Commercial Division Blog

Posted: November 4, 2013 / Categories Commercial, Contracts

"Best Efforts" Clause Enforced Notwithstanding Absence of Objective Criteria in Agreement Against Which Efforts Could Be Measured

On October 24, 2013, Justice Friedman of the New York County Commercial Division issued a decision in Glanzer & Co., LLC v. Air Line Pilots Association, 2013 NY Slip Op. 32713(U), denying defendant's motion for summary judgment dismissing plaintiff's breach of contract claim after concluding that material issues of fact existed with respect to whether defendant had breached a "best efforts" clause in the parties' contract.

The contract in Glanzer was between an investment bank and an airline pilot's union that required the union to "use its reasonable best efforts to cause an entity or party other than [the union] . . . to pay . . . a customer investment banking fee," i.e., a "success fee," to the plaintiff in connection with labor contract negotiations between the union and U.S. Airways. The airline did not pay plaintiff a success fee, which resulted in the plaintiff suing the union for breaching the "best efforts" clause.

At the close of discovery, the union moved for summary judgment dismissing this claim on the ground that the parties' agreement contained no objective criteria against which its efforts could be measured. In her decision, Justice Friedman acknowledged a division of authority among New York courts over how to interpret "best effort" clauses. On the one hand, she wrote, there is "substantial authority that for a contractual provision requiring a party to employ reasonable efforts or 'best efforts' to be enforceable, there must be objective criteria against which a party's efforts can be measured, whether the requirement is deemed to be implicit or explicit," and, "a clear set of guidelines against which to measure a party's efforts is essential to its enforcement." (Internal quotation marks and citations omitted). On the other hand, she wrote, "there is also substantial authority that a 'best efforts' provision may be enforceable, notwithstanding that the contract itself does not set forth objective criteria by which to measure the best efforts." (Internal quotation marks and citations omitted). Indeed, Justice Friedman quoted several federal court cases characterizing New York's best efforts jurisprudence as "murky" and "far from clear."

Justice Friedman concluded that, "at least where a material question of fact exists as to whether best efforts have been made, a best efforts provision may be enforced in the absence of contractually articulated criteria" and denied the union's summary judgment motion after finding that such factual disputes existed.

Until New York's conflicting "best efforts" jurisprudence is reconciled, parties who wish to put "best efforts" clauses in their commercial agreements would be well advised to include objective criteria for measuring the success of such efforts.