Opinion ID: 770612
Heading Depth: 3
Heading Rank: 2

Heading: Breach of the Implied Duty of Good Faith and Fair Dealing (Count II)

Text: 48 The district court also dismissed appellants' claim based on Essex's alleged breach of the implied duty of good faith and fair dealing, reasoning: 49 In this case, plaintiffs allege only that Essex has failed to complete the clean-up process and obtain final DEP approval within a reasonable time. They point to no acts or omissions done in bad faith. There is no allegation, and certainly no evidence, that Essex has committed any misconduct. Summary judgment is therefore appropriate. 50 App. at 13a. Appellants claim that the district court erred in granting summary judgment on this claim because it ignored evidence from which a reasonable jury could conclude that Essex breached the implied duty of good faith and fair dealing during the course of its cleanup of the Property. Appellants point to the following evidence in support of their claim: (1) documents confirming that appellees attempted to renege upon the standards set forth in the Clean-Up Plan; (2) evidence showing that appellees inexplicably failed to even begin remediation for many years after delineating contamination on the Property; and (3) DEP documents reprimanding Essex for `violations' and `unacceptable' progress. Br. at 49. 51 To be sure, every contract in New Jersey contains an implied covenant of good faith and fair dealing. Sons of Thunder, Inc. v. Borden, Inc., 690 A.2d 575, 587 (N.J. 1997); see also Restatement (Second) of Contracts S 205 (1981) (Every contract imposes upon each party a duty of good faith and fair dealing in its performance and its enforcement.). The implied covenant is an independent duty and may be breached even where there is no breach of the contract's express terms. Emerson Radio Corp. v. Orion Sales, Inc., 80 F. Supp.2d 307, 311 (D.N.J. 2000) (citing, inter alia, Sons of Thunder, Inc., 690 A.2d at 575); see also Bak-a-Lum Corp. v. Alcoa Bldg. Prods., Inc., 351 A.2d 349, 352 (N.J. 1976). 52 The implied covenant of good faith and fair dealing requires 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. Sons of Thunder, Inc., 690 A.2d at 587 (internal quotation marks omitted); Palisades Properties, Inc. v. Brunetti, 207 A.2d 522, 531 (N.J. 1965). A party to a contract breaches the covenant if it acts in bad faith or engages in some other form of inequitable conduct in the performance of a contractual obligation. See, e.g., Sons of Thunder, Inc., 690 A.2d at 589 (distinguishing prior decision in Karl's Sales & Service, Inc. v Gimbel Bros. Inc., 592 A.2d 647 (N.J. Super. Ct. App. Div. 1991), in which there were no allegations of bad faith or dishonesty on the part of the terminating party to the contract); Association Group Life, Inc. v. Catholic War Veterans, 293 A.2d 382, 384 (N.J. 1972) (stating that a contracting party breaches duty of good faith and fair dealing by engaging in behavior that was not contemplated by the spirit of the contract and fell short of fair dealing); Emerson Radio Corp., 80 F. Supp.2d at 311 (The Restatement and the [New Jersey] cases note a state of mind or malice-like element to breach of good faith and fair dealing, holding that the duty excludes activity that is unfair, not decent or reasonable, nor dishonest.); Kapossy v. McGraw-Hill, Inc., 921 F. Supp. 234, 248 (D.N.J. 1996) (noting that courts imply a covenant of good faith and fair dealing in order to protect one party to a contract from the other party's bad faith misconduct or collusion with third parties where there is no breach of the express terms of the contract); see also Restatement (Second) of Contracts S 205 cmt. a (noting that [t]he phrase `good faith' is used in a variety of contexts, and its meaning varies somewhat with the context and explaining that [g]ood faith performance or enforcement of a contract emphasizes faithfulness to an agreed common purpose and consistency with the justified expectations of the other party; it excludes a variety of types of conduct characterized as involving `bad faith' because they violate community standards of decency, fairness or reasonableness.). 10 53 Section 205 of the Restatement (Second) of Contracts provides examples of the types of behavior that can give rise to a claim for breach of the implied duty of good faith and fair dealing in the context of one's performance under a contract: 54 Subterfuges and evasions violate the obligation of good faith in performance even though the actor believes his conduct to be justified. But the obligation goes further: bad faith may be overt or may consist of inaction, and fair dealing may require more than honesty. A complete catalogue of types of bad faith is impossible, but the following types are among those which have been recognized in judicial decisions: evasion of the spirit of the bargain, lack of diligence and slacking off, willful rendering of imperfect performance, abuse of power to specify terms, and interference with or failure to cooperate in the other party's performance. 55 Id. S 205 cmt. d (emphasis added). 56 Appellants' basic contention is that the circumstances of this case demonstrate that there is a genuine issue of material fact concerning Essex's lack of good faith in its performance of its obligation to remediate the Property and obtain DEP in accordance with Paragraph 16 of the Agreement. They claim that since the DEP approved the Clean-Up Plan in 1985, Essex has not performed its cleanup in a diligent manner, and in fact, has engaged in bad faith conduct purposely to protract the process. According to appellants, Essex's conduct has precluded them from obtaining the fruits of their contract, i.e., a property that is not environmentally distressed. 57 We cannot agree that the evidence in this case supports the existence of a genuine issue of material fact on the issue of Essex's good faith in its performance of its obligation to remediate and detoxify the Property. In reality, appellants' argument rests exclusively on their subjective interpretation of the March 1986 letter in which Benning set forth the following reservations as to whether certain aspects of the Clean-Up Plan were reasonable in the circumstances: 58 The clean-up plan calls for the excavation and disposal of the contaminated soil to a level of 1 ppm, . . . based on the requirements of the case manager at BISE. I believe these levels are extremely low and not warranted. . . . We fully intend to remove the contaminated dirt from the former tank farm area. . . . However to satisfy BISE we are required to perform 15 separate sample analyses in the laboratory instead of using a portable field analyzer to determine the extent of pollution and excavation, and to excavate to 1 ppm residual total VOC in the soil. I believe these requirements are both unreasonable and unwarranted. The clean up plan had to be approved by the end of 1985 and time was not available to question the requirement or to rationally discuss these points. However, the IAG discussion [which Benning attended on March 18, 1986] indicate [sic] that the [DEP] has also been rethinking some of their procedures and actions. I believe hexane and heptane are classified as hydrocarbon and I believe that a higher level than 1 ppm is perfectly justified. 59 App. at 225a-26a. Appellants claim that this letter exhibits Essex's lack of good faith and confirms that Essex attempted to renege upon the standards set forth in the Cleanup Plan. Br. at 49; reply br. at 22-23. 60 While the letter questions whether the cleanup level of 1 ppm is warranted and whether lab analysis of soil samples is necessary as opposed to Essex merely conducting field measurements of the soil, the letter does not demonstrate a lack of good faith on Essex's part in performing its obligations pursuant to Paragraph 16 of the Agreement. First, as we previously mentioned, the letter discusses Essex's obligations under the Clean-Up Plan relating to soil remediation, but appellants do not dispute that Essex has completed its soil remediation and detoxification efforts. In fact, appellants confirmed that Essex began its cleanup of the soil shortly after the sale, and that it completed soil remediation sometime within two years. Thus, we fail to see how this letter can demonstrate Essex's lack of diligence in that regard, or how Essex's conduct in questioning certain aspects of the Clean-Up Plan compromised appellants' right to receive the fruits of the contract. See Sons of Thunder, Inc., 690 A.2d at 587 (internal quotation marks omitted). 61 Moreover, and perhaps more importantly, Benning wrote the March 1986 letter after he met with DEP officials and discussed the topic of appropriate cleanup levels in soil. The letter specifically states that the IAG discussion on March 18 indicate [sic] that the department has also been rethinking some of their procedures and actions. App. at 225a. Thus, while the letter questioned the reasonableness of certain aspects of the Clean-Up Plan, Benning's comments indicate that he did so because of his previous discussions with DEP officials which apparently led him to believe that the DEP might no longer view some of its requirements as necessary or appropriate. Thus, when viewed in context, the letter does not indicate that Essex intended to renege on its obligation to cleanup the Property, and it does not indicate that Essex performed its contractual obligations with a lack of good faith. 62 In any event, Benning's concern over certain aspects of the Clean-Up Plan is of no consequence when we consider that less than two months later, he wrote a memorandum to Essex officials in which he recognized and re-emphasized Essex's obligation to adhere to the requirements set forth in Clean-Up Plan. The memorandum states: 63 Lately we have received letters from NJDEP and have discussed our program and permit applications with both state and local officials. These discussions have led to some very specific program requirements and items we must `keep in mind.' For example: 64 1. The NJDEP's ECRA office and the department of solid waste management have made it very clear that we must adhere to the Clean Up Plan. 65 App. at 227a. 66 Simply put, the fact that Benning questioned certain aspects of the Clean-Up Plan is not evidence that Essex acted in bad faith, as the DEP obviously responded to Benning's concerns by indicating that Essex was obligated to remediate the Property in accordance with the Clean-Up Plan, and Benning expressly reaffirmed Essex's intent to comply with its contractual and statutory obligations in that regard. Moreover, appellants do not demonstrate that Essex ever failed to implement a substantive remediation measure that the DEP required in connection with Essex's cleanup of the Property, and do not dispute that Essex completed soil remediation on the Property within two years of the sale. In our view, Benning's May 1986 memorandum reaffirming Essex's commitment to remediate the Property in accordance with the Clean-Up Plan belies appellants' assertion that the March 1986 letter evidences Essex's intent from the outset to conduct its remediation and detoxification efforts in bad faith. Reply br. at 23. In the circumstances, we will affirm the district court's dismissal of appellants' claim that Essex breached the duty of good faith and fair dealing. 67