On December 5, 2023, the First Department issued a decision in Hemingway Group LLC v. i80 Group LLC, 2023 NY Slip Op. 06229, upholding an implied covenant claim based on the bad faith exercise of discretion, explaining:
The motion court properly denied defendants’ motion to dismiss so much of the second cause of action that alleges that i80 Group breached the implied covenant of good faith and fair dealing in the 2019 i80 LLC Agreement. A party may only invoke the covenant of good faith and fair dealing when it is clear from the underlying contract that the contracting parties would have agreed to proscribe the act later complained of had they thought to negotiate with respect to that matter. The implied covenant operates to prevent a party from acting unreasonably to deprive the other party from receiving the fruits of its bargain. Here, the complaint sufficiently asserts that i80 Group breached the implied covenant of good faith and fair dealing in the 2019 i80 LLC Agreement. Specifically, plaintiff asserts that defendants deprived it of the fruits of its bargain by terminating its membership interests in the i80 Group without reasonable justification shortly after i80 Group received the large investment from nonparty ICONIQ Capital and then managed the investment through entities other than the Fund.
(Internal quotations and citations omitted).