UNITED STATES DISTRICT COURT FOR THE

DISTRICT OF NEW HAMPSHIRE

Harris Wayside Furniture

Company, Inc., Harris 

Furniture Company, Inc.,

Harris Bros. Furniture 

Company, Inc. 

v. Civil No. 06-cv-392-JM

Idearc Media Corp. 

f/k/a Verizon Directories Corp.

O R D E R

Before the court is Defendant’s Motion for Reconsideration

of the order which granted in part and denied in part defendant’s

motion to dismiss. See Order, Civil No. 06-392-JM (D.N.H. June

25, 2007) (“June 25 Order”). Defendant principally argues that

because I construed the Application for Advertising not to be a

contract, the duties, expectations and detriment that underlie

plaintiffs’ claims are not cognizable. After carefully reviewing

the motion for reconsideration, I fail to perceive any new facts

or law presented in defendant’s arguments which might persuade me

to rule differently on the underlying motion to dismiss. I find,

however, that defendant’s reading of Donovan v. Castle Springs, 

No. Civ. 01-413-M, 2002 WL 31906183 (D.N.H. Dec. 20, 2002)

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warrants some discussion.

Defendant argues that Donovan requires a contract be formed

in order to support a claim for a breach of the implied duty of

good faith and fair dealing in contract formation and, because

the court concluded no contract was formed here, Count I should

have been dismissed. Specifically defendant contends that “an

essential element of this ‘branch’ of the implied covenant is

that a mutual exchange of promises be made and that ‘there is an

underlying contract into which [the implied covenant] may be

implied.’” See Def.’s Mot. for Recon. (document no. 22) (“Def.’s

Mot.”) at 2 (quoting Donovan, 2002 WL 31906183 at *8 fn. 8.

Defendant argues that, in Donovan, there was no breach of the

implied duty of good faith and fair dealing in contract formation

because the alleged promise of one year’s employment could not be

implied in the at-will employment contract that ultimately was

formed. See Def.’s Mot. at 2. In other words, defendant reads

Donovan to stand for the proposition that the challenged promise

must become an implied term of a contract to give rise to a claim

for breach of the implied good faith duty in contract formation,

so if there is no contract, there can be no claim arising out of

the promise or representation. 

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Defendant misreads Donovan in two significant aspects. 

First and most importantly, Donovan cites New Hampshire law for

the established rule that the implied duty of good faith and fair

dealing arises in “‘three distinct categories of contract

cases,’” id. at *8 (quoting Centronics Corp. v. Genicom Corp.,

132 N.H. 133, 139, 562 A.2d 187, 191 (1989)), not in three

distinct types of contracts. As the New Hampshire Supreme Court

explained in Centronics:

Our common law of good faith contractual 

obligation is not, however, as easily stated

as we might wish, there being not merely one

rule of implied good faith duty in New Hampshire’s

law of contract, but a series of doctrines, each

of them speaking in terms of an obligation of 

good faith but serving markedly different functions.

Since the time of our first contract decision

couched in terms of good faith, Griswold v. Heat

Corp., 108 N.H. 119, 229 A.2d 183 (1967), we have

relied on such an implied duty in three distinct

categories of contract cases: those dealing with

standards of conduct in contract formation, with

termination of at-will employment contracts, and 

with limits on discretion in contractual performance.

Id., 132 N.H. at 139, 562 A.2d at 191. In discussing the duty

implicit in contract formation, the court explained “the

continuing good faith bar to misrepresentation is antecedent to

the agreement itself.” Id. (citing Bursey v. Clement, 118 N.H.

412, 414, 387 A.2d 346, 348 (1978), Dawe v. Am. Universal Ins.

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Co., 120 N.H. 447, 449-50, 417 A.2d 2, 4 (1980), and McCarthy v.

Barrows, 118 N.H. 173, 175-76, 384 A.2d 787, 788 (1978)). “That

obligation requires that if one party makes a representation of a

material fact to another party for the purpose of inducing the

other party to change his position or enter into a contract, the

party making the representation must tell the truth.” Bursey,

118 N.H. at 414, 387 A.2d at 348 (emphasis added). 

To give that language its plain meaning, the party to whom

the misrepresentation is told need only change his position, not

necessarily enter a contract, for the duty to be breached. See

id. (recognizing breach of the duty based on the erroneous

representation that building permits to develop the land would be

available, even though development permits were not part of the

purchase and sale agreement for the land at issue). While the

facts in these cases generally involve contracting parties, the

law seems to require a change of position, not a contract. See

id. If any doubt remains about the viability of the duty

attaching simply if one knows another will be induced to act

based on a promise or representation, without requiring that

representation become implicit in a contract that might follow,

the Centronics court explicitly stated “[b]y way of contrast, the

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1I recognize that other jurisdictions have limited the

implied duty of good faith in fair dealing to contract

performance. See e.g. Hutchins v. Zoll Med. Corp., 430 F. Supp.

2d 24, 34 (D. Mass. 2006) (finding good faith duty “inapplicable

during the courtship dance phase of contract formation” (internal

quotation omitted)), aff’d, 492 F.3d 1377 (Fed. Cir. 2007); Hord

Corp. v. Polymer Research Corp., 275 F. Supp. 2d 229, 238 (D.R.I.

2003) (not recognizing good faith obligation at time of contract

formation); Macomber v. Travelers Prop. and Cas. Corp., 261 Conn.

620, 638, 804 A.2d 180, 193 (2002) (same); Novinger Group v.

Hartford Ins. Co., Civ. No. 1:06-CV-0188, 2007 WL 1450396, *7

(M.D. Pa. May 16, 2007) (same). Whether or not New Hampshire

represents the prevailing view on the doctrine, the law is

settled here and, as a federal court sitting in New Hampshire and

exercising diversity jurisdiction over this action, I am required

to apply New Hampshire law. See Erie R.R. v. Tompkins, 304 U.S.

64, 78 (1938) (holding state law governs in diversity actions).

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good faith enforced in the second category of our cases is an

obligation implied in the contract itself. . ..” Centronics, 132

N.H. at 139, 387 A.2d at 349. Although defendant argues to the

contrary, my reading of New Hampshire law finds the implied duty

of good faith and fair dealing in contract formation arises

before any contract is formed and, while relevant to, exists

independent of, the terms of the relationship between the parties

that ultimately may develop.1 

Second, Donovan based its decision that the plaintiff there

could not prevail on his claim for breach of the implied duty in

contract formation because the defendant, in fact, had not made

any representation or promise, let alone in bad faith, that could

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2While defendant here relies on footnote 8, where the

Donovan court recognized the defendant there “correctly states

the rule that the covenant of good faith and fair dealing only

exists when there is an underlying contract into which it may be

implied,” the Donovan court made that statement in the context of

discussing plaintiff’s breach of contract claim and explained

that an at-will employment agreement in fact existed there. See

id. at *8 n.8. The court went on to find that Count V asserted a

separate cause of action, based on the implied good faith duty in

contract formation, which was distinct from the alleged breach of 

the at-will employment contract, which carried its own duty of

good faith. See id. at *8 (“Recognizing, however, that Donovan

likely intended to plead something above and beyond his breach of

contract claim, the court turns to the law of good faith and fair

dealing.”) 

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be understood to have induced plaintiff to change his position. 

See Donovan, 2002 WL 31906183 at *9 (explaining that defendant

could not have acted in bad faith by making a promise it did not

intend to keep, when defendant never made the promise). Indeed

in Donovan, in an effort to distinguish plaintiff’s breach of

contract claim asserted in Count III from the breach of the

implied duty of good faith and fair dealing claim in Count V, the

court focused on what defendant did that plaintiff alleged had

induced him to leave his former employment, that occurred before,

and independent of, the at-will employment agreement that

followed. See id. at *8.2 The claim failed in Donovan not

because there was no contract into which the alleged promise of a

year’s employment could have been implied, as defendant argues. 

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3The plaintiff argued the quoted annual salary and the

explanation of the seasonal nature of the work led him to believe

he would be employed for at least a year, see id. at *6; however,

the facts showed the job was advertised simply as a “full-time,

year-round maintenance supervisor” and that plaintiff signed

documents which clearly provided for the employment to be atwill. See id. at * 2. 

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The claim failed because plaintiff admitted that a promise of a

year’s employment in fact never was made, so that promise could

not have induced him to leave his former employment. See id. at

*9.3 The facts in Donovan showed plaintiff only expected to

have the job for at least a year, not that defendant had acted in

bad faith by representing he would have a year’s employment while

knowing the job, in fact, would only be at-will. There simply

were no facts that supported the claim that defendant made a

promise with no intention of keeping it, for the purpose of

getting plaintiff to take the job. See id. (citing Hydraform

Prods. Corp. v. Am. Steel & Aluminum Corp., 127 N.H. 187, 200,

498 A.2d 339 (1985)).

The implied duty in contract formation requires the party 

making a promise or representation to do so in good faith, and to

deal fairly with a second party whom the first party knows would

change his position in reliance on that representation. The

relevant facts to the claim are all antecedent to any agreement

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which may or may not be executed subsequently. See Donovan, 2002

WL 31906183 at *9; see also Dawe, 120 N.H. at 449, 417 A.2d at 3

(misrepresented coverage under insurance contract); Bursey, 118

N.H. at 414-15, 387 A.2d at 348 (misrepresented availability of

building permits); McCarthy, 118 N.H. at 175, 384 A.2d at 788

(misrepresented septic system). In Donovan, because no promise

had been made, plaintiff could not have changed his position in

reliance on it, and no claim for a breach of the implied duty of

good faith and fair dealing in contract formation arose. The

terms of plaintiff’s employment agreement that followed were not

relevant to what defendant did before the plaintiff decided to go

to work for defendant. See id. at *8-9.

Donovan and the New Hampshire law on which it relies support

my reading of plaintiffs’ claim in Count I here, that defendant

breached the implied duty of good faith and fair dealing in

contract formation when it represented that plaintiffs had a zero

balance, which induced plaintiffs to continue to give defendant

their advertising business, when, in fact, defendant had no

intention of honoring the representation but, instead, intended

to use the Application to extort the outstanding balance from

plaintiffs. While these facts are only alleged, they adequately

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state a claim for breach of the implied duty in contract

formation for purposes of this preliminary review. I stand by my

original analysis of this claim.

Defendant is reminded that the standard of reviewing a

complaint for failure to state a claim is very generous,

requiring the court to indulge all reasonable inferences in

plaintiffs’ favor. See Apont-Torres v. Univ. of P.R., 445 F.3d

50, 55 (1st Cir. 2006) (citing authority). At this very early

stage in the proceedings, plaintiffs need only allege the minimal

facts necessary to state the essential elements of the claims

asserted, not prove any of them. Whether plaintiffs ultimately

prevail on any of those claims cannot be determined on the

nascent record, nor would such a determination be appropriate at

this preliminary stage of review. 

Conclusion 

For the reasons set forth above, defendant’s motion for

reconsideration (document no. 22) is denied.

Upon further review of plaintiffs’ claims prompted by

defendant’s motion, I appreciate the challenge presented by the 

writ and the manner in which the claims are presented in that

document. Plaintiffs are ordered to restate the claims asserted,

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in a new complaint that conforms to the pleading standards set

forth in Fed. R. Civ. P. 8(a). This is to be a restatement of 

the claims as they have been recognized, not an opportunity to

add new claims. The newly filed complaint shall be the

controlling pleading in this action. Plaintiffs must file the

complaint within 30 days of the date of this order.

SO ORDERED.

/s/ James R. Muirhead 

James R. Muirhead

United States Magistrate Judge

Date: September 14, 2007 

cc: Lawrence M. Edelman, Esq.

Philip A. Brouillard, Esq.

 

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