CCR International, Inc. v. Elias Group, LLC

Background

CCR owned the Coco Rico soda business and related assets before transferring them to CCR Development Group under a 2008 asset purchase agreement. CCR Development Group paid only part of the purchase price and defaulted on the remainder. In 2013, CCR assigned Elias Group its rights to receive payment from CCR Development Group.

The assignment agreement required Elias to make specified payments to CCR, including a payment if Elias later acquired the Coco Rico assets. That payment was generally calculated as $5 million, reduced by certain amounts Elias paid in acquiring the assets. Elias later acquired the assets from CCR Development Group under a 2015 agreement. Elias paid $4.75 million in cash, issued a $1 million note, and released CCR Development Group’s payment obligations to Elias under the assigned 2008 agreement.

CCR, CCR Development Group, and José Fuertes—the “CCR Parties”—claimed that Elias had promised to pay CCR $8.5 million but failed to do so. They asserted contract claims and a claim for breach of the implied covenant of good faith and fair dealing, which is a duty that New York law reads into contracts to protect each party’s right to receive the contract’s benefits. In a prior summary-judgment ruling, the court rejected the CCR Parties’ contract claims, holding that Elias had not agreed to pay CCR the $8.5 million. The implied-covenant claim was the CCR Parties’ sole remaining claim.

Elias sought supplemental permission to move for summary judgment on that claim. Elias represented that it intended to voluntarily dismiss its counterclaims if all of the CCR Parties’ claims were dismissed.

Legal standard

Summary judgment is appropriate when the moving party shows that no genuine dispute exists about a fact that could affect the result and that the party is entitled to judgment under the law. The court must view the evidence in the light most favorable to the party opposing the motion. Once the moving party meets its burden, the opposing party must identify evidence creating a genuine factual dispute; allegations or speculation alone are insufficient.

Under New York law, the implied covenant of good faith and fair dealing cannot contradict the contract’s express terms, create new contractual rights, or impose a separate duty based on the same facts as a contract claim. A claim is duplicative when it arises from the same facts and seeks the same damages as the contract claim.

Court’s analysis

The CCR Parties said Elias used a lengthy due-diligence period to worsen CCR Development Group’s financial condition and required it to turn over the Coco Rico formula before the closing. They argued that these circumstances forced the transaction to close without payment of the $8.5 million debt. They relied on allegations in their amended complaint rather than evidence supporting those assertions.

The court held that the allegations depended entirely on the contract theory it had already rejected. The court had previously determined that Elias bought CCR’s rights to receive payment from CCR Development Group and that, when Elias released CCR Development Group’s $8.5 million debt, it released the debt owed to Elias. It had not agreed both to release that debt and to pay CCR the same amount in cash.

The court also found the implied-covenant claim duplicative because it was based on the same alleged failure to pay $8.5 million and sought the same damages as the rejected contract claim. The CCR Parties’ references to their belief or understanding that Elias would pay could not create an $8.5 million obligation inconsistent with the contracts. Their allegations that Elias acted under pressure or with bad faith likewise did not make the claim independent from the contract claims.

Ruling

Judge Paul A. Engelmayer granted Elias’s motion for summary judgment seeking to dismiss the CCR Parties’ sole remaining claim for breach of the implied covenant of good faith and fair dealing. The order stated that Elias’s counterclaims were the only claims remaining and directed Elias to move to voluntarily dismiss them by April 12, 2021. The court also directed the parties to submit a joint letter addressing whether the case could be closed after all claims were dismissed.