Opinion ID: 2557294
Heading Depth: 2
Heading Rank: 5

Heading: Breach of Implied Covenant Claim

Text: Finally, Smyjunas contends that the trial court erred when it denied his motion to dismiss J & M's breach of implied covenant of good faith and fair dealing claim. In reviewing a motion to dismiss, our standard of review is whether the allegations in the plaintiff's pleadings are reasonably susceptible of a construction that would permit recovery. Gen. Insulation Co. v. Eckman Constr., 159 N.H. 601, 611, 992 A.2d 613 (2010). We assume the plaintiff's pleadings to be true and construe all reasonable inferences in the light most favorable to it. Id. We need not assume the truth of statements in the plaintiff's pleadings, however, that are merely conclusions of law. Id. We then engage in a threshold inquiry that tests the facts in the writ against the applicable law. Id. Dismissal is warranted if the writ's allegations do not constitute a basis for legal relief. See id. Smyjunas argues that J & M has failed to plead a claim for breach of the implied covenant or duty of good faith and fair dealing because it has not alleged that it had a contractual relationship with any of the defendants. Smyjunas contends that, without a contractual relationship between the parties, there is no cause of action for breach of the implied covenant or duty of good faith and fair dealing. We agree. [A]n obligation of good faith is imposed by statute in the performance and enforcement of every contract or duty subject to the Uniform Commercial Code. Centronics Corp. v. Genicom Corp., 132 N.H. 133, 138, 562 A.2d 187 (1989); see RSA 382-A:1-201(b)(20), :1-304 (Supp. 2010). Additionally, New Hampshire recognizes a common law good faith contractual obligation. Centronics Corp., 132 N.H. at 139, 562 A.2d 187. There is 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. Id. ; see Birch Broad. v. Capitol Broad. Corp., 161 N.H. 192, 198 (2010). The various implied good-faith obligations fall into three general categories: (1) contract formation; (2) termination of at-will employment agreements; and (3) limitation of discretion in contractual performance. Livingston v. 18 Mile Point Drive, 158 N.H. 619, 624, 972 A.2d 1001 (2009). New Hampshire law has not recognized a claim for breach of the implied covenant of good faith and fair dealing outside of the contractual context. J & M urges us to acknowledge that parties to business dealings generally have an obligation to deal with one another fairly and in good faith and to recognize a claim for breach of this general obligation. J & M does not contend that this claim is recognized in any other jurisdiction and cites scant legal authority to support recognizing such a claim. Under these circumstances, we decline J & M's invitation to create such a new cause of action. J & M mistakenly asserts that we have already recognized a similar cause of action in the employment-at-will context. When employment is at will, J & M argues, no contract exists, but an employer nonetheless has an obligation to act in good faith and deal fairly with employees. This argument misconstrues New Hampshire law. Employment at will refers to an employment contract that is for an indefinite period of time and is terminable at will. See Monge v. Beebe Rubber Co., 114 N.H. 130, 132, 133, 316 A.2d 549 (1974). In Monge, we held that a termination by the employer of a contract of employment at will which is motivated by bad faith or malice or based on retaliation is not in the best interest of the economic system or the public good and constitutes a breach of the employment contract. Id. at 133, 316 A.2d 549. The rationale underlying Monge is that there is an implied covenant in every contractual relationship that the parties will carry out their obligations in good faith. Cloutier v. A & P Tea Co., Inc., 121 N.H. 915, 920, 436 A.2d 1140 (1981). Accordingly, the covenant of good faith to which we referred in Monge is a not a free-standing obligation that employers have to treat their employees fairly, but is an obligation implied into an employment contract that otherwise would be terminable at will. Smyjunas argues that because the jury in this case returned a general verdict, the remedy for the trial court's failure to dismiss J & M's breach of implied covenant claim is to reverse and remand for a new trial. See MacKenzie v. Linehan, 158 N.H. 476, 483, 969 A.2d 385 (2009). The rule in New Hampshire with respect to general verdicts is that when we are in doubt as to whether the jury would have found as it did if the error had not been committed, the case should be reversed. Id. at 484, 969 A.2d 385. Although Smyjunas states this general rule, he does not demonstrate why it is doubtful that the jury would have returned the same verdict had the breach of implied covenant claim been dismissed, and we fail to see why we should entertain such doubt. To determine whether the jury would have returned the same verdict without the implied covenant claim, we examine whether it would have been reasonably possible for this to be the only claim for which the jury found Smyjunas liable. If so, then we would doubt whether the jury would have returned the same verdict if the implied covenant claim had been dismissed. If, on the other hand, the jury could not reasonably have found Smyjunas liable for the implied covenant claim alone without also finding him liable for another claim, then we would not doubt whether the jury would have still returned a verdict for J & M if the implied covenant claim had been dismissed. Based upon our review of the jury instructions, we conclude that it would not reasonably have been possible for the jury to find Smyjunas liable on the breach of implied covenant claim without also finding him liable on the unjust enrichment claim. The jury was instructed that to find for J & M on its breach of implied covenant claim, it had to find that Smyjunas committed a wrongful act. The jury was also instructed that the specific wrongful act of which Smyjunas was accused was of distributing the assets of Gorham Supermarket without accounting for J & M's claim and knowing that J & M had a claim. The same wrongful act forms the basis of J & M's unjust enrichment claim. The jury was instructed that to find in J & M's favor on its unjust enrichment claim it had to find that Smyjunas committed a wrongful act and that the wrongful act of which he was accused was the distribution of money when [he] should have reasonably known that J & M ... had a claim that was likely to lead to the judgment. Because the same wrongful act forms the basis of both claims, if the jury found in J & M's favor on its implied covenant claim, the jury would have also found in J & M's favor on its unjust enrichment claim. Moreover, the damages J & M sought were the same for all of its claims. The jury was instructed that the damages [J & M] seeks are fees and costs in the amount of $110,007.01. Because it is clear that if the jury found for J & M on the implied covenant claim, the jury would also have found for J & M on the unjust enrichment claim, and because J & M sought the same damages for both claims, we have no doubt that had the implied covenant claim been dismissed, the jury would have returned the same verdict. Accordingly, although we hold that the trial court erred when it failed to dismiss J & M's breach of implied covenant claim, this error does not require us to reverse and remand for a new trial.