EMPOSIMATO v. CIFC ACQUISITION CORP.

Full title: PAUL EMPOSIMATO, JR. and BRIAN NIXON, Plaintiffs, v. CIFC ACQUISITION…

Court: Supreme Court of the State of New York, New York County

Date published: Mar 7, 2011

2011 N.Y. Slip Op. 50343 (N.Y. Sup. Ct. 2011)

Opinion

601728/2008.

Decided March 7, 2011.

Epstein Becker Green, P.C. New York, New York (Robert D. Goldstein, Diana Costantino Gomprecht), For Plaintiffs and Third-Party Defendant.

Stroock Stroock Lavan LLP New York, New York, (Bruce H. Schneider, David A. Sifre), For Defendants and Third-Party Plaintiff.

BERNARD J. FRIED, J.

In this action alleging breach of a stock purchase agreement, defendants and third-party plaintiff move, pursuant to CPLR 3212, for summary judgment: (1) dismissing the complaint in the main action; and (2) granting partial summary judgment in favor of defendant/third-party plaintiff CIFC Acquisition Corp. (CIFC) as to liability on its combined counterclaim and third-party claim, which also alleges breach of the stock purchase agreement. Plaintiffs and third-party defendant Concordia International Forwarding Corp. (Concordia) cross-move, pursuant to CPLR 3212, for summary judgment dismissing CIFC's counterclaim/third-party claim in its entirety, or, alternatively, dismissing so much of that claim as seeks expectancy damages.

Plaintiffs Paul Emposimato, Jr. and Brian Nixon own all the shares of stock of Concordia, a company which provides international freight forwarding services. In August 2007, plaintiffs began negotiations with defendant Jefferies Capital Partners IV, L.P. (JCP), a private equity investment firm, concerning a possible sale of plaintiffs' Concordia stock to JCP. Plaintiffs, Concordia and an individual who had been acting in conjunction with JCP executed a letter of intent, on August 23, 2007 (the Letter of Intent), which contemplated that Concordia would be acquired by a newly-formed company, and that equity financing for the acquisition would be provided by an affiliate of JCP.

JCP formed CIFC — which is wholly owned by a company that is wholly owned, in turn, by JCP and its affiliates ( see Def. Mem. of Law, at 2 n 1) — to serve as the entity which would acquire plaintiffs' Concordia stock. Plaintiffs, Concordia and CIFC entered into a securities purchase agreement, dated as of January 18, 2008 (the SPA), which provided that, subject to the terms and conditions thereof, plaintiffs would sell their Concordia stock, and the stock of certain entities that were defined in the SPA as being affiliated with Concordia, to CIFC.

The SPA contemplated that the stock sale would be consummated after a sequence of steps in which: (1) plaintiffs and Concordia would deliver to CIFC certain documents that were referred to in the SPA, but not yet created at the time when the SPA was executed, namely, (a) an "Annex A," which itemized the shares of stock that would be sold pursuant to the SPA (the Stock), and (b) various schedules (all, collectively, the Schedules; each, individually, a Schedule), each of which was named in accordance with the section of the SPA that identified the Schedule and described its contents; (2) CIFC would perform an initial phase of due diligence, referred to as "Pre-Acknowledgment Diligence," which included the review of certain documents, information and materials relating to Concordia's business operations; (3) subject to the occurrence or satisfaction of certain conditions — including (a) CIFC's satisfaction with the disclosure set forth in Annex A and the Schedules, and with the results of the Pre-Acknowledgment Diligence, and (b) the availability of financing to complete the acquisition that was satisfactory to defendants — CIFC would deliver a so-called "Acknowledgment" to plaintiffs, which included a certification that CIFC had completed the Pre-Acknowledgment Diligence to its satisfaction, an equity commitment letter from JCP evidencing the availability of the equity component of the financing for the Stock acquisition, and executed loan documentation evidencing the availability of the debt component of the financing for the Stock acquisition; and (4) within seven days after CIFC delivered the Acknowledgment to plaintiffs, and subject to plaintiffs' satisfaction with the Acknowledgment, defendants would conduct and complete a second phase of due diligence, referred to as "Sensitive Diligence," which included visits to certain of Concordia's, and its affiliated entities', facilities, and telephone interviews of certain of Concordia's, and its affiliated entities', customers and vendors.

The SPA provided, inter alia, that:

The Buyer acknowledges that the Sellers may be unable to deliver, at or prior to the execution of [the SPA], to the Buyer Annex A and all Schedules referenced in [the SPA]. The Sellers agree that they will deliver to the Buyer Annex A and such delayed [S]chedules promptly after the execution of [the SPA] and in any event prior to the delivery by Buyer of the Acknowledgment. The Sellers acknowledge and agree that the Buyer's obligation to deliver the Acknowledgment and proceed with the transactions contemplated by [the SPA] will be subject . . . to the Buyer's satisfaction, in its sole discretion, with the disclosure set forth in Annex A and such delayed [S]chedules. (SPA § 5.1 [e] [underlining in original].)

From the date of [the SPA] until the Closing Date . . ., all parties hereto agree to act in good faith and use reasonable efforts to obtain the satisfaction of the conditions specified in [the SPA] and to take all such other actions reasonably necessary or advisable to consummate the transactions contemplated hereby. Sellers shall use their best efforts to deliver the Schedules to Buyer by no later than February 28, 2008. ( Id., § 5.5.)

[The SPA] may be terminated prior to the Closing . . . by either the Sellers or the Buyer, in the event that the Sensitive Diligence has not been completed by the later of April 30, 2008 or thirty (30) days after receipt by the Buyer of the final version, in reasonable and customary form, of all schedules (collectively, the "Schedules") referenced in this Agreement . . ., unless the failure to consummate the Sensitive Diligence . . . is attributable to a failure on the part of the party seeking to terminate [the SPA] to perform any obligation required to be performed by such party or its Affiliates at or prior to the Closing. ( Id., § 8.1 [e].)

The complaint alleges that: between February 18, 2008 and April 14, 2008, plaintiffs provided to defendants "all Schedules as defined in" SPA § 8.1 (e); and, "on or before April 14, 2008," plaintiffs "furnished defendants with the final version of all such Schedules, in reasonable and customary form" (Complaint, ¶ 13).

Plaintiffs sent a letter to JCP (the Termination Notice) on June 6, 2008¹ which stated:

1 The Termination Notice is dated June 3, 2008, but plaintiffs concede that it was mistakenly dated, and should have been dated June 6, 2008 ( see Nixon Affid., ¶ 56)

Buyer has breached the SPA by, among other things, demanding that information, charts and documents neither contemplated by, nor integral to, the SPA be prepared and incorporated into schedules to the SPA, in order, apparently, to delay the termination date of the SPA and thereby provide additional time for the Buyer to attempt to obtain the necessary financing. In view of Buyer's multiple breaches of the SPA, the Sellers have ceased to have any obligations thereunder since the time of the initial material breach.

In the event a court of competent jurisdiction determines that the Buyer has not breached the SPA, this letter shall be deemed to be notice of termination of the SPA, pursuant to Section 8.1 [(e)² ] of the SPA as the "Sensitive . . . Diligence" was not completed by May 30, 2008, more than thirty days following Buyer's receipt of the final version of the schedules in reasonable and customary form.

2 The letter referred, here, to section 8.1 (d) of the SPA, but was clearly intended to invoke the ground for termination set forth in SPA § 8.1 (e).

(Schneider Affirm., Ex. P.)

The complaint asserts two causes of action which seek, respectively: (1) a judgment declaring that plaintiffs properly exercised their right to terminate the SPA under SPA § 8.1 (e), and that the Termination Notice effectively terminated the SPA; and (2) damages for defendants' alleged breach of the covenant of good faith and fair dealing that was implied in the SPA by (a) "demanding that plaintiffs provide Schedules that were neither reasonable nor customary within the meaning of the SPA," (b) "repeatedly insisting that, as a condition to providing the Acknowledgment, plaintiffs furnish information that [was] not required by the SPA," and (c) "failing to provide plaintiffs with the Acknowledgment . . . and . . . to complete the Sensitive Diligence" (Complaint, ¶ 24).

In defendants' answer, CIFC asserts a combined counterclaim against plaintiffs and third-party cause of action against Concordia, for breach of contract, which alleges that plaintiffs and Concordia breached the SPA, by failing or refusing to provide CIFC with the information and materials that it required in order to be able to deliver the Acknowledgment and to complete the Sensitive Diligence, and by purporting to terminate and repudiate the SPA in a manner that was not in accordance with its terms.

Defendants' and Third-Party Plaintiff's Motion

Defendants' and third-party plaintiff's motion is granted, but only in part, to the extent that a judgment will be issued herewith in defendants' favor, on the complaint's first cause of action, declaring that plaintiffs' purported termination of the SPA was not authorized under SPA § 8.1 (e).

As previously set forth, SPA § 8.1 (e) authorized termination of the SPA "in the event that the Sensitive Diligence ha[d] not been completed by . . . thirty (30) days after receipt by the Buyer of the final version, in reasonable and customary form, of all [S]chedules." Thus, plaintiffs' purported termination of the SPA by means of the Termination Notice, on June 6, 2008, could only have been authorized under section 8.1 (e) if, by 30 days prior to that date — i.e., by May 7, 2008 — plaintiffs had furnished CIFC with final versions, in reasonable and customary form, of all of the Schedules.

Plaintiffs assert that the Termination Notice was authorized under SPA § 8.1 (e) because they had delivered versions of the Schedules to defendants, on April 11 and 14, 2008 (all of the foregoing, collectively, the April 14 Schedules), which were final versions, in reasonable and customary form, of all of the Schedules ( see Nixon Affid., ¶ 24 and Exs. 48-50; Complaint, ¶ 13). However, the April 14 Schedules were not final versions of all of the Schedules, as evidenced by, inter alia, the contents of an e-mail which was transmitted with many of those Schedules, and the contents of the versions of Schedules 1.3 (e), 1.3 (n) and 3.20 which were included among those Schedules.

Plaintiffs' and Concordia's corporate counsel, Epstein Becker Green, P.C. (EBG), transmitted many of the April 14 Schedules to defendants' counsel, Stroock Stroock Lavan LLP (SSL), under cover of an e-mail which stated, "please find attached for your review a revised copy of the . . . Schedules to the [SPA]. Please note that we are distributing the attached document to you and to Concordia concurrently. Accordingly, the . . . Schedules remain subject to further review and comment by Concordia" (Schneider Affirm., Ex. G, at C008862). The foregoing disclaimer indicated that Concordia had not approved of, or agreed to be bound by, the contents of the versions of the Schedules that were transmitted to SSL with the e-mail, and impliedly reserved a right to revise those Schedules after Concordia had had an opportunity to review and comment upon them.³

3 EBG's reservation of a right to revise the Schedules after Concordia had reviewed them cannot be deemed a mere formality. Nixon states in his affidavit that, because the Schedules "defined the scope of the representations and warranties [Emposimato] and I would be making [in the SPA] about Concordia's business operations and finances," and "we could be liable to [defendants] for breach of warranty if the Schedules were in any way inaccurate, [Emposimato] and I had to be completely comfortable with the Schedules before we would allow ourselves to be bound by them" (Nixon Affid., ¶ 17).

CIFC was contractually obligated to deliver the Acknowledgment to plaintiffs before it could conduct the Sensitive Diligence, and CIFC's obligation to deliver the Acknowledgment was subject to, inter alia, its satisfaction with the disclosure set forth in the Schedules ( see SPA §§ 5.1 [b], [c], [e]). However, insofar as the disclaimer indicated that the versions of the Schedules which were sent under cover of the e-mail had not been agreed to by Concordia, and were subject to further revision, those versions of the Schedules would not have afforded a basis upon which CIFC could reasonably have determined whether it was satisfied with the disclosure set forth therein. Plaintiffs may not reasonably maintain that versions of the Schedules which were sent to defendants with a statement indicating that they were not binding upon Concordia were, nevertheless, binding upon CIFC, to the extent that they were sufficient to trigger commencement of the 30-day period within which CIFC, in order to avoid termination of the SPA pursuant to section 8.1 (e) thereof, was required to complete Sensitive Diligence.

Schedule 1.3 (e), as provided in SPA § 1.3 (e), was to set forth "[b]y way of illustration only, an example of the calculation of Closing Working Capital in a hypothetical scenario," and "also . . . the actual line items to be reflected and utilized in such calculation."⁴ The version of Schedule 1.3 (e) that was included among the April 14 Schedules was not final, because it contained the qualifying statement: "Schedule to be updated once the scope and approach to Working Capital Calculation has been agreed to with PWC," i.e., CIFC's accountants (Schneider Affirm., Ex. G, at C008867).

4 Although SPA § 1.3 (e) actually refers to an "Exhibit 1.3 (e)" rather than a Schedule 1.3 (e), that appears to have been merely a typographical error. EBG evidently treated the document as a Schedule rather than an Exhibit, and the affidavit of plaintiffs' expert refers to the document as a Schedule ( see Schneider Affirm., Ex. G, at C008867; Douglass Affid., ¶ 14).

The SPA expressly provided that Schedules could be updated by means of "supplement[s]" (SPA § 5.1 [f]), and the fact that a Schedule might be updated after plaintiffs had delivered it to CIFC would presumably not be sufficient, alone, to render that Schedule non-final as of the time when it was originally delivered to CIFC. However, the above-quoted qualification evidenced that the version of Schedule 1.3 (e) on which it was written was not final, because it indicated: that "the scope and approach to Working Capital Calculation" which would actually be used at the closing had not yet been agreed upon; and, thus, that that version of Schedule 1.3 (e) could not set forth "an example of the calculation of Closing Working Capital" and "the actual line items to be reflected and utilized in such calculation."⁵

5 The words "hypothetical scenario" in SPA § 1.3 (e) were presumably intended to signify that Schedule 1.3 (e) could employ hypothetical numbers in its calculation of Closing Working Capital, rather than that the Schedule would be sufficient if it merely set forth some hypothetical means of calculating the Closing Working Capital which did not necessarily bear any relation to the "scope and approach to Working Capital Calculation" that would actually be used at the closing. That conclusion is warranted by the requirement, also contained in SPA § 1.3 (e), that Schedule 1.3 (e) set forth "the actual line items to be reflected and utilized in such calculation."

Schedule 1.3 (n), as provided in SPA § 1.3 (n), was to set forth a "list[]" of "foreign exchange contracts . . . entered into for the purpose of hedging receivables and the contra accounts between [Concordia] and any non-U.S. Affiliated Entity," and the then-current amounts of the liabilities and/or obligations owed under those contracts. The version of Schedule 1.3 (n) that was included with the April 14 Schedules was not final because: (1) it did not list any specific contracts but purported to be, instead, only a summary of certain contracts, the "total due" under which amounted to more than $6,000,000; (2) it contained a statement that "[t]he foreign exchange forward purchase contracts to hedge the foreign receivables are acquired daily at the exchange rate then in effect for the varying maturities required and, together with contracts acquired on other days may number [in the hundreds] at any one date. NEED TO DISCUSS"; and (3) EBG delivered a set of comments to SSL, at or around the time when the April 14 Schedules were delivered, which included the statement "Schedule 1.3 (n) — Foreign exchange contracts — too fluid and changeable to be listed" (Schneider Affirm., Ex. G, at C008869 [emphasis in original]; Ex. H, at C008850).

Andrew Douglass — a corporate attorney with experience in the area of mergers and acquisitions who has submitted an affidavit as an expert on plaintiffs' behalf — opines in his affidavit that it was immaterial that the version of Schedule 1.3 (n) that was included with the April 14 Schedules contained a summary of foreign exchange contracts rather than a list of the specific contracts involved because: there were no agreements to identify in Schedule 1.3 (n), inasmuch as the relevant transactions were of a type that "are generally treated as over-the-counter transactions and . . . are rarely governed by master agreements"; "in light of the ongoing, fluid nature of forward purchases of foreign currency, . . . a requirement [that Schedule 1.3 (n) had to set forth every forward purchase] would have required plaintiffs to identify . . . every one of the hundreds of forward purchases that take place every year among [Concordia's and its affiliates'] 15 foreign offices"; and the foreign exchange contracts were entered into solely to eliminate the risk of currency fluctuations, and had no effect upon Concordia's finances, or upon the calculation of Concordia's "Indebtedness," which would affect calculation of the "Closing Purchase Price" (Douglass Affid., ¶¶ 16-17). Douglass asserts that, "[g]iven the nature of foreign currency forward purchases, the number of transactions involved, the absence of any written contracts, and the lack of materiality of the aggregate amount of such transactions to the financial condition of Concordia, there [was] no legitimate basis to require Schedule 1.3 (n) to list the hundreds of purchases in effect as of any given day and time" ( id., ¶ 16). However, none of the foregoing considerations excused plaintiffs from their contractual obligation, under SPA § 1.3 (n), to deliver a Schedule 1.3 (n) which was, in form, a list of any contracts that plaintiffs wished to be included on that Schedule rather than a mere summary of any such contracts. The words " NEED TO DISCUSS," which were included on the version of Schedule 1.3 (n) that was among the April 14 Schedules, evidenced EBG's awareness that that version of the Schedule was not sufficient in and of itself — i.e., without discussion or something else beyond its contents — to satisfy plaintiffs' obligation to deliver the Schedule that was required by SPA § 1.3 (n).

SPA § 3.20 provided that Schedule 3.20 was to set forth a list of the insurance policies under which Concordia and its affiliated entities were insured, and that Concordia would furnish to CIFC "complete copies of the insurance policies listed on Schedule 3.20 as part of Schedule 3.20" (underlining in original]). However, plaintiffs had not provided complete copies of all of the relevant insurance policies to CIFC by April 14, 2008. In response to one of defendants' interrogatories, which asked plaintiffs to identify the final versions of all of the Schedules that plaintiffs had furnished to defendants on or before April 14, 2008, plaintiffs answered that they "refer[red] defendants to [inter alia] the documents Bates Numbered . . . CIFC-0029037 — CIFC-0029093, CIFC[-]0029100 — CIFC-0029112 . . . [and] CIFC-0046004 — CIFC[-]0046009 . . . " (Schneider Affirm., Ex. E, Resp. to Interrog. No. 5). Yet those documents, which are copies of insurance policies presumably comprising part of Schedule 3.20, were apparently not provided by EBG to SSL until between May 20 and 29, 2008 ( see id., Ex. Q, at CIFC-0046003 — CIFC-0046609; Ex. R, at CIFC-0029036 — CIFC-0029093; Ex. S, at CIFC-0029099 — CIFC-0029112; Ex. U, Items 14, 15). Thus, plaintiffs themselves evidently acknowledge that parts of what they claim to have been the final version of Schedule 3.20 had not been provided to defendants with the April 14 Schedules.⁶

6 See also Schneider Affirm., Ex. I, at C-003610 (setting forth SSL's request to EBG, on April 22, 2008, for copies of certain insurance policies, and that certain insurance policies which were not included on Schedule 3.20 be added thereto); Ex. K, at C-004198 (indicating that, as of May 14, 2008, copies of certain insurance policies had still not been provided to CIFC).

Even assuming, merely arguendo, that the contents of the covering e-mail and of certain of the April 14 Schedules did not sufficiently indicate that the April 14 Schedules were not "final version[s]" of the Schedules, for purposes of SPA § 8.1 (e), the April 14 Schedules could not be deemed final, for such purposes, because: in the context of the parties' course of dealing, plaintiffs would have been required to give CIFC adequate, contemporaneous notice that they intended the April 14 Schedules to be final versions, if plaintiffs intended that CIFC treat them as such; and plaintiffs have failed to establish that they provided CIFC with such notice.

The course of dealing between the parties, from February 18 through June 4, 2008, was one in which the parties were continually discussing revisions in, and plaintiffs repeatedly provided CIFC with revised versions of, the Schedules. Nixon states in his affidavit that he "was responsible for negotiating" the Schedules that plaintiffs delivered to defendants, and that: "[b]etween February 18 and May 25, 2008, EBG and [he] sent no less than five . . . sets of proposed Schedules to [SSL]"; "[i]n response to each set of draft Schedules, SSL sent a Project Forward Diligence Related Open Items/Issues List' ('Open Issues List') seeking extensive changes to the Schedules"; "[i]n turn, [EBG and he] responded to each Open Issues List with narrative responses and revised Schedules"; and, although "[t]hese extensive back and forth negotiations went on for months, . . . [the parties] never agreed on the contents of the Schedules" (Nixon Affid., ¶¶ 22-23).

Within that context — and particularly after May 25, 2008, by which time CIFC had received two sets of Schedules subsequent to the April 14 Schedules — there would have been no basis upon which CIFC should reasonably have been expected to understand that the April 14 Schedules were final versions of the Schedules for purposes of SPA § 8.1 (e). The word "final" is ordinarily used to signify that something is the last in place, order or time. Thus, the April 14 Schedules would not have been "final version[s]" of all of the Schedules after May 25, 2008, according to the plain meaning of those words, because the April 14 Schedules were not then the last-in-time versions of all of the Schedules.

Plaintiffs have not established that the April 14 Schedules were distinguishable, in any manner or respect which would have indicated that they were final, from the sets of Schedules that plaintiffs delivered to CIFC before and after the April 14 Schedules. Thus, if plaintiffs had wished to deem or declare the April 14 Schedules to be final versions of the Schedules for purposes of SPA § 8.1 (e), notwithstanding the circumstance that certain of them were ostensibly not final, plaintiffs would have been required to give CIFC adequate, contemporaneous notice of that fact. Such notice would presumably have been required, a fortiori, in view of plaintiffs' agreement, pursuant to SPA § 5.5, that they would "act in good faith and use reasonable efforts to obtain the satisfaction of the conditions specified in [the SPA] and . . . take all such other actions reasonably necessary or advisable to consummate the transactions contemplated [t]hereby."

Plaintiffs have failed to establish that they gave defendants the requisite notice. Plaintiffs assert that defendants should have been aware that the April 14 Schedules were final versions of the Schedules because "each of [plaintiffs'] post April 14 responses to [defendants'] Open Issues Lists contained [a] legend on the first page" which stated that " [c]ompliance by Sellers with Buyer's Request to incorporate information requested into a specific schedule is not to be construed as an acknowledgment by Sellers that the specific request is proper under the SPA" (Nixon Affid., ¶ 24 [emphasis in original] and Exs. 53, 57; see also Douglass Affid., ¶ 20). While the legal meaning and effect of that putative disclaimer may be open to some debate, it was not sufficient to apprise defendants that plaintiffs had deemed the April 14 Schedules to be final for purposes of SPA § 8.1 (e).

Nixon states in his affidavit that "it was made clear to [defendants] that the April 14 Schedules satisfied section 8.1 (e), as stated in a May 30, 2008 letter to SSL" (Nixon Affid., ¶ 24; see also Pl. and Concordia's Amended Mem. of Law, at 29 n 6).⁷ In the letter, EBG wrote that:

7 According to defendants, plaintiffs "admitted in response to Interrogatory No. 14 that . . . they do not recall at this time any specific communications where they stated that the schedules were "final versions'"" (Def. Reply Mem. of Law, at 31 n 13). However, it does not appear that defendants have included a copy of the document which contains that response in their submissions on this motion.

[t]he Schedules delivered in April 2008 were responsive to the provisions of the SPA to which they were directed and were reasonable, customary and final, thereby establishing no later than May 30, 2008 as the date by which the [Sensitive Diligence] was to have been completed. Sellers' revisions to the previously delivered February Schedules and the revisions in subsequently delivered Schedules were made in response to your requests, though many of the revisions requested, including some in the Schedules delivered in April, were inappropriate and not warranted by the SPA. The requested changes were nevertheless made in view of the need for the Schedules to be satisfactory to Buyer if the Acknowledgment were to be received.

(Nixon Affid., Ex. 31.) However, after having provided defendants with at least two sets of revised Schedules in May 2008, plaintiffs could not belatedly declare, on May 30, 2008, that the April 14 Schedules had been final versions of the Schedules for purposes of SPA § 8.1 (e), and that the 30-day period, within which CIFC would have been required to complete Sensitive Diligence in order to avoid plaintiffs' having a right to terminate the SPA, had already expired.

Douglass opines in his affidavit that the April 14 Schedules were sufficient to trigger commencement of the 30-day period described in SPA § 8.1 (e), but fails to offer a coherent explanation as to how the April 14 Schedules could properly be deemed to have constituted final versions for such purposes. In support of his opinion, Douglass states:

I have reviewed [defendants'] motion for summary judgment and understand that [defendants] claim[] that the April 14, 2008 Schedules were not "reasonable and customary" as provided by Section 8.1 (e) and that plaintiffs' termination was therefore improper.

. . . . In my professional opinion, the April 14 Schedules were in reasonable and customary form and, therefore, satisfied the requirements of Section 8.1 (e) of the SPA. As a result, I believe that the delivery of those schedules triggered the 30 day period for [defendants] to complete the Sensitive Diligence phase, as required by the SPA, which [defendants] did not do.

In [their] memorandum of law, [defendants] assert[] several complaints to support [their] argument that the April 14 Schedules were not final, but . . . do[] not provide any analysis as to whether the Schedules were "reasonable and customary," which is the applicable standard under Section 8.1 (e). The "reasonable and customary" standard is typical in such provisions because it is understood by the parties that Disclosure Schedules can never be truly final until the closing date and it is not uncommon for information to be updated and supplied at a later date, prior to or at the closing.

(Douglass Affid., ¶¶ 9-11.)

The quoted portions of Douglass's affidavit are erroneous, at least, in that they: misstate the main thrust of defendants' argument, which is that the April 14 Schedules did not trigger the commencement of the 30-day period described in SPA § 8.1 (e) because they were not "final version[s]" of the Schedules, rather than because they were not "reasonable and customary"; appear to opine that the April 14 Schedules were sufficient to trigger the 30-day period because they were "reasonable and customary," regardless of whether they were "final version[s]" of the Schedules; and suggest or assert that the parties' use of the words "reasonable and customary," which are nearly contiguous to the words "final version" in SPA § 8.1 (e), indicated the parties' intent that Schedules, in order to trigger commencement of the 30-day period, did not need to be "truly final."

The grammatical structure and phrasing of SPA § 8.1 (e) clearly indicate the parties' intention that, in order to trigger the commencement of the 30-day period referred to therein, Schedules were required to be both the final versions of the Schedules and in reasonable and customary form. It was not sufficient that Schedules satisfied only one or the other of those requirements. Douglass's interpretation of the provision, because it essentially deprives the words "final version" of any effect, would violate the basic tenet of contract interpretation that "[a] reading of [a] contract should not render any portion [of the contract] meaningless" ( Beal Sav. Bank v Sommer, 8 NY3d 318 , 324). Thus, it is unavailing for plaintiffs to argue either (a) that the April 14 Schedules could trigger the commencement of the 30-day period even if they were not final versions of the Schedules, so long as they were in reasonable and customary form, or (b) that defendants' argument fails insofar as it asserts merely that the April 14 Schedules were not final versions, and does not establish that the April 14 Schedules were not in reasonable and customary form.

Douglass's contention that the words "reasonable and customary," in SPA § 8.1 (e), were intended to imply that versions of Schedules, in order to trigger commencement of the 30-day period, did not have to be "truly final" is also untenable.⁸ First, the parties would presumably not have intended the words "reasonable and customary" to modify or subsume the meaning of the words "final version," because the two phrases are concerned with two different and independent aspects of the Schedules. The phrase "final version" would concern the place of a version of a Schedule in some sort of sequence, presumably temporal, and would presumably indicate that a version of a Schedule was required to be the last in a temporal sequence. The phrase "in reasonable and customary form" would primarily concern, as the words themselves suggest, the form or format of a Schedule, and, thus, would indicate that a Schedule was required to be reasonable and customary in its form or format. Because the two phrases concern different aspects or characteristics of the Schedules, it is improbable that the parties would have intended the meaning of either phrase to modify the meaning of the other. One may speak of a document as being reasonably final, but would not ordinarily speak of a reasonable and customary form of finality.

8 This is not to say that the words "final version," themselves, were absolute in meaning, or that the construction of those words would not be subject to traditional contract principles of substantial performance and compliance.

Secondly, if the parties had intended the requirement of the finality of versions of the Schedules to be governed by the words "reasonable and customary," they would presumably not have included the separate word "final" in SPA § 8.1 (e) at all, because: if the word "final" had been omitted, a reader would have been required to look only to the words "reasonable and customary" for aid in understanding whether Schedules were sufficiently final as to trigger commencement of the 30-day period; and the inclusion of the words "final version" required that they be given some effect, absent a valid, overriding reason why they should not be. Douglass's tortuous construction of SPA § 8.1 (e) would essentially imply a contract term from the words "reasonable and customary" (i.e., a contract term providing that a version of a Schedule need not be actually or truly final) which substantially contradicts an express and nearly contiguous contract term (i.e., the contract term requiring that a version of a Schedule be "final"), and would give effect to the purportedly implied contract term while denying meaning or effect to the express contract term.

For all of the foregoing reasons, I find: that the April 14 Schedules were not "the final version[s]" of all of the Schedules, within the meaning ascribed to those words in SPA § 8.1 (e); and, accordingly, that plaintiffs' purported termination of the SPA by means of the Termination Notice was not authorized under SPA § 8.1 (e). Although defendants move for summary judgment dismissing the complaint, plaintiffs' first cause of action seeks a judgment declaring that plaintiffs properly exercised their right to terminate the SPA, under section 8.1 (e) of the SPA, and that the Termination Notice effectively terminated the SPA. However, "when a court resolves the merits of a declaratory judgment [cause of] action against the plaintiff, the proper course is not to dismiss the [cause of action], but rather to issue a declaration in favor of the defendants" ( Maurizzio v Lumbermens Mut. Cas. Co., 73 NY2d 951, 954). Thus, instead of dismissing the first cause of action, I will issue a declaration herewith that plaintiffs' purported termination of the SPA, pursuant to SPA § 8.1 (e), was not authorized by or under that provision.

Defendants have failed to demonstrate their entitlement to dismissal of the second cause of action, which alleges that defendants breached the covenant of good faith and fair dealing that was implied in the SPA by (a) demanding that plaintiffs provide Schedules to CIFC that were neither "reasonable" nor "customary," as required by the SPA, (b) insisting, as a precondition to their provision of the Acknowledgment to plaintiffs, that plaintiffs provide information that was not required by the SPA, and (c) failing to provide plaintiffs with the Acknowledgment and to complete the Sensitive Diligence.

Defendants, in their moving papers, assert no cognizable argument for dismissal of the second cause of action as against CIFC and JCP.⁹ Rather, defendants appear to presume that — by demonstrating, in connection with the complaint's first cause of action, that plaintiffs wrongfully repudiated or attempted to terminate the SPA — they have, by the same means, also demonstrated that they are entitled to dismissal of the second cause of action ( see e.g. Def. Mem. of Law, at 3 [stating that "Sellers' and Concordia's breach of the SPA" — i.e., by their "purported termination of the SPA [that] was premature and wrongful" — "entitles CIFC to . . . summary judgment dismissing the complaint against it"]). However, defendants have failed to establish in their moving papers that — insofar as plaintiffs wrongfully repudiated or attempted to terminate the SPA by means of the Termination Notice on June 6, 2008 — that would automatically and necessarily preclude plaintiffs' second cause of action, which alleges that, at some time or times prior to June 6, 2008, defendants breached the implied covenant of good faith and fair dealing.

9 To the extent that defendants may assert any argument(s) for dismissal of the second cause of action, for the first time, only in their reply papers, that did not satisfy their burden, as the proponents of a summary judgment motion, of making a prima facie showing of entitlement to summary judgment dismissing that cause of action as a matter of law ( see e.g. Alrobaia v Park Lane Mosholu Corp., 74 AD3d 403 , 404 [1st Dept 2010]). Defendants do assert arguments in their moving papers for dismissal of the second cause of action on grounds which are applicable to JCP, individually, and those arguments will be addressed below.

Defendants assert that the second cause of action should be dismissed as against JCP, individually, on three grounds: (1) that any covenant of good faith and fair dealing implied in the SPA is not applicable to JCP, because JCP was not a party to the SPA; (2) that plaintiffs have failed to adequately allege any basis for JCP's liability on the second cause of action under an alter ego theory because, even assuming that JCP dominated CIFC, plaintiffs have failed to allege any fraud, corporate misconduct, wrong or injustice that was perpetrated by means of such domination; and (3) that plaintiffs' claim for breach of the implied covenant of good faith and fair dealing is merely an impermissible substitute for a nonviable breach of contract claim. However, none of those arguments has merit.

While it is generally true that a claim for breach of the covenant of good faith and fair dealing that is implied in a contract cannot be asserted against a nonparty to the contract, such a claim may be asserted against a nonparty where there is a basis for the claim under principles of corporate veil piercing or alter ego liability. A corporate veil may be pierced, and an entity affiliated with a corporation may be liable for the corporation's breach of contract, either "where the officers and employees of the [affiliated entity] exercise control over the daily operations of the [corporation] and act as the true prime movers behind the [corporation's] action, or on the theory that the [affiliated entity] conducts business through the [corporation], which exists solely to serve the [affiliated entity]" ( Pritchard Servs. [NY] v First Winthrop Props., 172 AD2d 394, 395 [1st Dept 1991]; see also Pebble Cove Homeowners' Assn. v Fidelity NY FSB, 153 AD2d 843, 843 [2d Dept 1989]). The second cause of action clearly alleges a claim against JCP based upon the theory that it is liable as CIFC's alter ego, for CIFC's breach of the implied covenant, and not upon the theory that JCP was itself a signatory to the SPA. The complaint alleges: that JCP created CIFC for the sole purpose of serving as the vehicle for JCP's purchase of the Stock; that CIFC, when it executed the SPA, was acting merely as an instrument of JCP; and that, at the time of the events alleged in the complaint, CIFC was acting under JCP's exclusive ownership and control, and as JCP's alter ego ( see Complaint, ¶¶ 7-8).

Defendants argue that plaintiffs have failed to adequately allege any basis for JCP's liability on the second cause of action under an alter ego theory because, even assuming, arguendo, that JCP dominated CIFC, plaintiffs have failed to allege any fraud, corporate misconduct, wrong or injustice that was perpetrated by means of such domination. However, an entity that is affiliated with a corporation may be liable for the corporation's breach of a contract where the affiliated entity has caused the corporation to breach the contract, or rendered the corporation unable to meet its obligations under the contract, and/or the corporation is a mere shell or "dummy" corporation which has no assets of its own ( see e.g. Teachers Ins. Annuity Assn. of Am. v Cohen's Fashion Opt. of 485 Lexington Ave., Inc., 45 AD3d 317 , 318 [1st Dept 2007]; Ventresca Realty Corp. v Houlihan, 41 AD3d 707 , 709 [2d Dept 2007]; Simplicity Pattern Co. v Miami Tru-Color Off-Set Serv., 210 AD2d 24, 25 [1st Dept 1994]; A.W. Fiur Co. v Ataka Co., 71 AD2d 370, 374 [1st Dept 1979]).

The complaint's averments concerning the conduct that allegedly constituted the purported breaches of the implied covenant consistently allege that it was "defendants," jointly, which perpetrated or engaged in that conduct. Those averments, in conjunction with the complaint's allegations that CIFC was acting under JCP's exclusive control, and as JCP's alter ego, sufficiently allege — as a basis for CIFC's liability — that, insofar as CIFC did breach the implied covenant, it was JCP which caused CIFC to commit the breach. The complaint also alleges that CIFC is a mere shell corporation which has substantially no assets of its own ( see Complaint, ¶ 7).

Of course, a party seeking to pierce a corporate veil under an alter ego theory bears a "heavy burden" ( Collins v E-Magine, 291 AD2d 350, 351 [1st Dept 2002]. As a general rule, "[p]arent and subsidiary or affiliated corporations are . . . treated separately and independently so that one will not be held liable for the contractual obligations of the other . . ." ( Sheridan Broadcasting Corp. v Small, 19 AD3d 331 , 332 [1st Dept 2005]). However, claims involving veil piercing and alter ego liability are "fact-laden claim[s] that [are] not well suited for summary judgment resolution" ( First Bank of Ams. v Motor Car Funding, 257 AD2d 287, 294 [1st Dept 1999] [citation and internal quotation marks omitted]). Defendants, here, have failed to demonstrate the absence of a triable issue of fact as to whether CIFC breached the SPA, and as to whether, if it did, it was acting merely as JCP's alter ego in doing so ( see e.g. Shkolnik v Krutoy, 65 AD3d 1214 , 1215 [2d Dept 2009]).

Also without merit is defendants' assertion that plaintiffs' claim for breach of the implied covenant of good faith and fair dealing should be dismissed as against JCP because it is merely an impermissible substitute for a nonviable breach of contract claim. A claim for breach of the implied covenant is, itself, a type of breach of contract claim. The distinguishing characteristic of a claim for breach of the implied covenant is merely that — while a claim for breach of contract may allege the breach of a contract term which is either express or implied — a claim for breach of the implied covenant alleges the breach of a contract term which is not express, but should be implied. Plaintiffs may properly assert their second cause of action as a claim for breach of the implied covenant, because it alleges the breach of contract terms that are not express, and that should be implied.

The branch of defendants' motion which seeks partial summary judgment as to liability on CIFC's combined counterclaim against plaintiffs and third-party claim against Concordia (the counterclaim and/or the third-party claim, hereinafter, CIFC's Claim) is also denied. CIFC's Claim alleges that plaintiffs and Concordia breached both implied and express terms of the SPA by: (1) failing or refusing to comply with CIFC's requests for information that CIFC required in order for it to finalize the Pre-Acknowledgment Diligence, deliver the Acknowledgment to plaintiffs, proceed with Sensitive Diligence and obtain bank financing for the Stock acquisition; and (2) purporting to terminate and repudiate, or actually terminating and repudiating, the SPA in an unauthorized and improper manner.

As regards the first ground for breach of contract, defendants did not make a prima facie showing in their moving papers that CIFC requested information from plaintiffs and/or Concordia that any of them was obligated under the terms of the SPA to provide, and that any of them failed or refused to provide. Defendants have established, as a possible basis for CIFC's counterclaim against plaintiffs on the second of the aforementioned grounds, that plaintiffs' purported termination of the SPA was wrongful, because it was not authorized under SPA § 8.1 (e). However, defendants have not established that CIFC is entitled to partial summary judgment as to plaintiffs' liability on that portion of its counterclaim because, as set forth below, defendants did not make a prima facie showing in their moving papers as to all of the requisite elements for such a counterclaim.

Defendants assert that plaintiffs' improper attempt to terminate the SPA was either an actual or anticipatory breach of the SPA ( see Answer, ¶ 85). The elements of a claim to recover damages for breach of contract are "the existence of a contract, the [claimant's] performance under the contract, the [other party's] breach of that contract, and resulting damages" ( JP Morgan Chase v J.H. Elec. of NY, Inc., 69 AD3d 802 , 803 [2d Dept 2010]). Although CIFC's Claim alleges that CIFC "at all times fully performed its obligations under the SPA" (Answer, ¶ 87), defendants did not make a prima facie showing that CIFC performed its obligations under the SPA. Among other things, plaintiffs' second cause of action alleges that defendants breached the SPA at times pre-dating plaintiffs' wrongful attempt to terminate the SPA and, as previously discussed, defendants have not established that they are entitled to dismissal of that cause of action.

As a general rule, a party seeking damages for anticipatory breach or repudiation of a contract may seek either expectancy damages, which are intended to place the party in as good a position as if the contract had been performed, or restitutionary damages, which are intended to place the party in as good a position as if the contract had never been entered into ( see e.g. In re Asia Global Crossing, Ltd., 404 BR 335, 341 [SD NY Bankr 2009] [applying New York law]). CIFC's Claim seeks damages of at least $30,000,000, representing the loss that CIFC allegedly suffered as a result of the fact that the Stock acquisition contemplated by the SPA was not consummated, and CIFC did not acquire the Stock at the price agreed upon in the SPA. Insofar as defendants are seeking partial summary judgment in CIFC's favor as to liability on CIFC's Claim, in their instant motion, it is clear that they are seeking a judgment as to liability for expectancy rather than restitutionary damages. While asserting that CIFC has not "foreclosed itself from seeking its reasonable out-of-pocket expenses," defendants also assert that CIFC "is entitled to its expectancy damages," and that, "if [CIFC] is made whole, then it may not need to pursue its fees and expenses related to the transaction . . ." (Def. Reply Mem. of Law, at 23-24, 24 n 10).

"[A]n anticipatory breach relieves the nonbreaching party of the need to tender performance" ( Inter-Power of NY v Niagara Mohawk Power Corp., 259 AD2d 932, 934 [3d Dept 1999]). However, a party moving for summary judgment as to liability on a claim of anticipatory breach — at least where, as here, the liability is for expectancy rather than restitutionary damages ( see generally In re Asia Global Crossing, Ltd., 404 BR at 341 [stating that, where a party seeks damages for repudiation of a contract that are "measured by [the party's] restitutionary interest, the ready, willing, and able requirement . . . is inapt"]) — must make a prima facie showing in its moving papers that, but for the other party's anticipatory breach, it was ready, willing and able, including financially able, to perform its obligations under the contract ( see e.g. Ross Bicycles v Citibank, 200 AD2d 379, 380 [1st Dept 1994]; compare American List Corp. v U.S. News World Report, 75 NY2d 38, 43-44 [stating under the circumstances therein — where the plaintiff (a) had already been performing under the allegedly breached contract for a year and a half, and (b) was seeking "only to recover moneys which [the] defendant undertook to pay under the contract, thereby assuming a definite obligation" — that a "nonrepudiating party need not . . . tender performance nor prove its ability to perform the contract in the future"]).

Defendants did not make a prima facie showing in their moving papers that — but for plaintiffs' wrongful repudiation or anticipatory breach — CIFC was ready, willing and able to perform its obligations under the SPA. Pursuant to SPA § 5.1 (b), CIFC's obligation to deliver the Acknowledgment, and to proceed with the Stock acquisition, was subject to, among other things, CIFC's "satisfaction, in its sole discretion, with the disclosure set forth on . . . [the] Schedules and with the results of the Pre-Acknowledgment Diligence and subject to the availability of financing satisfactory to [defendants] to complete the acquisition of the [Stock] . . . " Whether or not CIFC would have been ready and willing to perform its contractual obligations culminating in the Stock acquisition is unclear, inter alia, because: defendants were concededly not satisfied with the Schedules as they existed as of the time when plaintiffs purported to terminate the SPA ( see e.g. Wilson EBT, at 225-227, 385, 392); and defendants have not established either that plaintiffs would thereafter necessarily have revised the Schedules in a manner which would have made them satisfactory to CIFC, or that defendants would have proceeded with the Stock acquisition in the absence of such revisions. Defendants also failed to make a prima facie showing in their moving papers that CIFC would have been financially able to proceed with the Stock acquisition.¹⁰

10 Although defendants offer some evidence in their reply papers to support their contention that CIFC would have been financially able to close on the Stock acquisition, the proponent of a motion for summary judgment cannot rely upon evidence that is submitted for the first time with its reply papers to satisfy its burden of making a prima facie showing of entitlement to judgment as a matter of law ( see e.g. Migdol v City of New York, 291 AD2d 201, 201 [1st Dept 2002]).

Defendants failed to make a prima facie showing as to the requisite element of damages, with respect to CIFC's claim for expectancy damages, because defendants' moving papers did not include a prima facie showing: that the alleged expectancy damages were proximately caused by plaintiffs' wrongful attempt to terminate the SPA; or that — despite defendants' continuing dissatisfaction with the Schedules, and the multiple conditions and contingencies upon which the parties' duties to perform their respective obligations under the SPA prior to the closing on the Stock acquisition depended — an award of such damages would be based upon something more than mere speculation.

For the foregoing reasons, defendants have not established that CIFC is entitled to partial summary judgment as to liability on either its counterclaim against plaintiffs or its third-party claim against Concordia.

Plaintiffs' and Concordia's Cross Motion

Plaintiffs and Concordia assert that CIFC's Claim for breach of contract should be dismissed: (1) in its entirety, because the SPA was merely a preliminary agreement which obligated the parties, at most, only to negotiate in good faith the terms of the contemplated Stock acquisition that were left open by the SPA, and because the evidence in the record establishes that plaintiffs and Concordia satisfied their obligation to negotiate in good faith; or (2) alternatively, insofar as it seeks expectancy damages based upon the loss which CIFC allegedly suffered as a result of the fact that it did not acquire the Stock at the price agreed upon in the SPA, because (i) the SPA was a preliminary agreement and, even if there were an issue of fact as to whether plaintiffs performed their obligation to negotiate in good faith, expectancy damages are not available for the breach of such a preliminary agreement, (ii) the expectancy damages that CIFC seeks are consequential damages, and SPA § 7.2 (c) bars CIFC's recovery of consequential damages, and (iii) the amount of such damages, which would be calculated as the difference between the fair market value of the Stock at the time of the purported breach and the price for the Stock agreed upon in the SPA, would be equal to zero.

However, plaintiffs' and Concordia's cross motion for summary judgment dismissing CIFC's Claim for breach of contract is denied in its entirety because, as will be set forth in more detail below, they have failed to establish to the preclusion of any issue of fact: that the SPA was only a preliminary agreement which did not create any enforceable obligations with respect to consummation of the Stock acquisition; that the expectancy damages that CIFC seeks are consequential damages; or that the fair market value of the Stock at the time of the purported breach must be deemed to be equal to the price for the Stock that was agreed upon in the SPA, such that the amount of CIFC's expectancy damages would necessarily be equal to zero.

Plaintiffs and Concordia contend that the SPA was only a preliminary agreement, and that it did not create any enforceable obligations with respect to the Stock sale which was the SPA's ultimate objective. They concede that the SPA was binding to some degree, and rely upon an analytical framework — utilized by certain federal and New York State courts — in which binding, preliminary agreements have been divided into two types: "Type I" preliminary agreements, which are "complete, reflecting a meeting of the minds on all the issues perceived to require negotiation," and "bind[] both sides to their ultimate contractual objective"; and "Type II" preliminary agreements, which "are binding only to a certain degree [ — ] reflecting agreement on certain major terms, but leaving other terms open for further negotiation" — and "do not commit the parties to their ultimate contractual objective but [only] to the obligation to negotiate the open issues in good faith in an attempt to reach the . . . objective within the agreed framework" ( IDT Corp. v Tyco Group, S.A.R.L., 54 AD3d 273 , 275 [1st Dept 2008] [citations and internal quotation marks omitted], affd 13 NY3d 209 ).

Plaintiffs and Concordia assert that the SPA was a Type II preliminary agreement because, although it expressed agreement as to certain terms of the proposed Stock acquisition, it left many of the material terms of that transaction open for further negotiation, and contemplated that the parties would reach a more definitive agreement in the future. They contend that the SPA, as a Type II preliminary agreement, was binding and enforceable, at most, only to the extent of obligating the parties to negotiate the open terms in good faith, and not to the extent that it created any obligation to consummate the Stock acquisition. Thus, plaintiffs and Concordia argue, CIFC cannot recover the expectancy, or "benefit of the bargain," damages which CIFC asserts that it incurred as a result of the fact that it did not acquire the Stock at the price agreed upon in the SPA.

However, plaintiffs and Concordia have failed to establish that the parties intended the SPA to be only a preliminary agreement with respect to the contemplated Stock acquisition, and not a final and definitive agreement. In the course of resolving a dispute as to whether an agreement was a Type I preliminary agreement or a Type II preliminary agreement, the Appellate Division, First Department, noted that the New York Court of Appeals:

recently rejected the federal type I/type II classifications as too rigid, holding that in determining whether the document in a given case is an enforceable contract or an agreement to agree, the question should be asked in terms of "whether the agreement contemplated the negotiation of later agreements and if the consummation of those agreements was a precondition to a party's performance."

( Amcan Holdings, Inc. v Canadian Imperial Bank of Commerce, 70 AD3d 423 , 427 [1st Dept 2010], quoting IDT Corp. v Tyco Group, S.A.R.L., 13 NY3d 209, 213 n 2 [2009].) The record, here, is devoid of any evidence suggesting that the SPA contemplated the parties' negotiation of any material, subsequent agreement, or that the consummation of any subsequently negotiated agreement would be a precondition to any party's duty to perform its obligations under the SPA, or with respect to the Stock acquisition. Rather, all of the evidence contained in the record indicates that the SPA was itself the definitive agreement, pursuant to which, and subject to the terms and conditions of which, the parties intended the Stock acquisition to be consummated.

The Letter of Intent — which was executed by plaintiffs, Concordia and an individual who represented JCP's interests on August 23, 2007, approximately five months prior to the date of the SPA — contemplated only one subsequent, definitive acquisition agreement. An exhibit to the Letter of Intent, in which the parties purported to "[s]et forth . . . the steps to complete the acquisition of Concordia," provided that the parties would "draft, negotiate, execute and deliver the [i.e., a single] definitive acquisition agreement," and that the parties — after they had completed certain other specified steps, which did not include the negotiation and execution of any additional governing agreement — would "[c]lose on the closing date, assuming that the results of the Sensitive Diligence [were] reasonably satisfactory to [the acquiring entity] and that the other conditions in the definitive agreement ha[d] been satisfied" (Nixon Affid., Ex. 6, at CIFC-0009221 [emphasis added]). The Letter of Intent also expressly provided that it was "not binding upon any person and ha[d] no legal effect whatsoever," except in certain respects that were specifically enumerated therein ( id. at CIFC-0009220).

The terms of the SPA itself also indicate that the parties intended it to be the single definitive agreement which would govern their respective rights and obligations leading up to, and culminating in, the closing on the Stock acquisition. In clear contrast to the merely preliminary, four-page document which the parties themselves entitled a "Letter of Intent," the SPA: is entitled a "Securities Purchase Agreement," which presumably indicates the parties' intent that the consummation of a securities purchase transaction would be within the scope of that agreement; is 49 pages in length, and contains extensive, particularized provisions which delineated the parties' respective rights and obligations continuing through, and even after, a closing on the Stock acquisition; and does not refer to the parties' negotiation or execution of any subsequent agreement, more comprehensive or definitive than the SPA, which would govern the Stock acquisition.

The parties' intention that the SPA would govern their respective rights and obligations with respect to the Stock acquisition, through and even after the closing on that transaction, is indicated by, inter alia, SPA §§ 1.9 (providing for post-closing adjustments to the purchase price), 6.1-6.2 (setting forth particularized conditions precedent to the parties' obligations to consummate the Stock sale), 7.1-7.3 (providing that certain representations and indemnification obligations would survive for specified periods after the closing date), 8.1 (providing that the SPA " may be terminated prior to the Closing" [emphasis added] under certain enumerated circumstances, and indicating, thus, the parties' intention that — absent such a termination, or a termination provided for by some other provision of the SPA — the SPA would continue in effect until the closing), 9.1 (setting forth a delivery address for certain notices that would be delivered after the closing), 9.3 (providing that the SPA could be "modified, amended or waived only by a writing" signed by each of the parties), and 9.6 (providing that the SPA, together with certain other specified documents, "embod[ied] the entire agreement and understanding among the parties with respect to this transaction . . .").

Unlike the Letter of Intent — which expressly provided that it was not binding upon the parties thereto, except in limited, specifically enumerated respects — the SPA contains representations by each party that the SPA, when it is executed and delivered by that party, will be a "valid and binding obligation[] of [such party], enforceable against [such party] in accordance with [its] . . . terms" ( see SPA §§ 2.2, 3.4, 4.3). Those representations presumably indicate the parties' intent that the SPA as a whole, and all of its provisions, would be binding, and not that the SPA would be binding only to the limited extent of requiring the parties to engage in good faith negotiations ( see also SPA §§ 8.2 [providing that "each party may be liable to the others for any breach of this Agreement . . ."], 9.16 [providing that each party "shall be entitled to . . . specific performance of the obligations to be performed by the other parties in accordance with the [SPA's] provisions"]).

Plaintiffs and Concordia have cited no express provision in the SPA which would suggest that the parties contemplated that they would subsequently negotiate and execute any agreement, more definitive than the SPA, which would govern their respective rights and obligations in connection with the contemplated Stock acquisition. Instead, plaintiffs and Concordia assert that the SPA was only a preliminary agreement, which did not create any binding and enforceable obligation with respect to consummation of the Stock sale, because it was incomplete, and left many material terms of the parties' agreement concerning the transaction open for future negotiation, with the hope or expectation "that a definitive agreement would eventually be reached" (Pl. and Concordia's Amended Mem. of Law, at 2).

According to plaintiffs and Concordia, the most important of the "unresolved terms" which the SPA left open for subsequent negotiation were "the contents of the Schedules" ( id., at 9). However, the contents of the Schedules were not material, open terms of the parties' agreement concerning the Stock acquisition, which could only be finalized, or become operative or effective, with CIFC's negotiated agreement or consent. Rather, the contents of the Schedules were a part of plaintiffs' and Concordia's performance obligations under the already negotiated, and already agreed-to, terms of the SPA.

The SPA allocated exclusively to plaintiffs and Concordia the obligation to prepare the Schedules and to deliver them to CIFC ( see e.g. SPA §§ 5.1 [e], 5.5). The SPA also set forth the requisite contents for each of the Schedules, and the nature of the prescribed contents was generally such that it would more appropriately have been supplied by plaintiffs and/or Concordia rather than arrived at as the result of negotiations between the parties, because: (1) the contents related principally to factual matters and/or information concerning Concordia and its affiliated entities, which would presumably have been within the knowledge of plaintiffs and Concordia, but not within the knowledge of defendants ( see e.g. Schedule 3.13 [a] [a list of Concordia's and its affiliated entities' "material contracts"], Schedule 3.18 [d] [a list of the names and current annual salaries of certain of Concordia's and its affiliated entities' officers and employees]); and (2) it was primarily plaintiffs and Concordia, rather than CIFC, who had made, and would be liable upon, the various representations and warranties in the SPA which concerned the contents of the Schedules ( see id., §§ 2.1-3.28; see also Nixon Affid., ¶ 17).¹¹

11 The SPA refers in various instances to the "disclosure set forth" in or on the Schedules ( see e.g. SPA § 5.1 [b], [e]), and the term "disclosure" is, of course, generally used to describe material or information that is disclosed by one party to another rather than to describe a negotiated term or provision of a contractual agreement.

Plaintiffs and Concordia assert that the contents of the Schedules were open terms of the parties' agreement because CIFC's obligation to proceed with the Stock acquisition was contingent upon its satisfaction, in its sole discretion, with the contents of the Schedules ( see id., § 5.1 [b], [e]). However, the SPA merely gave CIFC the right to decline to proceed with the Stock acquisition if, after plaintiffs and Concordia had prepared and delivered the Schedules to CIFC, CIFC were not satisfied with the contents of the Schedules. Nothing in the SPA gave CIFC any contractual right to participate in the preparation or creation of, or to negotiate or determine the contents of, the Schedules. Indeed, plaintiffs and Concordia evidently concede that they could have delivered Schedules to CIFC which — although they were not satisfactory to CIFC — would have been sufficient to satisfy plaintiffs' and Concordia's contractual obligation, under the SPA, to deliver the Schedules.¹²

12 Nixon asserts in his affidavit that — although defendants were dissatisfied with the April 14 Schedules, and continued to insist that those Schedules be revised — the April 14 Schedules "were in objectively final and reasonable and customary form," and "satisfied" SPA § 8.1 (e) (Nixon Affid., ¶ 24).

In fact, the parties' inclusion of provisions in the SPA which afforded CIFC a right to decline to proceed with the Stock acquisition, if it were not satisfied with the contents of the Schedules, indicates that the contents of the Schedules were not material terms of the parties' agreement, which CIFC had a right to negotiate. If the contents of a Schedule had to be negotiated between the parties, and could only become operative or effective — as an initial matter — with CIFC's negotiated agreement, then CIFC could simply have refused to agree to the contents of any of the Schedules, and there would have been no reason or need for the SPA to also provide, as a separate matter, that CIFC could decline to proceed with the Stock acquisition if it were not satisfied with the contents of the Schedules.¹³

13 Plaintiffs and Concordia presumably gave substantial consideration to defendants' requests for revisions of the Schedules not because their contents comprised open terms of the SPA, which could be resolved only with CIFC's negotiated agreement, but because the SPA gave CIFC the right to decline to proceed with the Stock acquisition if it were not satisfied with the contents of the Schedules. Thus, if plaintiffs wished to consummate the Stock sale to CIFC, it would have availed them little to simply deliver Schedules to CIFC that satisfied plaintiffs' obligations under the SPA, and to refuse to revise those Schedules, if, because defendants were not satisfied with the Schedules, CIFC declined to proceed with the Stock acquisition.

Plaintiffs and Concordia contend that the SPA also left other material terms of the parties' agreement concerning the Stock acquisition open for future negotiation, apart from the Schedules, which indicated that the SPA was merely a preliminary agreement. According to plaintiffs and Concordia, those open material terms were: (1) how two foreign entities, Ibex UK and Ibex SA, would be handled in connection with the Stock acquisition; (2) whether, and to what extent, Concordia's capital leases would be treated as "operating capital leases" under the SPA, and thereby alter the final purchase price; (3) the amount that CIFC would pay to plaintiffs as a result of its election, after the SPA was executed, to proceed with the Stock acquisition under section 338 (h) (10) of the Internal Revenue Code (IRC); (4) the manner in which the foreign currency forward purchase facilities, or hedging contracts, that had been entered into by Concordia's foreign affiliates, would be described on Schedule 1.3 (n); (5) whether, and to what extent, the lenders that were financing CIFC's acquisition of the Stock would be permitted to participate in Sensitive Diligence; (6) the permissible scope of Sensitive Diligence; and (7) the terms of the landlord consents that were required in order for CIFC to be able to assume Concordia's existing leases ( see Pl. and Concordia's Amended Mem. of Law, at 11-12). However, plaintiffs and Concordia have failed to establish that any of the foregoing matters was both (a) left open and not resolved by the SPA, and (b) an essential term of the parties' agreement with respect to their consummation of the Stock acquisition, such that the omission of an agreement concerning that term from the SPA would have rendered the parties' obligations relating to consummation of the Stock acquisition, as set forth in the SPA, unenforceable.

Plaintiffs and Concordia assert that the SPA was merely a preliminary agreement because, it did not set forth an agreement concerning how Ibex UK and Ibex SA would be handled in the Stock acquisition, i.e., whether those entities would fall within the scope of the defined term "Affiliated Entities" in the SPA, by reason of their inclusion on Schedule 1.3 (a) thereto, and how and whether those entities would be transferred to CIFC at the closing. Plaintiffs and Concordia assert that "[t]he SPA did not provide any guidance with regard to Ibex SA and Ibex UK" (Nixon Affid., ¶ 32), and that Ibex UK and Ibex SA "were not . . . even mentioned in the SPA" (Pl. and Concordia's Amended Mem. of Law, at 11).

However, plaintiffs and Concordia have not established that those entities were such a material, integral and essential part of Concordia's operations that the SPA, because it did not mention them, was unenforceable with respect to the matters, relating to the Stock acquisition, that were agreed upon therein. Nixon himself concedes, in his affidavit, that "Ibex SA and Ibex UK . . . are purely shell companies," and that the matter of whether the definition of the term "Affiliated Entities" would include those two entities, and whether their stock would be transferred to CIFC, was "completely immaterial," because those entities "were not truly affiliated with Concordia," and were "simply name-holders with no assets or business activities, so [that] their inclusion or exclusion from the term Affiliated Entities would have no impact on the balance of the SPA . . ." (Nixon Affid., ¶¶ 32, 33). Moreover, insofar as the SPA did not specifically address the question of how Ibex SA and Ibex UK would be handled in the Stock acquisition, and the resolution of that matter would depend primarily upon the contents of Annex A and Schedule 1.3 (a) to the SPA: plaintiffs were free to prepare and deliver an Annex A and Schedule 1.3 (a) which dealt with those two entities in a manner that plaintiffs believed to be accurate, appropriate and desirable; and CIFC was thereafter free to choose not to proceed with the Stock acquisition if CIFC was, in its sole discretion, dissatisfied with the contents of that Annex A and Schedule 1.3 (a).

Plaintiffs and Concordia assert that another material term of the parties' agreement that was left open by the SPA was the matter of whether, and to what extent, Concordia's capital leases would be considered to be "operating capital leases," as that term was used in the SPA. Plaintiffs and Concordia contend that the SPA did not indicate which of Concordia's capital leases should be considered to be "operating capital leases," but that that issue had to be resolved before the final purchase price for the Stock could be determined, because: SPA § 1.3 (d) provided that the purchase price would be reduced by the amount of Concordia's "Indebtedness" at the time of the closing; and SPA § 1.3 (n) defined the term "Indebtedness" to include any liability "in respect of any . . . capital lease[], but, in the case of operating capital leases, only to the extent the aggregate amount of all such leases is in excess of $300,000." The parties allegedly had a disagreement with respect to certain capital leases which plaintiffs maintained were, and defendants maintained were not, operating capital leases.

However, the mere fact that the parties may have had a dispute concerning the definition of the term "operating capital lease," as it was used in the SPA, did not make that an unresolved, material term of the parties' agreement concerning the Stock acquisition, which rendered the parties' obligations with respect to the consummation of that transaction unenforceable. Rather, insofar as the parties' differing interpretations of the term "operating capital lease" resulted in a dispute as to the value of one of the components that was used in calculating the amount of the closing purchase price, SPA § 1.9 set forth a procedure pursuant to which such a dispute would be resolved, i.e., that, if the parties could not themselves resolve a dispute concerning the value of such a component, and agree upon the closing purchase price, the dispute would be submitted to an accounting firm, and the accounting firm would issue a determination resolving the dispute that was "final and binding on the parties" (SPA § 1.9 [c]).

Another material term of the parties' agreement that was left open by the SPA, according to plaintiffs and Concordia, was the matter of the amount that CIFC would pay to plaintiffs on account of the increased tax liability that plaintiffs would incur as the result of CIFC's election under IRC § 338 (h) (10), after the SPA was executed, to treat the Stock acquisition as an asset purchase (the Election).

However, the SPA contemplated the possibility of the Election, and set forth a procedure for dealing with a dispute between the parties concerning the extent of Concordia's and/or CIFC's liabilities to plaintiffs as a result of the Election. SPA § 5.8 expressly provided: that it was CIFC's right to elect to treat the Stock acquisition as an asset purchase under IRC § 338 (h) (10); that, at the closing, plaintiffs would provide evidence and supporting documentation to CIFC of the amount of the additional taxes that plaintiffs were required to pay as a result of that Election; that, if Concordia or CIFC did not agree with plaintiffs' calculation as to the amount of those additional taxes, CIFC would notify plaintiffs of the disagreement, and the parties would "consult and resolve in good faith any disputes regarding such calculation"; that, "[p]romptly upon resolution of any such dispute," Concordia would pay to plaintiffs the amount of the additional taxes; and that any amount paid to the plaintiffs in consideration thereof would be deemed an increase to the closing purchase price (SPA § 5.8 [b], [e]).

Plaintiffs' contention that the SPA left open the amount that Concordia and/or CIFC would pay to plaintiffs as a result of the Election is wholly theoretical, because the closing never occurred, and, thus, plaintiffs did not, at the time of a closing on the Stock acquisition, provide CIFC with the evidence and supporting documentation, referred to in SPA § 5.8, concerning the additional taxes that plaintiffs would be required to pay as a result of the Election. Moreover, inasmuch as the SPA deemed any amount which was paid to plaintiffs, on account of their additional tax liability resulting from the Election, to be an increase in the amount of the closing purchase price, a dispute between the parties concerning Concordia's and/or CIFC's liability in connection therewith — which the parties were not able to resolve in good faith, in accordance with the procedure set forth in SPA § 5.8 (e) — would presumably have been subject to resolution by means of the previously mentioned dispute resolution procedure, set forth in SPA § 1.9 (c), which was final and binding upon the parties.

According to plaintiffs, another material term left open by the SPA, which rendered the SPA merely a preliminary agreement — and unenforceable as regards the parties' obligations with respect to consummation of the Stock acquisition — was defendants' continuing dissatisfaction with plaintiffs' description, in Schedule 1.3 (n), of the foreign currency forward purchase facilities, or hedging contracts, that were used by Concordia's foreign affiliates. However, insofar as defendants were dissatisfied with plaintiffs' description of hedging contracts in Schedule 1.3 (n), and believed that plaintiffs had not set forth the information in that Schedule in the form that was required by SPA § 1.3 (n), that evidenced, at most, a disagreement between the parties as to whether plaintiffs had complied with their performance obligation under SPA § 1.3 (n), and not that a material term had been left unresolved by the SPA, which rendered the SPA merely a preliminary agreement.

Plaintiffs argue that the SPA was a preliminary agreement, additionally, because it left open for future negotiation certain material terms relating to Sensitive Diligence, namely: "[w]hether, and to what extent, [defendants'] lenders would be permitted to participate in Sensitive Diligence . . ., which was not permitted by the SPA , but which the lenders required as a condition to providing financing"; and the permissible "scope of Sensitive Diligence, including [defendants'] new demand for meetings with Concordia representatives [that were] not provided for in the SPA " (Pl. and Concordia's Amended Mem. of Law, at 11-12 [emphasis added]).

However, SPA § 5.1 (c) set forth in some detail the permissible scope of the Sensitive Diligence which the parties had agreed upon. Insofar as defendants may have wanted or needed certain types or forms of Sensitive Diligence which the SPA did not permit or omitted to allow — presumably because, during the negotiation of the SPA, defendants did not bargain for the inclusion of those types or forms of Sensitive Diligence within the permissible scope of the Sensitive Diligence authorized by the SPA — that is not an indication, let alone a sufficient basis upon which to conclude, that the SPA was an unenforceable, preliminary agreement as regards the parties' mutual rights and obligations with respect to the Stock acquisition contemplated by the SPA.

Plaintiffs assert that another material term which the SPA left open, and which rendered the SPA a merely preliminary agreement, was the issue of the terms or form of the landlord consents that were required in order for CIFC to assume Concordia's existing leases. Nixon himself concedes that there was "not technically a dispute" between the parties concerning that issue, but plaintiffs apparently contend that the terms or form of the landlord consents was a material term left open by the SPA based upon the circumstance that a draft of a form of a landlord consent that had been prepared by counsel to defendants' "prospective lenders" — which plaintiffs saw, for the first time, only in the course of the discovery for this action — "was far too overreaching and one-sided for us to even consider presenting to our landlords, most or all of whom would have rejected the proposed" form of consent (Nixon Affid., ¶ 38).

However, the SPA, as executed, set forth a reasonably complete agreement which governed the parties' respective rights and obligations with respect to the issue of the landlord consents. The SPA provided: that leases to which Concordia or one of its affiliated entities were parties fell within the scope of the defined term "Material Contracts"; that Schedule 3.15 to the SPA would set forth, inter alia, any consents, approvals, or authorizations which Concordia or any of its affiliated entities was required to obtain from any party to any Material Contract "for or in connection with the execution and delivery of [the SPA] or the consummation of the transactions contemplated [t]hereby," "except for those which, if not obtained, would not have . . . a Company Material Adverse Effect"; and that CIFC's obligation "to purchase the [Stock] and to consummate the other transactions contemplated by [the SPA was] . . . subject to" plaintiffs' and/or Concordia's having obtained all of the consents listed on Schedule 3.15 . . . (SPA §§ 3.13 [j], 3.15, 6.1 [b]).

Thus, Concordia and/or plaintiffs were required to obtain landlord consents, as part of their performance under the SPA, only insofar as, and to the extent that, the execution and delivery of the SPA, and/or the consummation of the transactions that were contemplated thereby, made the obtaining of such consents necessary. Assuming, arguendo, that disagreements had arisen between the parties concerning the terms of the landlord consents, those terms did not comprise a material, open term of the parties' agreement which rendered the SPA a preliminary agreement. Rather, again, plaintiffs' and Concordia's provision of the required landlord consents was a matter of their performance of their contractual obligations under the SPA, and CIFC's obligation to purchase the Stock, and to consummate the transactions contemplated by the SPA, was subject to all of the necessary landlord consents having been obtained.

Plaintiffs argue that the SPA's character as a preliminary agreement is evidenced, additionally, by the fact that, in various instances, the SPA made the parties' duties to perform their respective obligations with respect to the ultimate objective of the Stock acquisition contingent upon the occurrence or satisfaction of certain conditions. For example, as previously set forth, the SPA provided that CIFC was not obligated to proceed to consummation of the Stock acquisition unless it was satisfied, in its sole discretion, with the Schedules, the Pre-Acknowledgment Diligence and the Sensitive Diligence ( see SPA §§ 5.1 [b], [e]; 6.1 [j]). In support of the foregoing argument, plaintiffs cite the case of Solutia Inc. v FMC Corp. ( 456 F Supp 2d 429 [SD NY 2006]), wherein a joint venture agreement was determined not to have created an enforceable obligation to form a joint venture because, among other things, the obligations of the parties under the terms of the agreement " in respect of the ultimate contractual objective [were] conditioned on future approvals and on the occurrence of various conditions precedent" ( see id. at 444 [italics in original]).

However, the fact that the SPA made CIFC's obligation to proceed to culmination of the Stock acquisition contingent upon its satisfaction, in its sole discretion, with the Schedules, Pre-Acknowledgment Diligence and Sensitive Diligence did not render the SPA a merely preliminary agreement which was unenforceable as regards the parties' respective obligations with respect to consummation of the Stock sale ( see e.g. Matter of Associated Teachers of Huntington, Inc. v Board of Educ., Union Free School Dist. No. 3, Town of Huntington, 33 NY2d 229, 233-234 [finding that the fact that one party to a contract would be "the final judge" of whether another party "met the conditions necessary to receive the benefits of the agreement [did] not negate the existence of an enforceable contract right," inasmuch as "[b]oth common law and statutory law recognize the existence of contractual obligations where either the satisfactory performance of one party or the existence of conditions precedent is left solely to the good faith judgment of the other party"]; Outback/Empire I, Ltd. Partnership v Kamitis, Inc., 35 AD3d 563 , 563 [2d Dept 2006] [rejecting the contention of the defendant therein that the obligations of the plaintiff under a lease were illusory, because, although the contract contained provisions which "allowed the plaintiff, in its sole and absolute discretion, to terminate its obligations under the lease," the covenant of good faith and fair dealing, which is implied in every contract, required the plaintiff "to carry out its contractual obligations incident to the exercise of its discretion in good faith"]).

Plaintiffs' assertions to the contrary notwithstanding, the Solutia case does not support a determination that the SPA, because it conditioned the parties' performance of the Stock acquisition upon the occurrence of certain contingencies, was merely a preliminary agreement as regards the parties' obligations to consummate the Stock acquisition. In Solutia, the court determined that the joint venture agreement did not create enforceable obligations as regards the ultimate objective of that agreement based upon various circumstances which are not present here, including, most notably, that the joint venture agreement in that case "contained significant open terms and specifically contemplated further negotiations between the parties," and, in fact, expressly provided that the parties would "negotiate exclusively in good faith with each other for the formation of a joint venture" ( see Solutia Inc. v FMC Corp., 456 F Supp 2d at 444).

By contrast with the joint venture agreement in the Solutia case, the SPA did not leave any material terms of the parties' agreement concerning the contemplated Stock acquisition open for future negotiation, or contain any suggestion of, or reference to, any further negotiations between the parties concerning any such material term. Here, a determination that the SPA's provisions concerning the parties' obligations with respect to the consummation of the Stock acquisition were not enforceable would deny effect to the previously-quoted representations, contained in the SPA, wherein each party expressly represented that the SPA, after it had been executed and delivered by such party, would be "the valid and binding obligation[] of [such party], enforceable against [such party] . . ." (SPA §§ 2.2, 3.4, 4.3).

For the foregoing reasons, plaintiffs and Concordia have failed to establish: (a) that the SPA was merely a preliminary agreement; (b) that, because the SPA was merely a preliminary agreement, it did not create any enforceable obligation with respect to the parties' consummation of the Stock acquisition, but only an obligation to negotiate in good faith the terms of the acquisition that were left open by the SPA¹⁴; or (c) that, because the SPA was merely a preliminary agreement, expectancy damages are not available for breach of the SPA.

14 Plaintiffs and Concordia assert — as part of their argument that they are entitled to dismissal of CIFC's Claim because the SPA was merely a preliminary agreement which created, at most, an enforceable obligation to negotiate in good faith — that the evidence contained in the record establishes that plaintiffs and Concordia satisfied their obligation to negotiate in good faith. However, even assuming, arguendo, that plaintiffs and Concordia had established that the SPA was merely a preliminary agreement, which created an enforceable obligation only to negotiate in good faith, plaintiffs and Concordia have not submitted evidence in support of their motion which would be sufficient to establish, to the preclusion of any issue of fact, that they had satisfied that purported obligation to negotiate in good faith.

Also without merit is plaintiffs' contention that CIFC's Claim, insofar as it seeks expectancy damages, is barred by SPA § 7.2 (c), which provides that:

in no event shall Sellers be liable to [CIFC, Concordia] or any Affiliated Entity or any of their respective successors or assigns pursuant to Article 7 or otherwise for or with respect to Losses to the extent such Losses involve consequential, indirect, incidental or punitive damages claimed by [CIFC], except where such damages are payable by [CIFC, Concordia] or any Affiliated Entity or any of their respective successors or assigns to third parties.

Plaintiffs assert that the expectancy damages which CIFC's Claim seeks are barred by SPA § 7.2 (c) because: the expectancy damages would be calculated as the difference between the fair market value of Concordia at the time of the alleged breach and the price for Concordia agreed upon in the SPA; such damages would be measured primarily by a lost asset's — i.e., Concordia's — projected future income; and so-called "lost asset," or "hybrid," damages are a form of consequential damages, which are precluded by SPA § 7.2 (c).

However, assuming, arguendo, that SPA § 7.2 (c) would bar CIFC from seeking damages on its breach of contract claim that were consequential damages, the expectancy damages which CIFC seeks — in the amount of the difference between the fair market value of the Stock at the time of the purported breach and the price for the Stock agreed upon in the SPA — are general, rather than consequential, damages.

On a cause of action alleging breach of contract, a plaintiff may seek "two distinct categories of damages: (1) general' or market' damages; and (2) special' or consequential' damages" ( Schonfeld v Hilliard, 218 F3d 164, 175 [2d Cir 2000] [applying New York law]; see also Aristocrat Leisure Ltd. v Deutsche Bank Trust Co. Ams., 618 F Supp 2d 280, 292 [SD NY 2009] [applying New York law]). "A plaintiff is seeking general damages when he tries to recover the value of the very performance promised" ( Schonfeld v Hilliard, 218 F3d at 175 [citation and internal quotation marks omitted]). "General damages are sometimes called market' damages because, when the promised performance is the delivery of goods, such damages are measured by the difference between the contract price and the market value of the goods at the time of the breach" ( id. at 175-176).

By contrast, "[s]pecial' or consequential' damages" are those which "seek to compensate a plaintiff for additional losses (other than the value of the promised performance) that are incurred as a result of the defendant's breach" ( id. at 176). Consequential damages may include, inter alia, the lost operating profits of a business, or damages resulting from the loss of "an income-producing asset, the fair market value of which may be based, in whole or in part, on a buyer's projections of what income he could derive from the asset in the future" ( id.). "Damages seeking to recover the market value for a lost income-producing asset have sometimes been referred to as hybrid' damages" ( id.). However, while "[t]he same kind of market-value proof is sometimes required to prove general damages as to prove hybrid' damages for the loss of an income-producing asset," "the two remain analytically distinct" ( id. at 176-177).

Expectancy damages for the breach of a contract for the sale of shares of stock generally include damages calculated as "the difference between the agreed price of the shares and the fair market value [of the shares] at the time of the breach" ( Kovens v Paul, 2009 WL 562280, *4, 2009 US Dist LEXIS 19378, *11 [SD NY] [applying New York law, citation and internal quotation marks omitted], affd 358 Appx 228 [2d Cir 2009]; see also Simon v Electrospace Corp., 28 NY2d 136, 145; Aroneck v Atkin, 90 AD2d 966, 966 [4th Dept 1982]; Oscar Gruss Son, Inc. v Hollander, 337 F3d 186, 197 [2d Cir 2003] [applying New York law]). Here, insofar as CIFC's Claim seeks damages for breach of the SPA in the amount of the difference between the fair market value of the Stock at the time of the alleged breach and the price for the Stock agreed upon in the SPA, those damages would be general damages, because they represent the value of the very performance promised under the SPA, and not consequential damages, which represent lost profits, or lost income from an income-producing asset, or some other loss apart from the value of the very performance promised under the SPA.¹⁵

15 As support for their argument that CIFC's claimed expectancy damages, based upon the market value of the Stock, are consequential rather than general damages, plaintiffs and Concordia rely upon principles set forth in the previously-cited case of Schonfield v Hilliard ( 218 F3d 164 [2d Cir 2000]). However, that case relied substantially, in turn, upon a commentary on damages which includes the illustration that:

. . . some writers might use the term "lost profit" to describe the loss of expected market gain in the very performance promised. This usage may tend to confuse general and special [or consequential] damages, however. For instance, if the plaintiff contracts to purchase Blackacre for $10,000 and at the time of performance its market value is $20,000, then the plaintiff surely has an expectancy; but since that expectancy reflects a market gain in the very performance contracted for, it is an item of general damages, so the "profit" label might best be avoided.

(3 Dan B. Dobbs, Dobbs Law of Remedies § 12.2 [3], at 42 [2d ed 1993].)

Additionally, even assuming, arguendo, that the expectancy damages that CIFC seeks were consequential damages, and within the scope of the bar set forth in SPA § 7.2 (c), that would not preclude CIFC's claim for such damages as against Concordia. Although SPA § 7.2 (c) provides that "in no event shall Sellers [i.e., plaintiffs] be liable to [CIFC]" for losses involving consequential damages, that provision does not preclude any such liability on the part of Concordia to CIFC.

Plaintiffs and Concordia also argue that CIFC may not recover damages representing the market value of the Stock because the parties did not contemplate, at the time when they entered into the SPA, that plaintiffs or Concordia might be liable for such damages if the Stock acquisition contemplated by the SPA were not consummated. It is generally true that a party who seeks consequential damages for a breach of contract "must prove that liability for the loss of the asset was within the contemplation of the parties at the time the contract was made" ( Schonfeld v Hilliard, 218 F3d at 177). However, "[u]pon proof of a breach, the aggrieved party may recover general damages without regard to the contemplation of the parties" ( In re Best Payphones, Inc., 2007 WL 1388103, *9, 2007 Bankr LEXIS 1677, *25 [SD NY Bankr 2007], affd 432 BR 46 [SD NY 2010]). Thus, because the damages which CIFC seeks are general rather than consequential damages, CIFC need not establish, in order to recover those damages, that liability for such damages was within the contemplation of the parties at the time when they entered into the SPA.

Plaintiffs and Concordia assert that CIFC's Claim should be dismissed insofar as it seeks expectancy damages — even if the SPA did create a binding obligation to consummate the Stock sale, and even if the claim is not precluded by the SPA's bar against consequential damages — because the amount of such damages, calculated as the difference between the fair market value of the Stock at the time of the purported breach and the price for the Stock agreed upon in the SPA, would be equal to zero. Plaintiffs and Concordia assert that, under New York law, where there is a recent sale price for an asset that has been reached as the result of arm's-length negotiations, that sale price must be the basis for determining the asset's fair market value. Thus, plaintiffs and Concordia contend, the price that was agreed upon for the Stock in the SPA, which was the product of arm's-length negotiations, was also the fair market value of the Stock at the time of the alleged breach.

As plaintiffs and Concordia argue, the price for the Stock that was agreed upon in the SPA would constitute evidence as to the fair market value of the Stock at the time of the purported breach. However, inasmuch as nearly five months had elapsed between January 18, 2008, when the parties executed the SPA, and June 6, 2008, when plaintiffs allegedly breached the SPA by wrongfully attempting to terminate that agreement, it would be premature to determine on this motion, as a matter of law, that the fair market value of the Stock at the time of the purported breach must necessarily be deemed to be equal to the price for the Stock that was agreed upon in the SPA.

Plaintiffs and Concordia argue that CIFC's Claim should be dismissed as against Concordia, individually, because it: (1) was not a party to the SPA ( see Pl. and Concordia's Amended Mem. of Law, at 27); and (2) did not owe to CIFC any of the contractual obligations that were allegedly breached, e.g., the obligations to prepare and deliver the Schedules, to refrain from wrongfully terminating the SPA, and to tender the Stock to CIFC. However, Concordia did execute, and was a party to, the SPA. Furthermore, CIFC's Claim adequately alleges that Concordia breached obligations which it owed to CIFC pursuant to the provisions of the SPA.

SPA § 5.1 (a) provided that "Sellers shall, and shall cause [Concordia] to, permit [CIFC] and its counsel, accountants and other representatives . . . access, upon reasonable notice and during normal business hours throughout the period prior to the Closing, to the books and records, Contracts and other documents of [Concordia]. . . ." CIFC's Claim alleges: that, pursuant to the foregoing section, "[Concordia] was required to permit [CIFC] and its agents [such] access . . . throughout the period prior to the Closing"; that Concordia "consistently failed to meet [its] obligations under the SPA"; that "[t]he actions and inactions of . . . [Concordia] frustrated and prevented . . . [CIFC] from completing its Pre-Acknowledgment Diligence and obtaining its debt and equity financing so that it would be in a position to deliver the Acknowledgment . . ."; that, "[i]n response to [CIFC's] requests that information, charts and documents be . . . prepared and provided, . . . [Concordia] repeatedly failed to furnish the same to [CIFC] . . . and prevented [CIFC] from understanding the Business in fulfillment of its due diligence"; and that Concordia was "dilatory in responding to information requests from [CIFC], ignored several such requests entirely, and continually balked at [CIFC's] suggestions that the parties meet in person to expeditiously resolve open issues and items" (Answer, ¶¶ 46, 51, 54, 58, 66). As previously set forth, SPA § 3.20 required Concordia to provide to CIFC copies of the insurance policies which were listed on Schedule 3.20, which became a part of Schedule 3.20, and which had not all been received by CIFC more than 30 days prior to the date when plaintiffs wrongfully purported to terminate the SPA by means of the Termination Notice.

Also as previously set forth, Concordia: (a) represented, pursuant to SPA § 3.4, that the SPA "is, and each of the other agreements, instruments and documents of [Concordia] contemplated hereby will be when executed and delivered by [Concordia], the valid and binding obligations of [Concordia], enforceable against [Concordia] in accordance with their respective terms"; and (b) agreed, pursuant to SPA § 5.5, that, "[f]rom the date of [the SPA] until the Closing Date or the earlier termination of this Agreement in accordance with its terms," Concordia would "act in good faith and use reasonable efforts to obtain the satisfaction of the conditions specified in [the SPA] and to take all such other actions reasonably necessary or advisable to consummate the transactions contemplated [t]hereby." CIFC's Claim alleges that Concordia "breached the implied covenant of good faith and fair dealing, as well as [its] express contractual obligations under [SPA § ] 5.5 to act in good faith and use all reasonable efforts to obtain satisfaction of the conditions specified in the SPA and to take all actions reasonably necessary or advisable to consummate the transactions contemplated by the SPA," and that "[Concordia's] continuing breaches rendered Buyer unable to deliver the Acknowledgment and complete the Sensitive Diligence" (Answer, ¶¶ 80, 82).

Accordingly, the averments of CIFC's Claim adequately allege that Concordia breached obligations that it had assumed pursuant to the provisions of the SPA, and plaintiffs and Concordia have failed to establish that CIFC's Claim, insofar as it is asserted against Concordia, should be dismissed.

CONCLUSION, ORDER AND JUDGMENT

For the foregoing reasons, it is hereby

ORDERED that the motion by defendants and third-party plaintiff CIFC Acquisition Corp. (CIFC) for summary judgment dismissing the complaint as against them, and granting judgment in CIFC's favor as to plaintiffs' and third-party defendant Concordia International Forwarding Corp.'s (Concordia's) liability on CIFC's counterclaim/third-party claim is granted, but only in part, with respect to the complaint's first cause of action — which seeks a judgment declaring that plaintiffs' termination of the Stock Purchase Agreement (the SPA), entered into as of January 18, 2008, by means of a notice contained in a letter mistakenly dated June 3, 2008, but actually transmitted on June 6, 2008 (the Termination Notice), was proper, and that the SPA was effectively terminated by the Termination Notice — and only to the extent that a declaratory judgment is issued herewith in defendants' favor on the first cause of action, and the motion is otherwise denied; and it is further

ADJUDGED and DECLARED that plaintiffs' purported termination of the SPA by means of the Termination Notice was not authorized under SPA § 8.1 (e); and it is further

ORDERED that plaintiffs' and Concordia's cross motion for summary judgment is denied in its entirety.