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Current Developments in the Commercial Divisions of the
New York State Courts
Posted: May 31, 2014

Covenant of Good Faith and Fair Dealing Breached When Plaintiff’s Rights Under an Agreement are Frustrated

On May 29, 2014, the First Department issued a decision in Pleiades Publishing, Inc. v. Springer Science + Business Media LLC, 2014 NY Slip Op. 03917, affirming that the plaintiff had stated a claim for breach of the implied covenant of good faith and fair dealing.

In Pleiades Publishing, the plaintiff, “a publisher of English-language versions of Russian-language scientific, technical, and medical journals,” sued the defendant, the “plaintiff’s exclusive distributor pursuant to an agreement that required it to use ‘commercially reasonable efforts’ to promote the Russian-language journals and to market and promote them as ‘offerings in its online database,” alleging “that [the] defendant incorporated its journals into a bundle of available ‘non-subscribed’ journals, which disguised from customers the ‘separate identity, value proposition, and pricing approach for the” database. The First Department affirmed the trial court’s refusal to dismiss the plaintiff’s claim for breach of the implied covenant of good faith and fair dealing, explaining:

These allegations state a cause of action for breach of the implied covenant of good faith and fair dealing. While the agreement granted defendant the discretion to decide how to market and promote the [database], defendant did not have the right to exercise that discretion in such a way as to frustrate plaintiff’s rights under the agreement, deprive plaintiff of the value of its journals, or benefit itself at plaintiff’s expense.

(Internal quotations and citations omitted).

Claims for breach of the implied covenant of good faith and fair dealing are often dismissed because of the narrow circumstances in which the covenant applies. This decision illustrates how successfully to plead such a claim.

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