No. The lawsuit shouldn't be thrown out. The court said that just because both sides were smart business people doesn't give the bank a free pass to act unfairly. The judge who first heard the case was wrong for two reasons. First, he focused too much on both sides being powerful; the duty to be fair applies to everyone, not just in deals between a big company and a small one. Second, he thought the lawsuit was trying to add secret spoken promises to the written contract. The appeals court clarified that the lawsuit is about the bank breaking the unwritten rule of fairness that's part of every contract. The bank had the power to make decisions, but it had to use that power in good faith, not to purposely stop Richard and Eric from getting the bonuses and success they were promised.

Yes, the higher court said the case shouldn't have been dismissed. Seidenberg and Raymond should get a chance to prove Summit Bank didn't play fair. The court said the unspoken fairness rule is part of all contracts, even between experienced parties. The court said just because something wasn't written in the contract doesn't mean it can't matter, and claims of bad faith can be enough to keep a case going. The case goes back to court to get more facts and let a jury or judge decide if Summit truly acted unfairly.

We do not decide yet if Summit Bank broke the unspoken fairness rule, but we hold that the case should not have been dismissed. Seidenberg and Raymond should get a chance to prove Summit Bank didn't play fair. This fairness rule is part of all contracts, even between experienced parties. Just because something isn't written in the contract doesn't mean it can't matter, and claims of bad faith can be enough to keep a case going. We send the case back for more facts so a judge or jury can decide if Summit truly acted unfairly.

"This standard requires that `the pleading be searched in depth and with liberality to determine whether a cause of action can be gleaned even from an obscure statement.'"

The covenant "mandates 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.'"

—of good faith and fair dealing in three situations:(1) to allow the inclusion of additional terms and conditions not expressly set forth in the contract, but consistent with the parties' contractual expectations;(2) to allow redress for a contracting party's bad-faith performance of an agreement, when it is a pretext for the exercise of a contractual right to terminate, even where the …

Our review of a motion to dismiss for failure to state a cause of action under R. 4: 6-2 (e) is governed by the same standard as that applied by the trial court.

The standard "requires an assumption that the allegations of the pleading are true and affords the pleader all reasonable factual inferences."

—noting that a complaint adequately pled bad faith to support a claim for breach of the implied covenant where plaintiff alleged it `suffered as a result of...[defendant's] bad faith "and that [defendant's] actions were `wanton and willful and without privilege or right

The implied covenant cause of action applies in three scenarios:(1) it "permits the inclusion of terms and conditions which have not been expressly set forth in the written contract;" (2) it allows "redress for the bad faith performance of an agreement even when the defendant has not breached any express term;" and (3) it permits "inquiry into a party's exercise of discretion …

The guiding principle in the application of the implied covenant of good faith and fair dealing emanates from the fundamental notion that a party to a contract may not unreasonably frustrate its purpose

Bad faith or ill motive is an essential element of a claim for breach of the implied covenant of good faith and fair dealing.

While a variety of factors are to be considered in making the determination as to whether the conduct constitutes a breach of the implied covenant of good faith and fair dealing, "[u] ltimately, however, the presence of bad faith is to be found in the eye of the beholder or, more to the point, in the eye of the trier of fact."

No. A claim for breach of the implied covenant of good faith and fair dealing does not fail as a matter of law simply because the parties are sophisticated and have equal bargaining power. The court reasoned that the trial court erred by dismissing the complaint based on two incorrect premises: an overemphasis on the parties' equal bargaining power and a misapplication of the parol evidence rule. First, while unequal bargaining power was a factor in prior cases like *Sons of Thunder*, it is not a prerequisite (sine qua non) for a valid claim; it is merely one factor among many for the trier of fact to consider. Second, the parol evidence rule does not bar a claim for breach of the implied covenant because the covenant is implied by law into every contract and governs the performance of the agreement, not its formation. Evidence outside the written contract is necessary to assess whether a party's discretionary actions were performed in good faith and consistent with the other party's reasonable expectations. Plaintiffs' claims that Summit frustrated their ability to grow the business and terminated them in bad faith fall within recognized applications of the implied covenant, specifically regarding the bad faith exercise of contractual discretion and termination rights. The complaint sufficiently alleged a bad motive, which is a required element, and should therefore survive a motion to dismiss.

Yes, the court reversed the dismissal, finding that the plaintiffs' allegations, if proven, might support a claim of breach of the implied covenant of good faith and fair dealing. The court emphasized that the implied covenant is inherent in all contracts, even between sophisticated parties. The court clarified that the parol evidence rule does not bar the plaintiffs from substantiating their claim and that allegations of bad faith and ill motives are sufficient to survive dismissal. The matter was remanded, with the understanding that the presence of bad faith is ultimately for the trier of fact to determine.

Yes, Summit Bank may have breached the implied covenant of good faith and fair dealing by acting in bad faith or with improper motive, thereby injuring the plaintiffs' right to receive the benefits of the agreement. We reversed the dismissal, finding that the plaintiffs' allegations, if proven, might support their claim. We emphasize that the implied covenant is inherent in all contracts, even between sophisticated parties. We clarify that the parol evidence rule does not bar the plaintiffs from substantiating their claim and that allegations of bad faith and ill motives are sufficient to survive dismissal. We remand the matter, with the understanding that the presence of bad faith is ultimately for the trier of fact to determine.

Seidenberg v. Summit Bank

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