On March 9, 2022, the Second Department issued a decision in Rad & D’Aprile, Inc. v. Arnell Constr. Corp., 2022 NY Slip Op. 01472, holding that the failure timely to bring claims under a liquidating agreement is a breach of the duty of good faith and fair dealing, explaining:
The plaintiff established that the defendant breached the implied covenant of good faith and fair dealing by failing to timely prosecute the plaintiff’s pass-through claim against the City. The implied covenant of good faith and fair dealing between parties to a contract embraces a pledge 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. It encompasses any promises that a reasonable person in the position of the promisee would be justified in understanding were included. As this Court observed on a prior appeal, the contractual covenant of good faith and fair dealing is implied in a liquidating agreement, as in every contract. The covenant of good faith and fair dealing required the defendant to take all reasonable steps so that the plaintiff’s right to an eventual recovery, if any, from the City would be protected. Here, the defendant did not take all reasonable steps to protect the plaintiff’s right to recovery, as it failed to timely commence the action against the City, resulting in the dismissal of that action, as well as the plaintiff’s pass-through claim. The defendant further breached the covenant of good faith and fair dealing when it failed to inform the plaintiff of a settlement with the City and to provide it any compensation from the proceeds of that settlement.
(Internal citations omitted).