PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT
CALDERWOOD & HARKNESS LLP 425 Park Avenue, 33rd Floor New York, NY 10022
MEMORANDUM
TO: Linda Osei, Responsible Partner
FROM: Jeffrey Park, Lead Associate
DATE: October 28, 2024
RE: Allocation of Permitting Responsibilities Under MCA § 5.3 — Response to Meridian's Owner-Caused Delay Defense
MATTER: Northgate Telecommunications PLC — Defense of Meridian Infrastructure Partners LLC Construction Dispute
MATTER NO.: 1022-00005
COURT: Supreme Court of the State of New York, New York County, Commercial Division, Index No. 654321/2024
Right-click to update Table of Contents
I. Executive Summary
The purpose of this memorandum is to analyze whether the municipal permits required for the fiber build-out program at issue in this litigation were the responsibility of Northgate Fiber Americas Inc. ("NFA" or the "Owner") or Meridian Infrastructure Partners LLC ("Meridian" or the "Contractor") under Section 5.3 of the Master Construction Agreement dated March 15, 2020 (the "MCA"). This question stands at the center of Meridian's primary affirmative defense and is critical to the viability of both Meridian's claims and Northgate's counterclaims.
Meridian, in its February 2, 2024 response to Cure Notice No. 1, signed by its General Counsel Victor Sandoval, and again in its Verified Complaint filed July 15, 2024 (Count I — Wrongful Termination), asserts that NFA's failure to timely obtain municipal permits was a principal cause of delay on the project, thereby excusing Meridian's missed milestones and rendering Northgate's April 1, 2024 termination for cause under MCA § 14.1 unjustified. This defense, if credited by the court, would have cascading implications across the litigation — potentially converting the termination into one for convenience under MCA § 14.3 (triggering an 8% termination fee on the unperformed contract value), undermining Northgate's $49 million liquidated damages counterclaim, and bolstering Meridian's $200 million affirmative claim.
Based on my analysis of the contractual text, the parties' course of performance, deposition testimony, and contemporaneous documentary evidence produced in discovery, I conclude as follows:
MCA § 5.3, properly construed under its plain language, places the obligation to obtain the vast majority of municipal construction permits — including street-opening permits, right-of-way permits, utility installation permits, environmental permits, and railroad crossing permits — Squarely on the Contractor (Meridian). NFA's obligations under § 5.3 are limited to securing certain overarching franchise agreements and governmental licenses that authorize NFA to operate as a telecommunications provider in the relevant jurisdictions, along with FCC licenses and state public utility commission certifications. The contractual text is unambiguous in this allocation. Moreover, the parties' course of performance throughout Phase 1 of the project — during which Meridian obtained hundreds of municipal construction permits on its own without asserting that these fell within NFA's scope — confirms the parties' shared understanding that municipal construction permits were Contractor Permits. Finally, the documentary evidence demonstrates that Meridian's permitting delays during Phase 2, which form the core of its defense, were attributable to Meridian's own decision to reduce its permitting staff from twelve specialists to six as part of cost-cutting measures, not to any failure by NFA to perform its obligations under the MCA.
In sum, Meridian's permitting defense lacks support in the contract, in the parties' course of dealing, and in the documentary record. This memorandum sets forth the analysis supporting that conclusion and provides recommendations for further discovery and evidentiary development.
II. Background
A. The Master Construction Agreement
The MCA was executed on March 15, 2020 between Northgate Fiber Americas Inc. ("NFA"), a wholly owned subsidiary of Northgate Telecommunications PLC, as Owner, and Meridian Infrastructure Partners LLC, a portfolio company of Ridgepoint Capital Group LP, as Contractor. The MCA is a comprehensive construction agreement governing the design, engineering, permitting, and construction of approximately 18,500 route miles of underground and aerial fiber-optic cable across seven states: New York, New Jersey, Connecticut, Massachusetts, Pennsylvania, Maryland, and Virginia. The project, known internally as the "NFA Northeast Fiber Build-Out Program," represented one of the largest private fiber construction initiatives in the northeastern United States at the time of execution.
The total Contract Price under the MCA is $1.2 billion, structured as a hybrid compensation arrangement consisting of sixty-five percent (65%) fixed-price milestones and thirty-five percent (35%) unit-rate pricing. This structure was negotiated to allocate schedule risk to Meridian (through the fixed-price milestone component) while providing flexibility for route-mile variations (through the unit-rate component). The MCA has a five-year term commencing from the date of Notice to Proceed ("NTP"), which was issued on April 1, 2020, establishing an original completion date of March 31, 2025.
The MCA is governed by the laws of the State of New York, as specified in MCA § 22.1, without regard to conflicts of law principles. Disputes arising under the MCA are subject to the jurisdiction of the courts of the State of New York, County of New York. The MCA contains fourteen (14) defined milestones under MCA § 8.2, each with specific completion dates, scope descriptions, and associated payment values. These milestones are organized across three phases corresponding to geographic regions within the seven-state project footprint.
The MCA was negotiated over a period of approximately nine months, with both parties represented by experienced outside counsel and supported by industry consultants. The permitting provisions of § 5.3, including the Division of Responsibilities Matrix at Exhibit D, were the subject of extensive negotiation, as evidenced by multiple redline exchanges produced in discovery.
B. Meridian's Permitting Defense
Meridian's permitting defense first emerged formally in its February 2, 2024 response to Cure Notice No. 1, which NFA issued on January 15, 2024 following Meridian's failure to meet multiple Phase 2 milestones and its significant delay in mobilizing for Phase 3. In that response, signed by Meridian's General Counsel Victor Sandoval, Meridian asserted that delays in the project were "principally attributable to NFA's failure to timely obtain municipal permits, which were Owner's responsibility under MCA § 5.3." Sandoval's letter specifically contended that NFA bore responsibility for right-of-way access agreements and municipal construction permits across all seven states in the project footprint, and that NFA's purported delays in securing these authorizations caused cascading impacts on Meridian's milestone schedule.
Meridian reiterated and expanded this defense in its Verified Complaint, filed on July 15, 2024 in the Supreme Court of the State of New York, New York County, Commercial Division. Count I of the Verified Complaint (Wrongful Termination) and Count IV (Breach of the Implied Covenant of Good Faith and Fair Dealing) depend heavily on the theory that NFA's termination for cause on April 1, 2024 was pretextual and that Owner-caused delays — particularly permitting delays — excused Meridian's non-performance. Meridian further articulated its permitting grievances in its March 5, 2024 Corrective Action Plan, which was submitted pursuant to the cure provisions of MCA § 14.1(b) but which NFA rejected as inadequate on March 20, 2024.
The significance of Meridian's permitting defense to the overall litigation cannot be overstated. If the court credits Meridian's position that NFA was responsible for municipal construction permits and that NFA failed to timely secure them, several adverse consequences would follow for Northgate's position. First, it could undermine Northgate's termination-for-cause theory under MCA § 14.1, potentially converting the termination into one for convenience under MCA § 14.3. A termination for convenience would trigger the 8% termination fee specified in MCA § 14.3(c), calculated on the unperformed contract value of approximately $630.3 million, yielding a termination fee of approximately $50,424,000. Second, Meridian's affirmative claim of $200 million in damages — encompassing lost profits, demobilization costs, and consequential damages — would gain significant traction if the court were to find that NFA, rather than Meridian, was the cause of the project's delays.
C. Relevance to Claims and Counterclaims
The permitting allocation issue intersects with virtually every claim and counterclaim in this litigation, making its resolution a threshold question for the case as a whole.
Meridian's $200 Million Claim. Meridian's Verified Complaint asserts five counts, but Counts I (Wrongful Termination, seeking $126 million) and IV (Breach of Implied Covenant, seeking $74 million) depend most heavily on the theory that Northgate's termination was pretextual and that Owner-caused delays — principally permitting delays — excused Meridian's performance failures. If the permitting defense fails, the factual predicate for these counts is substantially weakened, as Meridian would need to rely on its other, less developed theories of Owner-caused delay (principally the constructive change order defense, which is addressed in a separate memorandum).
Northgate's Counterclaims ($149 Million Total). Counterclaim I seeks $49 million in liquidated damages under MCA § 9.1, assessed at the rate of $175,000 per day per milestone for "unexcused delay." The definition of "unexcused delay" in MCA § 9.1(b) expressly excludes delays caused by Owner's failure to timely perform its obligations under the MCA. If Meridian can establish that some or all of the permitting delays were Owner-caused, it could argue that a portion of the delay days underlying the LD assessments should be reclassified as "excused" and thereby reduce or eliminate the LD exposure. This could affect all five milestone LD assessments — Phase 1 Milestone 3 ($8.225 million), Phase 2 Milestone 5 ($3.85 million), Phase 2 Milestone 6 ($11.9 million), Phase 2 Milestone 7 ($15.925 million), and Phase 2 Milestone 8 ($9.1 million, capped).
Deposition Testimony. The permitting issue has been addressed extensively in deposition testimony taken to date. Renata Voss, NFA's Vice President of Regulatory Affairs, testified at her deposition on November 12–13, 2024 that NFA completed all franchise agreement filings in advance of each phase's planned start date and cooperated fully with Meridian's permitting team. Sean Calloway, NFA's Senior Director of Construction Management, testified on November 19, 2024 that NFA responded to all cooperation requests from Meridian within an average of five business days and maintained a detailed log of all such responses. These depositions provide critical support for Northgate's position, as discussed in further detail in Sections V and VI below.
III. Text of MCA § 5.3 — Permitting Obligations
A. Full Reproduction of Section 5.3
The allocation of permitting responsibilities between the Owner and the Contractor is governed by MCA § 5.3, entitled "Permits and Licenses." This section is divided into four subsections, each of which addresses a distinct aspect of the permitting framework. The full text of each subsection, as it appears in the executed MCA, is reproduced below.
Section 5.3(a) — "Owner Permits." Section 5.3(a) provides as follows:
"Owner shall be responsible for obtaining and maintaining, at its own cost and expense, all Owner Permits. As used herein, 'Owner Permits' shall mean: (i) franchise agreements with state and municipal authorities authorizing Owner to operate a telecommunications network within the applicable jurisdiction; (ii) licenses and registrations with the Federal Communications Commission ('FCC') required for Owner to operate the Fiber Network; and (iii) certifications or registrations with the applicable state public utility commission or equivalent regulatory body in each State within the Project footprint. Owner shall use commercially reasonable efforts to obtain all Owner Permits prior to the commencement of the applicable Phase of Work."
The definition of "Owner Permits" is specific and exhaustive. It encompasses three categories of governmental authorization, each of which pertains to NFA's right to operate as a telecommunications provider rather than to the physical construction of the fiber network. Franchise agreements authorize NFA to provide telecommunications services within a given jurisdiction. FCC licenses and registrations pertain to NFA's authority to operate communications facilities under federal law. State public utility commission certifications relate to NFA's status as a regulated or registered telecommunications carrier in each state. None of these categories encompasses the street-level, project-specific permits required for the actual construction, installation, or testing of fiber-optic infrastructure.
Section 5.3(b) — "Contractor Permits." Section 5.3(b) provides as follows:
"Contractor shall be responsible for obtaining and maintaining, at its own cost and expense, all Contractor Permits. As used herein, 'Contractor Permits' shall mean all permits, licenses, approvals, and authorizations required for the performance of the Work, other than Owner Permits, including without limitation street-opening permits, road-crossing permits, right-of-way use permits, utility installation permits, environmental permits, railroad crossing permits, and any other permits or approvals required by any Governmental Authority for the construction, installation, or testing of the Fiber Network."
The definition of "Contractor Permits" stands in deliberate contrast to "Owner Permits." While Owner Permits are limited to three enumerated categories, Contractor Permits are defined by a broad, inclusive formulation — "all permits, licenses, approvals, and authorizations required for the performance of the Work, other than Owner Permits" — followed by an illustrative list of specific permit types and capped by a sweeping catch-all clause. The breadth of this definition is critical to the present analysis and is discussed in detail in Section IV.A below.
Section 5.3(c) — "Owner Cooperation." Section 5.3(c) provides as follows:
"Owner shall cooperate with Contractor and provide reasonable assistance, including provision of franchise documentation and corporate authorizations, as reasonably required by Governmental Authorities in connection with Contractor's applications for Contractor Permits. Owner's obligation to cooperate under this Section 5.3(c) shall not be construed as imposing upon Owner any obligation to obtain Contractor Permits or to assume responsibility for the timeliness or outcome of Contractor's permit applications."
This subsection explicitly addresses the practical reality that certain municipal permitting authorities may require documentation from the network owner — such as proof of franchise authorization or a letter on the owner's letterhead — in connection with the contractor's permit applications. Critically, the subsection contains an express disclaimer: NFA's cooperation obligation "shall not be construed as imposing upon Owner any obligation to obtain Contractor Permits or to assume responsibility for the timeliness or outcome of Contractor's permit applications." This disclaimer directly anticipates and refutes the very argument Meridian now advances.
Section 5.3(d) — "Contractor's Obligation to Diligently Pursue Permits." Section 5.3(d) provides as follows:
"Contractor shall use commercially reasonable efforts to apply for and obtain all Contractor Permits in a timely manner consistent with the Milestone Schedule. Contractor shall include in its project schedule sufficient lead time for permit acquisition, taking into account typical processing times of the applicable Governmental Authorities. Contractor shall promptly notify Owner of any material delays in the issuance of Contractor Permits and shall take all reasonable steps to mitigate the impact of any such delays on the Milestone Schedule."
This subsection underscores that the permit acquisition timeline is Meridian's responsibility, that Meridian was expected to build sufficient lead time into its project schedule for the permitting process, and that Meridian was obligated to mitigate any permitting delays that arose. The "commercially reasonable efforts" standard is a meaningful obligation under New York law, and Meridian's decision to cut its permitting staff in half during Phase 2, as discussed in Section V.C below, raises serious questions about whether Meridian satisfied this standard.
B. Related Provisions
Several other provisions of the MCA are relevant to the permitting allocation issue and reinforce the interpretation set forth above.
MCA § 8.2 — Milestone Schedule. The Milestone Schedule, set forth in MCA § 8.2 and detailed in Exhibit C, establishes fourteen milestone dates with corresponding scope descriptions and payment values. The milestone dates were developed with the assumption that Meridian would diligently obtain all Contractor Permits in accordance with § 5.3(d). The Milestone Schedule does not contain any express contingency or buffer for delays attributable to Owner's performance of its permitting obligations. This omission is consistent with the narrow scope of Owner Permits, which — as overarching franchise agreements and regulatory authorizations — were expected to be in place well in advance of construction commencement for each phase, rather than obtained on a rolling basis like municipal construction permits.
MCA § 9.1 — Liquidated Damages. MCA § 9.1 imposes liquidated damages at the rate of $175,000 per day per milestone for "unexcused delay" in achieving milestones. Section 9.1(b) defines "unexcused delay" as "any delay in the achievement of a Milestone that is not an Excused Delay." "Excused Delay" is defined, in relevant part, as a delay caused by "Owner's failure to timely perform its obligations under this Agreement." The interaction between § 9.1 and § 5.3 is thus direct: if the court determines that specific permitting delays were caused by NFA's failure to perform its permitting obligations under § 5.3, those delay days could potentially be excluded from the LD calculation. Conversely, if the court confirms that the disputed permits were Contractor Permits, then any permitting delays are Contractor-caused and fully subject to LDs.
MCA § 16.1 — Change Orders. MCA § 16.1 provides that any change to the scope of Work under the MCA, including any change to the allocation of permitting responsibilities, must be documented through a written Change Order signed by authorized representatives of both parties. No Change Order modifying the permitting allocation of § 5.3 was ever executed. This is significant because Meridian now contends that the parties' understanding of permitting responsibilities differed from the contractual text — yet Meridian never sought to formalize any alternative arrangement through the Change Order process prescribed by the MCA.
MCA Exhibit D — Division of Responsibilities Matrix. Exhibit D to the MCA contains a detailed Division of Responsibilities Matrix that line-items each category of permit, license, and authorization required for the project and assigns responsibility for each to either the Owner or the Contractor. The Matrix is incorporated into the MCA by reference pursuant to MCA § 1.2 and was negotiated as an integral part of the permitting framework. The assignments in the Matrix are fully consistent with the text of § 5.3, as detailed in Section IV.D below.
IV. Contractual Analysis — Plain Language Interpretation
A. The "Contractor Permits" Definition Is Broad and Comprehensive
The definition of "Contractor Permits" in MCA § 5.3(b) is drafted with deliberate breadth and comprehensiveness. Three features of the definition, taken together, leave no room for Meridian's argument that municipal construction permits fall outside the scope of Contractor Permits.
First, the opening clause of the definition uses expansive, all-encompassing language: "all permits, licenses, approvals, and authorizations required for the performance of the Work, other than Owner Permits." The word "all" is categorical. The phrase "required for the performance of the Work" encompasses every permit necessary to execute the construction scope defined elsewhere in the MCA. The sole exclusion — "other than Owner Permits" — carves out only the three narrow categories of franchise agreements, FCC licenses, and state PUC certifications. Everything else falls to Meridian.
Second, the definition includes an illustrative list of specific permit types that are expressly designated as Contractor Permits: street-opening permits, road-crossing permits, right-of-way use permits, utility installation permits, environmental permits, and railroad crossing permits. These are precisely the categories of permits that Meridian now claims were NFA's responsibility. The inclusion of "right-of-way use permits" in this list is particularly significant, as it directly refutes Meridian's central allegation that ROW permits were an Owner obligation. The use of the phrase "including without limitation" before the list confirms that the enumerated items are merely examples and do not limit the scope of the broader definition.
Third, the definition concludes with a catch-all clause: "and any other permits or approvals required by any Governmental Authority for the construction, installation, or testing of the Fiber Network." This catch-all is designed to capture any permit type not specifically enumerated — ensuring that there is no gap in coverage and that every construction-related permit is classified as a Contractor Permit. The catch-all extends beyond construction to include permits required for "installation" and "testing" of the Fiber Network, covering the full lifecycle of the construction scope.
Under well-established New York contract interpretation principles, where the language of a contract is clear and unambiguous, the court will enforce it according to the plain and ordinary meaning of its terms. See Greenfield v. Philles Records, Inc., 98 N.Y.2d 562, 569 (2002) ("A written agreement that is complete, clear and unambiguous on its face must be enforced according to the plain meaning of its terms."); W.W.W. Assocs., Inc. v. Giancontieri, 77 N.Y.2d 157, 162 (1990). The definition of "Contractor Permits" in MCA § 5.3(b) is clear, unambiguous, and comprehensive. There is no reasonable reading of this provision under which municipal construction permits — the very permits listed as illustrative examples — could be interpreted as falling outside Meridian's responsibility.
B. "Owner Permits" Are Narrowly Defined
In contrast to the broad and inclusive definition of Contractor Permits, the definition of "Owner Permits" in MCA § 5.3(a) is narrow, specific, and exhaustive. Owner Permits are limited to exactly three categories:
(i) franchise agreements with state and municipal authorities authorizing NFA to operate a telecommunications network within the applicable jurisdiction;
(ii) FCC licenses and registrations required for NFA to operate the Fiber Network; and
(iii) state public utility commission certifications or registrations.
Each of these categories represents an overarching governmental authorization that pertains to NFA's legal right to operate as a telecommunications provider. Franchise agreements grant NFA the general right to place telecommunications facilities within a given jurisdiction's public rights-of-way. FCC licenses relate to NFA's authority to operate communications infrastructure under federal telecommunications law. State PUC certifications or registrations pertain to NFA's status as a regulated or registered carrier in each state. None of these authorizations is a construction-specific permit. None authorizes excavation, trenching, cable pulling, aerial strand installation, or any other construction activity that constitutes the "Work" under the MCA.
The distinction between Owner Permits and Contractor Permits reflects the standard allocation in the telecommunications construction industry. The network owner — the entity that will operate the network once constructed — secures the franchise and regulatory authorizations that establish its right to operate. The construction contractor — the entity that performs the physical work of building the network — secures the project-specific, location-specific, and activity-specific permits needed for construction. This allocation is logical, efficient, and well understood in the industry, and it is precisely the allocation embodied in MCA § 5.3.
C. The "Cooperation" Clause (§ 5.3(c)) Does Not Shift Permitting Responsibility
Meridian is expected to argue that NFA's cooperation obligation under MCA § 5.3(c) effectively imposed on NFA a duty to obtain municipal construction permits, or at least to play a role in the permitting process that went beyond mere cooperation. This argument fails for several independent reasons.
First, the text of § 5.3(c) defines NFA's cooperation obligation as providing "reasonable assistance, including provision of franchise documentation and corporate authorizations, as reasonably required by Governmental Authorities in connection with Contractor's applications for Contractor Permits." The phrase "Contractor's applications for Contractor Permits" is dispositive. It confirms that the applications are Contractor's applications and that the permits sought are Contractor Permits. NFA's role is to assist Meridian in Meridian's own permitting process — not to conduct that process on Meridian's behalf.
Second, § 5.3(c) contains an express disclaimer, quoted in full in Section III.A above, providing that NFA's cooperation obligation "shall not be construed as imposing upon Owner any obligation to obtain Contractor Permits or to assume responsibility for the timeliness or outcome of Contractor's permit applications." This language directly and unambiguously forecloses the argument that NFA's cooperation duty shifted any aspect of permitting responsibility from Meridian to NFA. The parties negotiated and agreed to this disclaimer, and the court must give it effect. See Vermont Teddy Bear Co. v. 538 Madison Realty Co., 1 N.Y.3d 470, 475 (2004) (courts must give effect to all provisions of a contract and must not adopt an interpretation that would render any term meaningless).
Third, New York courts consistently distinguish between a duty to cooperate — which supports the other party's performance of its own obligations — and an independent duty to perform the underlying obligation. See Dalton v. Educational Testing Serv., 87 N.Y.2d 384, 389 (1995) (implied covenant of good faith and fair dealing encompasses duty of cooperation but does not create independent substantive duties). A cooperation duty is inherently ancillary. NFA's obligation to provide franchise documentation and execute authorizations as needed by municipal permitting authorities was a supporting obligation — it facilitated Meridian's performance of its permitting duties but did not transform those duties into Owner obligations.
D. MCA Exhibit D — Division of Responsibilities Matrix
The Division of Responsibilities Matrix in Exhibit D provides granular, line-item confirmation of the permitting allocation established in § 5.3. The Matrix was negotiated between the parties as an integral component of the MCA and is incorporated by reference pursuant to MCA § 1.2. The relevant entries in the Matrix are as follows:
The Matrix leaves no room for dispute. Every category of municipal construction permit identified in this litigation — including the ROW permits that are the centerpiece of Meridian's defense — is expressly assigned to the Contractor. The three categories of Owner responsibility correspond exactly to the Owner Permits defined in § 5.3(a).
The Matrix was negotiated between the parties over the course of multiple drafting sessions. Both parties were represented by experienced counsel and supported by industry consultants who understood the significance of the permitting allocation. Meridian's current attempt to recharacterize permits that the Matrix expressly assigns to the Contractor as Owner obligations is inconsistent with the document Meridian negotiated and signed.
V. Course of Performance Evidence
Even if the court were to find any ambiguity in MCA § 5.3 — which we do not believe it should — the parties' course of performance over the first eighteen months of the project provides compelling evidence of the parties' shared understanding that municipal construction permits were Contractor Permits. Under New York law, course of performance evidence is admissible to interpret ambiguous contract terms and is given substantial weight as an indication of what the parties intended their agreement to mean. See Restatement (Second) of Contracts § 202(4); N.Y. U.C.C. § 1-303(a) (defining "course of performance").
A. Meridian Applied for and Obtained Permits Throughout Phase 1
During Phase 1 of the project — which covered the New York Metropolitan area and Northern New Jersey (approximately 3,200 route miles) from April 2020 through September 2021 — Meridian obtained hundreds of municipal construction permits on its own, treating these permits as Contractor Permits in every respect. Meridian's own project records, produced in discovery pursuant to NFA's First Request for Production of Documents, demonstrate the following:
Meridian's permitting team prepared and submitted permit applications directly to municipal authorities across dozens of jurisdictions in New York and New Jersey. These applications were submitted under Meridian's name (or, in certain jurisdictions, under NFA's name at the municipality's requirement, but prepared and prosecuted by Meridian). NFA's involvement in the permitting process during Phase 1 was limited to the cooperation role contemplated by § 5.3(c) — specifically, providing copies of franchise agreements and, where requested, signing letters of authorization confirming Meridian's authority to act on NFA's behalf in connection with permit applications.
The Phase 1 scope carried a milestone value of approximately $208 million. Of the four Phase 1 milestones (Milestones 1 through 4), Milestones 1, 2, and 4 were completed on time. Milestone 3 was completed forty-seven (47) days late. Significantly, Meridian did not assert permitting delays as a cause of the Milestone 3 delay at the time. Meridian's contemporaneous correspondence with NFA attributed the Milestone 3 delay to subcontractor performance issues — specifically, the inability of Meridian's directional boring subcontractor, Precision Underground LLC, to meet production targets in the congested urban environments of lower Manhattan and Hoboken. It was only after the relationship between the parties began to deteriorate during Phase 2 that Meridian retroactively recharacterized permitting delays as a material cause of project slippage.
This contemporaneous treatment of permitting during Phase 1 — in which Meridian took ownership of municipal permit acquisition without objection, protest, or claim of Owner responsibility — constitutes powerful course-of-performance evidence. It demonstrates that both parties understood and operated under the premise that municipal construction permits were Contractor Permits.
B. Meridian's Permitting Team and Internal Processes
Discovery has revealed that Meridian maintained a dedicated permitting department within its Northeast Division, specifically organized to support the NFA fiber build-out project. This department was overseen by Marcus Henley, Meridian's Vice President of Field Operations for the Northeast Division. Henley was deposed on December 3–4, 2024, and his testimony provides critical evidence regarding Meridian's internal understanding of its permitting responsibilities.
Henley confirmed that Meridian employed a team of eight to twelve permitting specialists during Phase 1 and the early stages of Phase 2. These specialists were responsible for researching municipal permitting requirements in each jurisdiction within the project footprint, preparing and compiling permit applications, submitting applications to the appropriate municipal authorities, tracking application status and following up with permitting agencies, and responding to requests for additional information or revisions from municipal reviewers. Henley testified that this permitting function was understood within Meridian to be a core Contractor responsibility under the MCA.
Henley further testified that NFA's role in the permitting process was limited to two specific activities, consistent with § 5.3(c): (1) providing copies of executed franchise agreements to Meridian's permitting team for inclusion in permit application packages, and (2) providing occasional letters of authorization when required by a municipality confirming that Meridian was authorized to act on NFA's behalf. Henley stated that, to his knowledge, NFA fulfilled these cooperation obligations promptly and without significant delay.
This testimony from Meridian's own senior operational executive is devastating to Meridian's permitting defense. It confirms that Meridian's internal organizational structure, staffing, and operating procedures were all designed around the premise that municipal construction permitting was Meridian's responsibility — a premise that Meridian now seeks to disclaim.
C. Phase 2 — Meridian's Permitting Delays Were Self-Inflicted
Meridian's permitting defense centers on Phase 2 of the project, which covered Connecticut, Western Massachusetts, and Southern Pennsylvania — a scope encompassing approximately 5,600 route miles. Phase 2 included Milestones 5 through 8, all of which were completed late by significant margins: Milestone 5 was 22 days late, Milestone 6 was 68 days late, Milestone 7 was 91 days late, and Milestone 8 was 134 or more days late (with the final figure still under dispute). Meridian began asserting permitting delay issues during Phase 2, particularly in Connecticut and Western Massachusetts, where municipal permitting processes were admittedly more complex and time-consuming than in the New York and New Jersey jurisdictions covered during Phase 1.
However, the documentary evidence produced in discovery reveals that Meridian's permitting difficulties during Phase 2 were largely self-inflicted. Beginning in mid-2022, Meridian implemented broad cost-cutting measures across its operations, directed by Bridget Yeung, Meridian's Chief Operating Officer. Internal Meridian emails produced in discovery — including emails from Yeung to Henley and other divisional leaders dated June through August 2022 — document a directive to reduce headcount across all support functions, including the permitting department. As a direct result of these cost-cutting measures, Meridian reduced its permitting specialist team from twelve individuals to six — a fifty percent reduction — at precisely the time when the project was transitioning into the more permitting-intensive Phase 2 jurisdictions.
Monthly progress reports submitted by Meridian to NFA during Phase 2 corroborate the impact of this staffing reduction. Beginning in October 2022, Meridian's progress reports began noting "permit acquisition backlogs" and "extended municipal processing times" as contributors to schedule delays. However, internal Meridian emails from the same period — which Meridian was compelled to produce after a discovery motion — reveal that the "permit acquisition backlogs" were caused not by municipal processing times but by Meridian's inability to submit applications on a timely basis due to insufficient staffing. In one particularly revealing email dated November 3, 2022, a Meridian permitting supervisor wrote to Henley: "We are now 6–8 weeks behind on submissions in CT and MA. We simply do not have enough people to keep up with the volume of applications required. The new jurisdictions have significantly more complex requirements than NY/NJ and we need additional resources."
The contrast between Meridian's external narrative (blaming NFA for permitting delays) and its internal communications (acknowledging that the delays resulted from its own staffing decisions) is stark and will be a critical element of Northgate's defense at trial.
Additionally, Sean Calloway's deposition testimony on November 19, 2024 confirmed that NFA fulfilled its cooperation obligations under § 5.3(c) throughout Phase 2. Calloway, NFA's Senior Director of Construction Management, testified that NFA provided franchise documentation and cooperation letters in response to Meridian's requests within an average of five (5) business days. Calloway maintained a detailed log — the "Cooperation Request Tracker" — documenting every cooperation request received from Meridian, the date received, the date NFA responded, and the nature of the response. This log, which has been produced in discovery as NFA Document No. NFA-00045832, shows no instance in which NFA delayed more than ten (10) business days in responding to a cooperation request from Meridian. In the vast majority of instances, NFA responded within three to five business days. This evidence directly refutes any claim that NFA's cooperation failures contributed to Meridian's permitting delays.
D. Phase 3 — Minimal Mobilization, Minimal Permit Activity
Phase 3 of the project covered Maryland, Virginia, and Eastern Pennsylvania, encompassing approximately 9,700 route miles with an associated milestone value of approximately $629 million — representing the largest and most valuable phase of the project. However, by the time of NFA's April 1, 2024 termination for cause, Meridian had constructed only approximately 340 of the 9,700 planned route miles — a completion rate of approximately 3.5 percent. This minimal mobilization is itself strong evidence of Meridian's overall failure to perform, independent of the permitting issue.
During Phase 3, Meridian submitted payment applications totaling $48.2 million for work performed. NFA approved and paid $31.7 million of this amount, disputing $16.5 million on grounds that include lack of adequate documentation, non-conforming work, and overbilling (these disputed amounts are the subject of Meridian's Count II for breach of the payment provisions and are addressed in a separate memorandum).
With respect to permitting specifically, documentary evidence shows that Meridian had applied for permits in only a small fraction of Phase 3 jurisdictions as of the termination date, consistent with its minimal overall mobilization for this phase. Critically, NFA had already secured all necessary franchise agreements for Maryland, Virginia, and Eastern Pennsylvania jurisdictions well before Phase 3 was scheduled to commence. Renata Voss's deposition confirmed that all Phase 3 franchise agreements were executed and delivered to Meridian's permitting team no later than June 2023, approximately four months before Phase 3 construction activities were initially scheduled to begin. There is no evidence — and Meridian has not alleged — that any Phase 3 permitting delay was caused by the absence of an NFA franchise agreement.
The Phase 3 evidence thus undercuts Meridian's narrative in two ways. First, it demonstrates that Meridian's failure to make meaningful progress on Phase 3 was not attributable to permitting issues at all, but rather to a broader failure to mobilize adequate resources — a failure consistent with the pattern of understaffing and cost-cutting identified in Phase 2. Second, it confirms that NFA fulfilled its Owner Permit obligations for Phase 3 well in advance, eliminating any arguable link between NFA's performance and Meridian's Phase 3 failures.
VI. Meridian's Specific Permitting Allegations and Rebuttal
Meridian has advanced several specific permitting-related allegations in its pleadings, deposition testimony, and correspondence. Each is addressed in turn below.
A. Allegation: NFA Failed to Obtain Right-of-Way Agreements
Meridian alleges that NFA was responsible for obtaining right-of-way ("ROW") agreements with municipalities, and that NFA's delays in securing these agreements cascaded into construction delays. This allegation appears in Meridian's February 2, 2024 response to Cure Notice No. 1 and is reiterated in Paragraphs 47–53 of the Verified Complaint.
Rebuttal. This allegation is squarely refuted by the plain text of MCA § 5.3(b), which expressly lists "right-of-way use permits" among the enumerated categories of Contractor Permits. The contractual distinction between franchise agreements (Owner Permits) and ROW use permits (Contractor Permits) is logical and well understood in the telecommunications construction industry. A franchise agreement grants the telecommunications provider a general authorization to place facilities within a jurisdiction's public rights-of-way. An ROW use permit, by contrast, is a project-specific, location-specific authorization to use a particular segment of public right-of-way for construction activities — it specifies the streets, blocks, or segments where work will be performed, the duration of the permitted work, and any conditions or restrictions imposed by the municipality. The franchise agreement is a prerequisite to applying for the ROW use permit, but the two are fundamentally different instruments serving different purposes.
Exhibit D of the MCA confirms this allocation in its Division of Responsibilities Matrix, which expressly assigns "Right-of-way use permits" to the Contractor. Meridian negotiated and agreed to this Matrix. Its attempt to recharacterize ROW use permits as Owner obligations is directly contradicted by the document it signed.
B. Allegation: NFA Franchise Agreements Were Obtained Late, Preventing Meridian from Applying for Permits
Meridian may argue — and has hinted at in discovery — that even though Contractor Permits were Meridian's responsibility, NFA's late delivery of franchise agreements prevented Meridian from applying for those permits because municipalities required proof of franchise authorization as a prerequisite to accepting permit applications. Under this theory, the root cause of Meridian's permitting delays was NFA's failure to timely secure franchise agreements, even though the permits themselves were technically Contractor Permits.
Rebuttal. This argument fails on the facts. The evidence demonstrates that NFA's franchise agreements were in place well in advance of each phase's planned start date:
• Phase 1 (New York and New Jersey): All franchise agreements were executed before Phase 1 commenced in April 2020.
• Phase 2 (Connecticut, Massachusetts, and Pennsylvania): All franchise agreements were executed before Phase 2 commenced. NFA's records show that franchise agreements for Connecticut were completed by February 2021, for Western Massachusetts by April 2021, and for Southern Pennsylvania by March 2021 — each months in advance of the Phase 2 start dates for those regions.
• Phase 3 (Maryland, Virginia, and Eastern Pennsylvania): All franchise agreements were executed no later than June 2023, approximately four months before Phase 3 construction was initially scheduled to begin.
Renata Voss testified at her deposition on November 12–13, 2024 that NFA's regulatory team completed all franchise agreement filings and obtained all necessary authorizations in advance of each phase's planned start date. Voss specifically testified that NFA provided copies of all executed franchise agreements to Meridian's permitting team promptly upon execution and that, to her knowledge, there was no instance in which Meridian was unable to apply for a municipal permit due to the absence of an NFA franchise agreement.
This testimony is consistent with Sean Calloway's testimony and with NFA's Cooperation Request Tracker, which documents NFA's timely provision of franchise documentation in response to Meridian's requests.
To further strengthen the evidentiary record on this point, we should pursue corroboration through the third-party subpoenas already issued to three municipal permitting authorities, as noted in Yuki Nakamura's October 20, 2024 memorandum regarding third-party subpoenas. These subpoenas seek, among other things, records showing whether any permit application submitted by Meridian was rejected or delayed due to the absence of a valid franchise agreement. If such records confirm that no application was rejected for this reason, Meridian's late-franchise-agreement theory would be definitively foreclosed.
C. Allegation: Certain Municipalities Required Owner (Not Contractor) to Be the Permit Applicant
Meridian may assert that certain municipalities in Connecticut and Massachusetts required the telecommunications network owner (NFA) — rather than the construction contractor (Meridian) — to be the named applicant on permit applications. Under this theory, those specific permits were de facto Owner Permits because the municipality would not accept an application from Meridian.
Rebuttal. MCA § 5.3(c) directly addresses this exact scenario. The cooperation clause requires NFA to provide "corporate authorizations" and documentation "as reasonably required by Governmental Authorities in connection with Contractor's applications for Contractor Permits." In municipalities where the permitting authority requires the network owner to be the named applicant, § 5.3(c) obligates NFA to sign the application as the named applicant. However, this ministerial act does not shift the underlying permitting responsibility from Meridian to NFA. Meridian remains responsible for identifying the permit requirement, preparing the application, assembling the supporting documentation, submitting the application, and prosecuting it through the municipal review process. NFA's role is limited to providing the signature or authorization that the municipality requires.
Sean Calloway's deposition confirmed that, in the handful of municipalities where NFA was required to be the named applicant, NFA signed applications within the timeframe requested by Meridian. Calloway testified that he was personally aware of approximately eight to ten municipalities in Connecticut and four to five in Massachusetts that had this requirement, and that in each instance, NFA executed the necessary application documents within the turnaround time requested by Meridian's permitting team. Calloway stated that there were no instances in which NFA refused or unreasonably delayed its execution of such applications.
Moreover, industry practice in telecommunications construction uniformly treats the named-applicant requirement as a ministerial or administrative matter that does not alter the fundamental allocation of permitting responsibility between owner and contractor. This practice is consistent with the approach taken in other large-scale telecommunications construction contracts, a point that Northgate's expert, Dr. Elinor Chazen, may be able to address in her expert report.
D. Allegation: 14 Owner-Directed Scope Changes Affected Permitting
Meridian claims that fourteen (14) unformalized scope changes directed by NFA altered route plans in ways that required new or amended permit applications, causing additional permitting delay. This allegation is the subject of a separate, detailed analysis in the memorandum regarding Meridian's constructive change order defense, but the permitting dimension of this argument warrants brief treatment here.
Rebuttal. Even assuming, arguendo, that NFA directed route changes (which NFA disputes in many instances), the obligation to obtain amended or new permits for revised routes would still fall on Meridian as Contractor Permits under § 5.3(b). A change in the route alignment does not change the nature of the permit — a street-opening permit is a street-opening permit whether the trench is dug on First Street or Second Street. The permit remains a construction-specific, project-specific authorization "required for the performance of the Work," and it therefore remains a Contractor Permit under § 5.3(b) regardless of whether the route was modified by a change order or was part of the original design.
Furthermore, MCA § 16.1 requires that any change to the scope of Work under the MCA, including any change with permitting implications, be documented through a written Change Order signed by authorized representatives of both parties. No written Change Orders were executed for any of the fourteen alleged scope changes. Meridian's failure to follow the Change Order procedure prescribed by the MCA is independently significant and may preclude Meridian from relying on these alleged scope changes as a defense under New York law. See Loral Corp. v. Meridian Group, 558 F.2d 1130, 1138 (2d Cir. 1977) (enforcing contractual change order provisions and holding that party's failure to comply with notice and documentation requirements barred recovery for alleged extra work). The analysis of this issue is set forth in the separate constructive change order memorandum.
VII. Applicable New York Law
A. Contract Interpretation — Plain Meaning Rule
Under New York law, the interpretation of an unambiguous contract is a question of law for the court. W.W.W. Assocs., Inc. v. Giancontieri, 77 N.Y.2d 157, 162 (1990). Where the terms of a contract are clear and unambiguous, the court must enforce the contract according to the plain meaning of its terms, without resort to extrinsic evidence. Greenfield v. Philles Records, Inc., 98 N.Y.2d 562, 569 (2002). The court's role is to give effect to the intent of the parties as expressed in the language of the agreement, and the best evidence of the parties' intent is the contract itself. Ashwood Capital, Inc. v. OTG Mgmt., Inc., 99 A.D.3d 1 (1st Dep't 2012).
MCA § 5.3 is unambiguous in its allocation of permitting responsibilities. The definitions of "Owner Permits" and "Contractor Permits" are clear, specific, and mutually exclusive. The Owner Permits definition enumerates three categories of regulatory authorizations — franchise agreements, FCC licenses, and state PUC certifications — and nothing more. The Contractor Permits definition encompasses "all" other permits required for the Work, including an illustrative list of specific permit types and a catch-all clause. No reasonable reading of these provisions supports the conclusion that municipal construction permits are Owner Permits.
New York courts adhere to the principle that contracts must be interpreted as a whole, giving effect to all provisions and rendering no term surplusage or meaningless. See Vermont Teddy Bear Co. v. 538 Madison Realty Co., 1 N.Y.3d 470, 475 (2004). The deliberate distinction between Owner Permits and Contractor Permits — reflected in the different definitional structures of §§ 5.3(a) and 5.3(b), the express disclaimer in § 5.3(c), and the line-item assignments in Exhibit D — reflects a purposeful allocation negotiated by sophisticated commercial parties. The court should enforce this allocation as written.
B. Course of Performance as Interpretive Aid
Even in the unlikely event that the court were to find some ambiguity in § 5.3, the parties' course of performance during Phase 1 and the early portion of Phase 2 provides an independent basis for interpreting the permitting allocation in Northgate's favor.
New York's Uniform Commercial Code § 1-303(a) defines "course of performance" as "a sequence of conduct between the parties to a particular transaction that exists if: (1) the agreement of the parties with respect to the transaction involves repeated occasions for performance by a party; and (2) the other party, with knowledge of the nature of the performance and opportunity for objection to it, accepts the performance or acquiesces in it without objection." While the UCC applies by its terms to transactions in goods, New York courts regularly look to UCC principles by analogy when interpreting commercial contracts. See Restatement (Second) of Contracts § 202(4) ("Where an agreement involves repeated occasions for performance by either party with knowledge of the nature of the performance and opportunity for objection to it by the other, any course of performance accepted or acquiesced in without objection is given great weight in the interpretation of the agreement.").
During Phase 1 of the project — spanning approximately eighteen months from April 2020 through September 2021 — Meridian obtained hundreds of municipal construction permits across New York and New Jersey without ever asserting that these permits were NFA's responsibility. NFA provided cooperation in accordance with § 5.3(c), and Meridian treated the permits as its own obligation. This repeated, uncontested course of conduct over a substantial period of time constitutes compelling evidence that both parties understood the MCA to assign municipal construction permits to Meridian.
C. Cooperation Clause Does Not Create Independent Duty
New York courts consistently distinguish between a duty to cooperate and a duty to perform. A duty to cooperate supports the other party's performance of its own contractual obligations but does not create an independent substantive obligation on the cooperating party. See Dalton v. Educational Testing Serv., 87 N.Y.2d 384, 389 (1995) (the implied covenant of good faith and fair dealing "embraces a pledge that neither party shall do anything which will have the effect of destroying or injuring the right of the other party to receive the fruits of the contract" but does not create independent duties).
NFA's cooperation obligation under MCA § 5.3(c) is, by its express terms, ancillary to Meridian's primary permitting obligation. The provision requires NFA to cooperate in connection with "Contractor's applications for Contractor Permits." This language confirms that the applications belong to Meridian and that the permits are Contractor Permits. NFA's duty is to assist, not to perform. A breach of NFA's cooperation duty — for example, an unreasonable delay in providing requested franchise documentation — might give rise to a claim against NFA if it could be shown to have actually and proximately caused delay. But the evidence, as discussed in Section V.C above, shows that NFA cooperated fully and timely, typically responding to cooperation requests within three to five business days.
D. Burden of Proof
Meridian bears the burden of proving its affirmative defense that Owner-caused permit delays excused its non-performance. Under New York law, a party asserting an affirmative defense bears the burden of establishing the factual basis for that defense by a preponderance of the evidence. See Ridgeway Capital Markets v. Plapinger, 66 N.Y.2d 90, 95 (1985).
To sustain its permitting defense, Meridian must establish that: (1) specific permitting obligations fell within NFA's scope under the MCA; (2) NFA failed to timely perform those obligations; and (3) NFA's failure was the proximate cause of Meridian's milestone delays. Each of these elements presents significant hurdles for Meridian.
On element (1), the contractual text, Exhibit D, and the course of performance all point overwhelmingly to the conclusion that municipal construction permits were Contractor Permits. On element (2), even if Meridian could identify isolated instances in which NFA's cooperation was delayed (which the evidence does not support), Meridian would need to show a pattern of failure, not merely isolated incidents. On element (3), even if Meridian could show some delay attributable to NFA cooperation issues, it must demonstrate that those specific delays were the proximate cause of its milestone slippage — a particularly high bar given the pervasive and multifaceted nature of Meridian's delays across all phases. The record is replete with other documented causes of Meridian's delays, including quality failures resulting in rework, crew shortages due to Meridian's inability to retain qualified field personnel, subcontractor underperformance, equipment failures, and Meridian's own management and staffing decisions (most notably the decision to reduce permitting staff during Phase 2).
In a concurrent delay scenario, where multiple causes contribute to the same period of delay, Meridian would bear the burden of disaggregating Owner-caused delay from Contractor-caused delay and demonstrating the specific portion of each milestone delay attributable to NFA's conduct. See Corinno Civetta Constr. Corp. v. City of New York, 67 N.Y.2d 297, 309 (1986) (where both parties contribute to delay, a party seeking to recover for delay must establish its entitlement through a critical path analysis or comparable methodology). This is the analysis that Dr. Chazen is currently conducting, and her preliminary findings confirm that Meridian's delays were predominantly Contractor-caused.
VIII. Impact on Liquidated Damages Analysis
The permitting allocation issue has direct and significant implications for Northgate's $49 million liquidated damages counterclaim under MCA § 9.1. This section summarizes the interaction between the permitting defense and the LD analysis.
MCA § 9.1 imposes liquidated damages at the rate of $175,000 per day per milestone for "unexcused delay" in achieving the milestones specified in the Milestone Schedule. The term "unexcused delay" is defined in § 9.1(b) as any delay that does not qualify as an "Excused Delay," which includes, among other things, delays caused by Owner's failure to timely perform its obligations under the MCA. If Meridian could establish that some portion of its milestone delays was attributable to NFA's failure to perform its permitting obligations under § 5.3, those delay days could potentially be reclassified as "Excused Delays" and excluded from the LD calculation.
The total liquidated damages assessed by NFA to date are $49 million, broken down as follows:
The aggregate LD cap under MCA § 9.1(d) is five percent (5%) of the total Contract Price — i.e., 5% × $1,200,000,000 = $60,000,000. The current assessed total of $49 million is below this cap, and accordingly, no cap-related defense is available to Meridian with respect to the aggregate amount.
Northgate's position is that all delay days underlying these LD assessments were Contractor-caused (or Contractor-responsible) and that the LD assessments are fully enforceable. The analysis set forth in this memorandum supports that position. If municipal construction permits are properly classified as Contractor Permits — as the contract unambiguously provides — then any permitting delays are Contractor-caused delays and cannot constitute "Excused Delays" under § 9.1(b).
Dr. Elinor Chazen of Lakeview Consulting Group LLC has been retained as Northgate's delay and damages expert. Dr. Chazen is conducting a critical path analysis of the project schedule to establish that permitting delays, to the extent they occurred, were on Meridian's critical path activities and were caused by Meridian's own understaffing and mismanagement of its permitting function, not by any failure on the part of NFA. Dr. Chazen's preliminary findings, as set forth in her December 20, 2024 memorandum to our team, support the conclusion that Meridian's delays were predominantly Contractor-caused. Specifically, Dr. Chazen's preliminary analysis indicates that:
(a) In Phase 1, the Milestone 3 delay was attributable to subco