Discretionary Contract May Not Be Exercised in Bad Faith

In refusing to dismiss a complaint alleging breach of an operating agreement which gave the defendants “‘sole and absolute discretion’” to “select the company’s investments,” Judge Jennifer Schecter of New York County’s Commercial Division held that no matter the language of an agreement—which should be enforced according to its terms—“the implied covenant of good faith and fair dealing can never be waived.” Here, defendants’ conduct in diverting a company opportunity for an investment in a fund where they held an undisclosed interest gave rise to plaintiff’s fiduciary duty claim.

Shatz v. Chertok

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