and positive repudiation and anticipatory breach.").
That brings us to O'Shanter's primary basis for its claim of anticipatory breach--that Niagara Mohawk communicated a positive and unequivocal repudiation of the Agreement irrespective of its claimed right to demand assurances. An anticipatory repudiation occurs when a party disclaims the duty to perform under the contract prior to the time designated for its performance and before it has received all the consideration due. Wester v. Casein Co. of America, 206 N.Y. 506, 513-14, 100 N.E. 488, 490 (1912). Such repudiation entitles the nonrepudiating party to rescind the contract and claim damages for total breach. Id. ; Long Island Rail Road Co. v. Northville Industries Corp., 41 N.Y.2d 455, 463, 362 N.E.2d 558, 563, 393 N.Y.S.2d 925, 930 (1977) (citations omitted). "To constitute an anticipatory repudiation there must be a clear manifestation of intent communicated in advance of the time for performance that when the time for performance arrives the required performance will not be rendered." Record Club of America v. United Artists Records, 643 F. Supp. 925, 936 (S.D.N.Y. 1986) (quoting Ronald A. Anderson, Uniform Commercial Code § 2-610:11, at 230 (3d ed. 1983)) (other citation omitted).
In other words, anticipatory repudiation occurs when "there is an 'overt communication of intention' not to perform." Tenavision, Inc. v. Neuman, 45 N.Y.2d 145, 150, 379 N.E.2d 1166, 1168, 408 N.Y.S.2d 36, 38 (1978). For these principles to operate, "the expression of intention not to perform must be positive and unequivocal." Record Club of America, 643 F. Supp. at 936 (citing Tenavision, 45 N.Y.2d at 150); see also 4 Arthur L. Corbin, Contracts § 973 (1951) ("definite and unequivocal"); 11 Samuel Williston, Contracts § 1322 (3d ed. 1968) ("positive and unconditional").
O'Shanter alleges that Niagara Mohawk communicated a positive and unequivocal repudiation of the agreement by (1) not responding to O'Shanter's written requests for written confirmation that Niagara Mohawk would perform its obligations, most notably the request in Krehm's March 1, 1994 letter, and (2) directing O'Shanter to contact Niagara Mohawk to initiate discussions regarding a new contract if O'Shanter rejected Niagara Mohawk's $ 50,000 offer to resolve the matter. According to O'Shanter, "the plain words of Niagara's March 22, 1994 letter, standing alone, are an unequivocal repudiation on their face." (P. Memo, p.22.)
Niagara Mohawk strongly disputes this characterization of the facts. The March 22, 1994 letter, it contends, was sent in the context of ongoing settlement discussions and did not implicitly or explicitly state that Niagara Mohawk would not perform its share of the agreement. (D. R.Memo, p.3.) Niagara Mohawk maintains that it still stands ready, willing, and able to perform its material obligations under the agreement despite what it characterizes as its own "hard bargaining."
Both parties argue by analogy to the decision in Record Club of America. In that case, the district court held that "[the defendant's] statements that it would cease servicing [the plaintiff] unless [the plaintiff] entered into a new agreement containing terms substantially more favorable to [the defendant] was an [anticipatory] repudiation." 643 F. Supp. at 936. In the instant case, however, Niagara Mohawk never expressly stated that it would not perform its obligations under the agreement. Whether the implication that Niagara Mohawk would not perform unless O'Shanter entered a new agreement was positive and unequivocal is another issue. As one commentator has explained, "whether a particular event or communication amounts to repudiation is often seen as a question of fact, and the cases and analyses provide limited guidance." Arthur Rosett, Partial, Qualified, and Equivocal Repudiation of Contract, 81 Colum. L. Rev. 93, 103 (1981).
On the one hand, Niagara Mohawk's March 22, 1994 letter could be read as an unequivocal repudiation in the context in which it was sent. Rather than respond to O'Shanter's requests for assurances that Niagara Mohawk intended to perform its contractual obligations, the letter stated that O'Shanter should contact Niagara Mohawk to "initiate discussions regarding the implementation of a new contract." On the other hand, the March 22 letter did reference the parties' ongoing "buy-out discussions." According to Herbert Schrayshuen, Niagara Mohawk never intended to avoid its performance under the Agreement but did believe there was an issue as to the Agreement's validity. (Schrayshuen R.Aff. P 15.) Schrayshuen's letter sought to push a new bargain but did not state that Niagara Mohawk would not honor the existing Agreement. (Schrayshuen R.Aff. P 19.) Though Niagara Mohawk's subjective intent is by no means dispositive, there is no dispute that O'Shanter willingly participated in the ongoing buyout discussions.
What further complicates this case is Niagara Mohawk's belief that the Indeck Yonkers order affected the parties' existing contractual obligations though Niagara Mohawk never applied for a PSC clarification. "When a party seeks to modify a continuing agreement, he must take great care to avoid the implication that unless the contract is modified as requested, such party will not perform at all." Rosett, 91 Colum. L. Rev. at 106. Courts and commentators have noted that "an expression of doubt as to whether the ability to perform in accordance with the contract will exist when the time comes, is not a repudiation." Elliott Associates, 1989. Del. Ch. LEXIS 63, at *4 (citing 4 Arthur L. Corbin, Contracts § 974 (1951)).
In other words, a demand for more than the contract calls for is not in itself a repudiation. Only when it amounts to a clear and unequivocal statement of intention not to perform except on conditions that go beyond the contract is it a repudiation. Given the ongoing buyout discussions that occurred simultaneous with the parties' continuing performance, reasonable minds could differ as to the import of the evidence. Drawing all reasonable inferences in Niagara Mohawk's favor, Niagara Mohawk expressed only some doubt as to whether it had to perform if O'Shanter did not negotiate a new contract. Drawing all reasonable inferences in O'Shanter's favor, Niagara Mohawk's March 22 letter, considered with its failure to provide requested assurances, was a clear and unequivocal repudiation.
With a genuine issue as to the material fact of whether Niagara Mohawk clearly and unequivocally expressed an intention not to perform, this Court will deny the parties' cross-motions for summary judgment on O'Shanter's first cause of action for breach of contract by anticipatory repudiation.
C. Breach of the Duty of Good Faith and Fair Dealing
O'Shanter's second cause of action alleges that Niagara Mohawk negotiated in bad faith and thereby breached its duty of good faith and fair dealing.
Every contract contains an implied covenant of good faith and fair dealing. Wood v. Lucy, Lady Duff-Gordon, 222 N.Y. 88, 118 N.E. 214 (1917); see also Gelder Medical Group v. Webber, 41 N.Y.2d 680, 363 N.E.2d 573, 394 N.Y.S.2d 867 (1977); Van Valkenburgh, Nooger & Neville v. Hayden Publishing Co., 30 N.Y.2d 34, 281 N.E.2d 142, 330 N.Y.S.2d 329, cert. denied, 409 U.S. 875, 93 S. Ct. 125, 34 L. Ed. 2d 128 (1972); Mutual Life Insurance Co. v. Tailored Woman, 309 N.Y. 248, 128 N.E.2d 401 (1953). In other words, "in every contract there is an implied covenant 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. . . . " Kirke La Shelle Co. v. Paul Armstrong Co., 263 N.Y. 79, 87, 188 N.E. 163, 167 (1933) (citations omitted). In the instant case, Niagara Mohawk's "good faith must be subjected to particular scrutiny because [its] obligation to enter into the contract was not voluntarily assumed but imposed by law." Philadelphia Corp. v. Niagara Mohawk Power Corp., 207 A.D.2d 176, 177, 621 N.Y.S.2d 237, 239 (3d Dep't 1995).
O'Shanter argues that Niagara Mohawk breached its implied promise of good faith and fair dealing when it "contrived the 'site-certainty' issue to intimidate O'Shanter into a fire-sale buy-out." (P. R.Memo, p. 7.) O'Shanter points out that Niagara Mohawk
(1) refused to provide a letter confirming that it would not terminate the Agreement; (2) refused to provide written (or verbal) confirmation that it was not repudiating the Agreement; and (3) advised O'Shanter verbally and in writing that it intended to seek a review by the PSC of the validity of the Agreement.
(P. Memo, p. 31.) Niagara Mohawk believes that its efforts to negotiate a new contract based on the Indeck Yonkers order were all in good faith.
The only issue to be resolved now, of course, is whether there is a genuine issue in this regard, specifically as to whether Niagara Mohawk did anything that had the effect of destroying or injuring O'Shanter's right to receive the fruits of the parties' Agreement. That depends on whether Niagara Mohawk acted honestly and reasonably with respect to its contractual obligations. The fact that Niagara Mohawk never sought a PSC clarification cuts both ways. It could evidence, as O'Shanter argues, an intimidation tactic to force a new agreement. On the other hand, a reasonable juror could also find based on the evidence of record that Niagara Mohawk reasonably raised the site-certainty issue in the context of ongoing buy-out discussions with full intent to fulfill the original agreement if negotiations ultimately failed.
Since a genuine issue exists in this regard, summary judgment is not appropriate, and the parties' cross-motions will be denied as to the second cause of action.
For the reasons set forth above, drawing all reasonable inferences against each party in considering their respective motions, this Court will deny the parties' cross-motions for summary judgment.
IT HEREBY IS ORDERED, that defendant's motion for summary judgment pursuant to Federal Rule of Civil Procedure 56 is DENIED.
FURTHER, that plaintiff's motion for summary judgment pursuant to Federal Rule of Civil Procedure 56 is DENIED.
Dated: February 26, 1996
Buffalo, New York
WILLIAM M. SKRETNY
United States District Judge