Counterclaim for Breach of Covenant of Good Faith and Fair Dealing Dismissed as Duplicative

On January 27, 2024, Justice Andrew Borrok of the New York County Commercial Division, issued a decision in Prosight Specialty Management Company v. Altruis Group, LLC, Index No. 653775/2023, granting plaintiff’s motion to dismiss the defendant’s counterclaims, including defendant’s counterclaim for breach of the implied covenant of good faith and fair dealing as duplicative of the defendant’s counterclaim for breach of contract. The Court explained:

The Defendant's counterclaim (the Counterclaim; NYSCEF Doc. No. 4) for breach of the covenant of good faith and fair dealing is dismissed. It is entirely duplicative of the breach of contract counterclaim (Amcan Holdings, Inc. v Can. Imperial Bank of Commerce, 70 AD3d 423, 426 [1st Dept 2010]). For example, (i) Counterclaim paragraphs 68 & 77 allege improper termination and improper invocation of Agreement Section 21(B)(3), (ii) paragraph 78 alleges failure to pay commissions due under the Agreement, (iii) paragraph 80 alleges improper early termination of the Agreement, (iv) paragraphs 81-82 allege refusal to pay monies due under the Agreement, and (v) paragraph 87 alleges deprivation of benefits the Defendant is "entitled to under the Agreement." Thus, it is dismissed. The additional allegation before this Court that one of the Plaintiffs' representatives admitted in his deposition that the Defendant may be entitled to some money for services rendered amounts to nothing more than a potential admission that Plaintiffs breached the Agreement, not a separate cause of action. As discussed (1.26.24), this is manifestly different than allegations of a course of dealings involving inconsistent communications as to the basis for certain denials (cf Truetox Laboratories, LLC v. Healthjirst PHSP, Inc., 68 Misc 3d 1209(A) [Sup Ct 2020]). As such, and as the SDNY court held (see NYSCEF Doc. No. 14 at 3-4), the breach of the covenant of good faith and fair dealing counterclaim is dismissed as duplicative.

Contact the Commercial Division Blog Committee at commercialdivisionblog@schlamstone.com if you or a client have questions concerning claims for breach of contract or breach of the implied covenant of good faith and fair dealing.