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Ophthalmic Surgeons, Ltd. v. Paychex, Inc. - 632 F.3d 31, 2011 U.S. App. LEXIS 1926

Rule:

New York law recognizes the existence of an implicit covenant of good faith and fair dealing. Every contract imposes upon each party a duty of good faith and fair dealing in its performance and its enforcement. The covenant 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. Further, the implied covenant of good faith encompasses any promises which a reasonable person in the position of the promisee would be justified in understanding were included in the agreement.

Facts:

Ophthalmic Surgeons, Ltd. ("OSL"), alleges that Paychex, Inc. ("Paychex"), its provider of direct deposit payroll services, breached its obligations under a written agreement when, over a period of six years and without objection from OSL, it paid an OSL employee $233,159 more than her authorized annual salary of $33,280. The U.S. District Court for the District of Rhode Island granted of summary judgment in favor of Paychex. OSL appealed.

Issue:

Did Paychex breach its obligations under a written agreement by paying an employee more than her salary?

Answer:

No

Conclusion:

The Court found that Paychex did not breach any explicit contractual obligation. Second, Paychex complied with its duty of good faith by regularly sending reports. That Dr. Andreoni, OSL's sole owner, failed to check on OSL's employee or to specify to Paychex that the reports should be sent to his attention did not suggest that Paychex breached the implied covenant of good faith. OSL was in the best position to monitor its finances and its employees. If there is any negligence to be found in this case, it is OSL's own negligence.

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