Court of Appeals – Implied covenant of good faith: 111 West 57th Investment, et al. v. 111 W57 Mezz Investor, et al.

New York State Court of Appeals

Implied covenant of good faith — Assignment of loan — Discretion

111 West 57^th Investment, et al. v. 111 W57 Mezz Investor, et al.

No. 41

Judges Wilson

Background: The plaintiff is an equity investor in a project to acquire and develop a luxury residential tower. It appeals the dismissal of its claims for breach of the implied covenant of good faith and fair dealing and tortious interference with contract.

Ruling: The Court of Appeals reversed. The court held that the plaintiff sufficiently pleaded a claim of implied breach of the covenant of good faith and fair dealing. Specifically, the court noted that the plaintiff alleged that the defendant violated the covenant by assigning a loan to another defendant as a part of a backroom deal intended to push the plaintiff out of the project’s capital structure and benefit from the windfall of equity that would flow to them. The Appellate Division erred in holding that the defendant’s absolute discretion to assign the loan negated any implied covenant. The discretion does not exculpate that party from complying with the implied covenant of good faith.

Haley N. Proctor for the appellants; Gary J. Mennitt and Steven Sinatra for the respondents.

Oral argument video

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