On April 1, 2025, Justice Cohen of the New York County Commercial Division issued a decision in World Host Group US Inc. v. O’Cloud Ventures, LLC, 2025 NY Slip Op. 31159(U), holding that an implied covenant claim cannot be based on pre-contract actions, explaining:
O’Cloud’s tenth counterclaim alleging a breach of the covenant of good faith and fair dealing is dismissed as duplicative of its breach of contract counterclaims. O’Cloud’s contention that its implied covenant claim is premised on WHG’s conduct during pre-contract negotiations is unavailing. The covenant of good faith and fair dealing is an implicit term of the contract itself. For that reason, parties cannot breach a contract’s implied promise of good faith and fair dealing before the contract is entered into. O’Cloud’s reliance on JJM Sunrise Automotive, LLC v Volkswagen Group of Am., Inc., for a contrary rule is unpersuasive. In that case, the court upheld an implied convent claim based on misrepresentation during both the negotiation process and for months after and thus it does not stand for the proposition that purely pre-contractual conduct can give rise to an implied covenant claim. The Court has considered the parties’ remaining arguments and finds them unavailing.
(Internal quotations and citations omitted).