal (see Loomis Aff., ¶¶ 106-107).

Northeast commenced this action on June 13, 2016 through the filing of a complaint ("Complaint") that alleges two causes of action founded upon the Letter Agreement. First, Northeast seeks a judgment declaring that it is entitled to a right of first refusal for Delaware's investment banking services through April 2019, five years from the closing of the Community Bank transaction. The second cause of action, alleging breach of contract, seeks to recover damages for Delaware's alleged breaches of the right of first refusal.

In an answer dated July 27, 2016 ("Answer"), Delaware admits entering into the Letter Agreement, but denies that Northeast has a right of first refusal, citing, among other things, the alleged termination of the agreement (see Fenlon Aff., Ex. B, ¶¶ 6, 19). Following a series of boilerplate affirmative defenses, Delaware alleges in detail two combined counterclaims/ affirmative defenses.

Delaware's first counterclaim (and eleventh affirmative defense) alleges that Northeast breached its obligations under the Letter Agreement by: (1) failing to adequately evaluate and advise Delaware with respect to the bank branches purchased with the proceeds of the capital raise (see id., ¶¶ 50-58); and (2) overcharging Delaware for its services (see id., ¶¶ 53, 59). The second counterclaim (and twelfth affirmative defense) seeks a declaration that Delaware is not subject to the alleged right of first refusal based on Northeast's failure to properly perform under the Letter Agreement, the parties' deteriorating business relationship and Delaware's decision to terminate the Letter Agreement (see id., ¶¶ 63-65).

At a preliminary conference held on September 20, 2016, the parties stipulated to a scheduling order calling for the completion of paper discovery by February 15, 2017 and the completion of all depositions by April 12, 2017. Those deadlines were extended several times, and the current scheduling order, which was entered on September 13, 2017, set deadlines of October 31, 2017 for the completion of all paper discovery and December 29, 2017 for the completion of all depositions. However, on December 22, 2017, just one week prior to the close of all fact discovery, Northeast commenced the instant motion practice. Oral argument was held on March 23, 2018, and this Decision & Order follows.

"To prevail on a motion for summary judgment, the moving party must establish prima facie entitlement to judgment as a matter of law by adducing sufficient competent evidence to show that there are no issues of material fact" (Staunton v Brooks, 129 AD3d 1371, 1372 [3d Dept 2015] [citations omitted]; see Alvarez v Prospect Hosp., 68 NY2d 320, 324 [1986]). If the movant fails to satisfy this initial burden, the motion must be denied, "regardless of the sufficiency of the opposing papers" (Alvarez, 68 NY2d at 324). But if the movant satisfies the initial burden, the burden shifts to the nonmoving party to demonstrate the existence of disputed material facts or a legal defense to the claim (see id.).

In interpreting the Letter Agreement, the Court is "guided by basic principles of contract interpretation which instruct that a contract should be construed to give effect to the parties' intent as gleaned from the four corners of the document itself, provided that its terms are clear and unambiguous" (Elmira Teachers' Assn. v Elmira City School Dist., 53 AD3d 757, 759 [3d Dept 2008], lvs denied 11 NY3d 709 [2008]). Contract language must be construed in accordance with the plain and ordinary meaning of the words used (see South Rd. Assocs., LLC v International Bus. Machs. Corp., 4 NY3d 272, 277 [2005]; Elmira Teachers' Assn., 53 AD3d at 759). Further, the Court should refrain from placing undue emphasis upon any particular word or phrase, or reading the contract in a manner that renders any portion thereof meaningless (see Beal Sav. Bank v Sommer, 8 NY3d 318, 324-325 [2007]; South Rd. Assocs., 4 NY3d at 277; Stevens & Thompson Paper Co., Inc. v Niagara Mohawk Power Corp., 49 AD3d 1011, 1013 [3d Dept 2008]).

Whether an agreement is ambiguous is a question of law for the Court (see Consedine v Portville Cent. School Dist., 12 NY3d 286, 293 [2009]; South Rd. Assocs., 4 NY3d at 278; Mary Imogene Bassett Hosp. v Cannon Design, Inc., 127 AD3d 1377, 1379 [3d Dept 2015]). "An agreement is unambiguous if the language it uses has a definite and precise meaning, unattended by danger of misconception in the purport of the [agreement] itself, and concerning which there is no reasonable basis for a difference of opinion" (Ellington v EMI Music, Inc., 24 NY3d 239, 244 [2014] [internal quotation marks and citations omitted]).

Under the Letter Agreement, Northeast's right of first refusal is triggered "in the event of a successful capital-raising transaction" (Loomis Aff., Ex. 8, ¶ 3). The proof adduced by Northeast demonstrates, prima facie, that the $12 million loan from Community Bank, of which at least $10 million was to be contributed to NBDC as equity to support the acquisition of six BOA branches (see Fenlon Aff., Ex. C), constitutes a successful capital-raising transaction within the meaning of the Letter Agreement. Northeast also has submitted proof establishing, prima facie, its own performance under the Letter Agreement, including the work undertaken as Delaware's exclusive placement agent (see Loomis Aff., ¶¶ 43-69).

Northeast has further established, prima facie, that the right of first refusal survives Delaware's purported termination of the Letter Agreement. Delaware expressly agreed that its compensation obligations under paragraph 3 "shall remain operative and in full force and effect" following termination of the Letter Agreement (Loomis Aff., Ex. 8, ¶ 7), and Northeast's compensation under paragraph 3 included the right of first refusal (see id., ¶ 3).^[FN3]

Finally, Northeast has met its initial burden of demonstrating Delaware's breach of the right of first refusal. Specifically, Northeast's proof demonstrates that Delaware engaged Sandler O'Neill to act as its independent financial advisor in connection with investment banking matters (see Fenlon Aff., Ex. J), and it paid the firm about $325,000 for services rendered from October 2015 through March 2016 (see id., Ex. K). Northeast also submits proof demonstrating that [*4]Delaware did not give notice to Northeast of its intention to retain Sandler O'Neill or provide Northeast with the option to exercise its right of first refusal.^[FN4]

Based on the foregoing, the Court concludes that Northeast has met its initial burden of demonstrating a right of first refusal for Delaware's investment banking services through April 2019 and a breach of that obligation by Delaware with respect to its retention of Sandler O'Neill.

Accordingly, the burden shifts to Delaware to establish, by admissible proof, the existence of triable issues of fact or a legal defense to Northeast's claims. Delaware offers nine principal arguments in opposition to this branch of Northeast's motion.

Delaware first contends that the right of first refusal did not vest because the Community Bank transaction was not a "capital-raising transaction." In this connection, Delaware's comptroller, Amanda Hall, avers that "[t]he purpose of the loan from Community Bank was to pay for the purchase of the [BOA] branches," whereas the "capital raise referred to in the [Letter Agreement] was contemplated to be conducted after the closing of the [BOA] transaction" (Hall Aff., ¶ 28). "In other words, . . . the Community Bank loan was not a capital raise. The capital raise was needed to pay back the Community Bank loan" (id., ¶ 29). Hall also submits proof showing that Delaware committed to a future increase of common equity in connection with the acquisition of the BOA branches (see id., ¶ 30; Ex. D).

Delaware's contention that the Community Bank loan was not a "capital-raising transaction" is belied by the clear and unambiguous terms of the Letter Agreement. Northeast was retained to assist Delaware in raising $12 million in capital to be "downstreamed as equity to NBDC, the purpose of which will allow [Delaware] to acquire the Sullivan County branches and related deposits of [BOA]" (Loomis Aff., Ex. 8, ¶ 2 [emphasis added]). The record conclusively demonstrates that Delaware did, in fact, raise $12 million in capital from the Community Bank loan and used this capital to acquire the BOA branches — precisely as contemplated in the Letter Agreement. In contrast, the post-acquisition capital raise to which Hall refers contemplated the issuance of only $3 million in additional common stock in order to reduce "the overall debt-to-equity leverage of [NBDC]" (Hall Aff., Ex. D), which had risen as a result of the Community Bank debt financing. Thus, Delaware's claim that the right of first refusal was conditioned upon a capital-raising transaction conducted following the acquisition of the BOA branches is conclusively defeated by the plain language of the Letter Agreement.

Delaware further maintains that the Letter Agreement defined a capital-raising transaction as a commitment by investors to purchase "Securities," which are defined as "capital securities, including any Tier 1 or Tier 2 qualifying capital" (Loomis Aff., Ex. 8). In this connection, Hall avers that the Community Bank loan did not involve the sale of capital securities and, therefore, was not a capital-raising transaction so as to trigger the right of first refusal (see Hall Aff., ¶¶ 38-42).

Delaware is correct that the Letter Agreement "contemplated that the structure of the [*5]proposed financing transaction will entail the placement [of about] $12 million in securities" (Loomis Aff., Ex. 8, ¶ 2). Nonetheless, the parties specifically contemplated that Northeast may propose, and Delaware may accept, "an alternate form of capital-raising transaction," in which case Delaware "agree[d] nonetheless to compensate Northeast . . . in accordance with [paragraph 3] of [the Letter] Agreement" (id.). Relatedly, the compensation provisions of paragraph 3 expressly recognize that the "capital-raising transaction" may involve the issuance of "debt (secured or unsecured)" (id., ¶ 3).

Based on the foregoing, Delaware has failed to raise a triable issue of fact or legal defense to support its contention that the Community Bank loan was not a capital-raising transaction within the meaning of the Letter Agreement.

Delaware next contends that Northeast's right of first refusal did not vest because the BOA transaction was not "successful." Northeast cites, among other things, its difficulty in carrying out the onerous covenants and repayment obligations associated with the Community Bank loan, which is said to have contributed to Delaware's need to explore a sale or merger (see Hall Aff., ¶¶ 31, 34). Delaware asserts that if Northeast had raised capital in the form of stock, it might have had some "breathing room" (id., ¶¶ 62-63).

In making this argument, Delaware conflates two separate and distinct issues: (1) the successful consummation of the capital-raising transaction that is the subject of the Letter Agreement; and (2) the success of the underlying transaction for which the capital was raised. Even assuming that the acquisition of the BOA branches was not a "successful" business transaction, Delaware did succeed, with the assistance of Northeast, in successfully raising the $12 million in capital needed to go forward with the acquisition transaction.

Delaware next argues that, even if the Community Bank transaction was a successful capital-raising transaction, the right of first refusal did not survive its termination of the Letter Agreement. In this regard, Delaware emphasizes the provisions of paragraph 7, which allow it to terminate the Letter Agreement "without liability or continuing obligations" (Loomis Aff., Ex. 8, ¶ 7 [ii]). Delaware further argues that the exception in paragraph 7 (ii) for "compensation . . . to be paid to Northeast . . . pursuant to [paragraph] 3" is limited to any outstanding obligations for the payment of money and does not apply to non-monetary forms of compensation.

Even assuming that Delaware could terminate the Letter Agreement under paragraph 7 without cause at a time when Northeast had performed its contractual obligations but Delaware's performance remained executory, the Court concludes that the right of first refusal survived the termination. It is evident from the text of paragraph 3 that the parties intended the right of first refusal to represent an additional form of incentive compensation to be received by Northeast upon the completion of a successful capital-raising transaction, and paragraph 7 clearly expresses the parties' intention that Delaware's compensation obligations "shall remain operative and in full force and effect," notwithstanding any termination (id., ¶ 7).

Further, while Delaware correctly observes that paragraph 7 (ii) refers to the compensation "to be paid" to Northeast, the Court rejects Delaware's cramped construction of the term that would limit its post-termination compensation obligations to the payment of money only. The term "payment" is sufficiently broad to encompass the provision of non-monetary [*6]consideration (Black's Law Dictionary [10th ed 2014], payment), particularly when read in light of paragraph 7 (ii), which, by its express terms, broadly applies to "any compensation" (Loomis Aff., Ex. 8, ¶ 7 [ii] [emphasis added]; see South Rd. Assoc., 4 NY3d at 277; Atwater & Co. v Panama R.R. Co., 246 NY 519, 524 [1927] ["Particular words should be considered, not as if isolated from the context, but in the light of the obligation as a whole and the intention of the parties as manifested thereby"]). Relatedly, Delaware's reading of the termination provision would render illusory Northeast's bargained-for right of first refusal.

Thus, when the Letter Agreement is read as a whole and due regard is given to the text, structure and purpose of the entire agreement, the circumstances of the contracting parties and their reasonable expectations, it is apparent that the Letter Agreement is susceptible to only one reasonable construction: "any compensation" obligation of Delaware, including the right of first refusal, "shall remain operative and in full force and effect" following termination of the Letter Agreement (Loomis Aff., Ex. 8, ¶ 7; cf. Sands Bros. & Co. v. Hyseq, Inc., 1997 US Dist LEXIS 15564, *12 [SDNY 1997] [text of agreement did not manifest parties' intention to have right of first refusal survive termination of aborted private placement]).

Delaware further argues that it should not be obliged to perform under the right of first refusal because it lost trust and confidence in Northeast. In particular, Delaware asserts that, following "the failed [BOA] transaction, there is no way that Northeast could have performed the function of trusted investment banker or financial advisor for Delaware" (Hall Aff., ¶¶ 73-76). In this connection, Delaware relies upon the language of paragraph 3 of the Letter Agreement that limits Northeast's right of first refusal to "investment banking services" that are "within Northeast['s] . . . expertise and ability" (Loomis Aff., Ex. 8, ¶ 3).

The Court concludes that Delaware's subjective dissatisfaction with Northeast's advisory services was a risk inherent in its decision to grant a long-term right of first refusal and does not provide a basis for avoiding performance thereunder. Paragraph 3 of the Letter Agreement conditions the right of first refusal upon a purely objective consideration: whether a "successful capital-raising transaction" has been consummated (id.). Likewise, the proviso that any future investment banking matter must be "within Northeast['s] . . . expertise and ability" (id.) calls for objective consideration of the capacity of Northeast to render the investment banking services required by Delaware. Notably, Delaware has not submitted any proof establishing that Northeast lacked sufficient expertise or ability to undertake the investment banking work for which Sandler O'Neill was engaged.

Delaware similarly contends that it should not be obliged to perform under the right of first refusal because the fees charged by Northeast for investment banking services are not comparable to the fees charged by others. In particular, Delaware argues that Sandler O'Neill, "the best national investment banking firm," charged a fee of only $325,000 for the Norwood transaction, whereas Northeast charged $746,091.51 for the much-smaller BOA transaction (Hall Aff., ¶¶ 77-78).

As Delaware observes, the right of first refusal includes the proviso that the fee charged by Northeast must be comparable to the rates charged by other registered broker dealers (see Loomis Aff., Ex. 8, ¶ 3). As such, the proviso requires consideration of the rates that Northeast [*7]proposes to charge for a particular engagement that is subject to the right of first refusal. Having failed to notify Northeast of the engagement for which Sandler O'Neill was retained, there is no basis to conclude that the fees charged by Northeast would not have been comparable. Accordingly, this argument is rejected.

Delaware additionally argues that the right of first refusal fails for lack of consideration. This Court disagrees. The compensation provisions of the Letter Agreement, including the right of first refusal, are supported by Northeast's agreement to serve as Delaware's placement agent and perform the other duties prescribed in the agreement. Further, "the adequacy of consideration is not a proper subject for judicial scrutiny" absent fraud or unconscionability (Apfel v Prudential-Bache Sec., 81 NY2d 470, 476 [1993]),^[FN5] and the Court sees no substantive unconscionability in an agreement whereby a sophisticated commercial bank agreed to accord an investment banker a right-of-first-refusal on future work for a defined period in exchange for bringing about a successful $12 million capital raise (see King v Fox, 7 NY3d 181, 191 [2006]; Matter of Conifer Realty LLC [Envirotech Servs., Inc.], 106 AD3d 1251, 1254 [3d Dept 2013]; see also Emigrant Mtge. Co., Inc. v Fitzpatrick, 95 AD3d 1169, 1170 [2d Dept 2012]).

Relatedly, Delaware asserts that the right of first refusal fails for lack of definiteness because the Letter Agreement does not define the measure of damages that it would be exposed to upon breach. This argument lacks merit. While parties to a contract generally are free to agree in advance on a measure of damages for a breach, their failure to do so does not render a contract indefinite. Rather, Northeast may pursue all common-law measures of damages available in an action for breach of contract.^[FN6] Further, Delaware has failed to come forward with proof affirmatively demonstrating that Northeast did not sustain any damages proximately caused by denial of the right of first refusal as to the Sandler O'Neill engagement.

Delaware next complains that the terms of the right of first refusal are unfair and unreasonable under the "high standards of commercial honor" required under Financial Industry Regulatory Authority ("FINRA") rules (Opp. Mem., p. 18). In particular, Delaware cites rules that, in the context of a public offering, prohibit a right of first refusal with a term of more than three years. Delaware also cites the implied duty of good faith and fair dealing, as well as Real Property Law § 422-d.

The Court rejects all of these contentions. As Delaware concedes, the cited FINRA rules apply only to public offerings of securities (see FINRA Rule 5110 [f] [2]). Further, the covenant of good faith and fair dealing cannot be used to "imply obligations inconsistent with other [express] terms of the contractual relationship" (511 W. 232nd Owners Corp. v Jennifer Realty Co., 98 NY2d 144, 153 [2002] [internal quotation marks and citation omitted]). Finally, the fact [*8]that the proceeds of the investment banking transaction ultimately were used to acquire the six BOA branches, including real estate, does not bring the Letter Agreement within Real Property Law § 422 (see Panarello v Segalla, 6 AD3d 515, 516 [2d Dept 2004]), a statute that governs claims for compensation by real-estate brokers.

For its eleventh affirmative defense (and first counterclaim), Delaware alleges that Northeast breached its contractual obligations under the Letter Agreement by: (1) failing to adequately evaluate and advise Delaware with respect to purchase of the six BOA branches that were financed with the proceeds of the $12 million capital raise (see Answer, ¶¶ 50-58); and (2) overcharging Delaware for its services (see id., ¶¶ 53, 59).

In particular, Delaware alleges that it was induced to purchase the six BOA branches and enter into the Community Bank loan "based on misrepresentations from [Northeast] and optimistic pro forma statements prepared by [Northeast] that were not warranted by the facts" (id., ¶ 55). "By the time the [transaction] closed the branches that were acquired had lost 40% of their deposits" (id., ¶ 56). "Therefore," Delaware continues, Northeast

breached the Letter Agreement, acted in bad faith, and breached its covenant of good faith and fair dealing in providing Delaware with baseless optimistic pro formas . . . and in failing to consider and/or willfully failing to advise Delaware that other banks that have bought [BOA] branches in recent years ended up with fewer deposits than expected (id., ¶ 57).^[FN7]

Northeast responds that the acquisition of the BOA branches falls outside the scope of the Letter Agreement. According to Northeast, there is nothing in the Letter Agreement that obliged Northeast to evaluate and/or provide financial advice on potential branch acquisitions, and, in fact, the stated purpose of the Letter Agreement was to raise the new capital needed to "allow [Delaware] to acquire the Sullivan County branches and related deposits of [BOA]" (Loomis Aff., Ex. 8, ¶ 2; see also id. ¶ 10 [merger clause]).^[FN8] Northeast further argues that the conclusory assertions of breach made by Delaware are not entitled to the presumption of truth.

The Court concludes that the present record fails to eliminate all material issues of fact as to whether Northeast performed its own obligations under the Letter Agreement. To recover on its contractual claim, Northeast bears the ultimate burden of demonstrating its own performance (see Clearmont Prop., LLC v Eisner, 58 AD3d 1052, 1055 [3d Dept 2009]), and the Hall affidavit suffices to raise a triable issue of fact as to whether Northeast provided overly optimistic projections regarding the financial viability of the purchase transaction and prepared pro forma statements that failed to give adequate consideration to the post-acquisition experiences of other purchasers of BOA branches (see Hall Aff., ¶¶ 7-18). Further, Northeast's own proof calls into question its contention that Northeast's financial projections and pro forma statements were not within the scope of the Letter Agreement (see e.g. Loomis Aff., ¶¶ 58, 64-65; Exs. 13 & 15).

Given the existence of a factual dispute as to Northeast's own performance under the Letter Agreement,^[FN9] the branches of its motion seeking summary judgment on its first cause of action, partial summary judgment on its second cause of action and dismissal of Delaware's second counterclaim must be denied.

Northeast moves for the dismissal of Delaware's first counterclaim, alleging breach of the Letter Agreement (see supra), contending that Delaware has not alleged the "bad faith, gross negligence or willful or reckless misconduct" required to overcome the exculpatory clause (Loomis Aff., Ex. 8, ¶ 6).^[FN10] The Court agrees.

Apart from conclusory and unsupported allegations of intentional or quasi-intentional misconduct, which the Court need not and will not accept as true (see SNS Bank v Citibank, 7 AD3d 352, 355 [2d Dept 2004]), the breaches of contract alleged by Delaware do not "smack[] of intentional wrongdoing . . . [or] betoken[] a reckless indifference to the rights of others" (Kalisch-Jarcho, Inc. v City of New York, 58 NY2d 377, 385 [1983]). "'Gross negligence' differs in kind, not only degree, from claims of ordinary negligence" (Lubell v Samson Moving & Stor., 307 AD2d 215, 216 [1st Dept 2003], quoting Colnaghi U.S.A. v Jewelers Protection Services, 81 NY2d 821, 823-824 [1993]). Where, as here, "[Delaware's] allegations [of overly optimistic projections and failing to consider the experience of other purchasers of BOA branches] amount, at most, to ordinary [breaches of contract], they do not meet the foregoing standard, and [Northeast] is entitled to summary judgment" (Lubell, 307 AD2d at 217).

In its moving papers, Northeast argues that the right of first refusal encompasses any investment banking services required by Norwood, as Delaware's successor-by-merger. In this connection, Northeast cites provisions of New York and Pennsylvania law providing that the surviving entity of a merger becomes responsible for liabilities and obligations of the merged entity (see Business Corporation Law § 906 [b] [3]; 15 Pa Stat Ann § 336 [a] [4]). Northeast also cites the plan of merger, which provides that Norwood shall be "responsible and liable for all the liabilities and obligations of [Delaware]" (Fenlon Aff., Ex. L, § 1.2).

In its opposition and cross motion, Delaware argues that the issue of whether Norwood is obliged to retain Northeast for investment banking services under the right of first refusal is not properly before the Court. According to Delaware, the Complaint does not seek a declaration regarding the effect of the right of first refusal upon Norwood and, in any event, the Court is without jurisdiction to determine the rights of Norwood, a non-party to this action.

In response, Northeast cross-moves pursuant to CPLR 1018 for an order amending the caption and Complaint nunc pro tunc to substitute Norwood, as successor by merger to Delaware, as the defendant in this action. In support of its motion, Northeast cites the acquisition [*9]and merger of Delaware, which became effective on July 31, 2016, about 45 days after the commencement of this action. Delaware opposes the motion on various grounds.

"Upon any transfer of interest, the action may be continued by or against the original parties unless the court directs the person to whom the interest is transferred to be substituted or joined in the action" (CPLR 1018). Thus, under the quoted statute, it is permissible for Northeast to maintain this action against Delaware, notwithstanding its merger into Norwood (see Platt Corp. v Platt, 21 AD2d 116, 120-121 [1st Dept 1964], affd 15 NY2d 705 [1965]). Alternatively, it is proper for Northeast or any other party to the case to move under CPLR 1018 to substitute Norwood, as the successor-by-merger to Delaware, as defendant (see id. at 121).

However, as Delaware correctly observes, the effect of the proposed substitution goes beyond reflecting the merger transaction or even assuring that Norwood will be liable for damages sustained as a result of Delaware's breach of the Letter Agreement. In its current form, the Complaint is limited to requesting a declaration that Delaware is obliged to extend a right of first refusal to Northeast. The proposed amended complaint, however, would recast the substantive allegations of the Complaint to seek a declaration that Norwood is subject to the right of first refusal with respect to any investment banking services that it may require in its own right (see Fenlon Aff., dated February 1, 2018, Ex. F, p. 1).

The Court finds that the cross motion should be denied for several independent reasons. First, a motion under CPLR 1018 is not a proper vehicle for effecting substantive amendments to a pleading, and Northeast did not move to amend its pleading pursuant to CPLR 3025 (b).

Second, there are no factual allegations in the proposed amended complaint supporting the conclusion that the right of first refusal was intended to oblige Norwood, a non-party to the Letter Agreement, to retain Northeast for investment banking services. In fact, neither the Complaint nor Northeast's moving papers for summary judgment address the critical language of the Letter Agreement (see Loomis Aff., Ex. 8, ¶ 3 ["right of first refusal for any investment banking services required by (Delaware and NBDC)"]; see also id., ¶ 9) or the legal issues inherent in the transfer of what effectively is a requirements contract (see Homestake Min. Co. v Washington Pub. Power Supply Sys., 476 F Supp 1162, 1165 [ND Cal 1979], affd 652 F2d 28 [9th Cir 1981]).

Finally, Delaware and Norwood would be substantially prejudiced by the proposed substitution (cf. Mortgage Elec. Registration Sys., Inc. v Holmes, 131 AD3d 680, 681-682 [2d Dept 2015]). The merger of Delaware and Norwood occurred only weeks after the June 2016 commencement of this action, but Northeast waited until February 1, 2018 to file its motion. Even then, the application was made in the form of a cross motion in response to Delaware's cross motion made in response to Northeast's motion for summary judgment. In the Court's view, fundamental fairness would require giving Norwood a chance to respond to any properly amended complaint seeking to hold it liable in its own right under the right of first refusal. Indeed, it was Northeast that charted a course to summary judgment in an effort to facilitate an expeditious and cost-efficient resolution of this action, but the requested amendment would essentially bring the case back to its initiatory stages.

Under the circumstances and in the exercise of discretion, Northeast's cross motion for an order pursuant to CPLR 1018 amending the caption and Complaint nunc pro tunc to substitute Norwood as the defendant in this action is denied.

Accordingly,^[FN11] it is

ORDERED that the branches of Northeast's motion seeking summary judgment on its first cause of action, partial summary judgment on its second cause of action and dismissal of Delaware's second counterclaim are denied, in accordance with the foregoing; and it is further

ORDERED that the branch of Northeast's motion seeking dismissal of Delaware's first counterclaim is granted, and the first counterclaim is dismissed; and it is further

ORDERED that Delaware's cross motion for summary judgment is denied; and it is further

ORDERED that Northeast's cross motion to amend is denied; and it is further

ORDERED that the parties shall have an additional ninety (90) days in which to complete expert disclosure in accordance with the rules of the Commercial Division, and Northeast is directed to file its note of issue by July 6, 2018; and it is further

ORDERED that, prior to the filing of the note of issue, the parties may engage in such additional fact discovery as they may agree; and finally it is

ORDERED that the parties shall appear for a compliance conference on July 9, 2018 at 9:30 a.m. to, among other things, discuss settlement of the case and, if needed, select a day certain for trial.

This constitutes the Decision & Order of the Court. The original Decision & Order is being transmitted to the Albany County Clerk for electronic filing and entry. Upon such entry, Northeast's counsel shall promptly serve notice of entry on all other parties to this action (Uniform Rules for the New York State Trial Courts [22 NYCRR] § 202.5-b [h] [1], [2]).