Summary
This New York Appellate Division decision resolves a dispute over hotel license agreements where the plaintiffs alleged breach of the implied covenant of good faith and fair dealing after ceasing to use the defendant's brand name and paying licensing fees. The court affirmed the lower court's grant of summary judgment dismissing the implied covenant claim, concluding that the parties intentionally omitted any contractual obligation for the defendant to maintain a first-class hotel standard. The appeal concerning a trial court-directed hearing on liquidated damages was dismissed as non-appealable, and one bill of costs was awarded to the defendant.
Topics
Practice areas
Questions Presented
- Whether the appellate court may review an order directing a hearing on liquidated damages
- Whether the trial court erred in granting summary judgment dismissing the breach of the implied covenant claim
Holdings
- The appeal of the order directing a hearing on liquidated damages must be dismissed because such an order is not appealable.
- The trial court properly granted summary judgment dismissing the breach of the implied covenant of good faith and fair dealing claim.
Key quotations
“"Implicit in every contract is a covenant of good faith and fair dealing which encompasses any promise that a reasonable promisee would understand to be included"” (at 667)
“"The implied covenant of good faith and fair dealing is a pledge that neither party to the contract shall do anything which will have the effect of destroying or injuring the right of the other party to receive the fruit of the contract, even if the terms of the contract do not explicitly prohibit such conduct"” (at 30)
Factual background
The parties entered license agreements permitting the plaintiffs to use the defendant’s hotel name for a resort in Turks and Caicos. In 2019 the plaintiffs stopped using the name and stopped paying licensing fees. The defendant sued for breach of contract and the plaintiffs sued for breach of the implied covenant of good faith and fair dealing.
Procedural history
The trial court (Supreme Court, Nassau County) entered an order on October 13, 2020 granting the defendant’s motion for summary judgment on the implied covenant claim and on portions of its breach‑of‑contract counterclaim, and ordered a hearing on liquidated damages. The appellants appealed the order.