United States District Court, Southern District of New York
August 27, 2003
JOHN HUMMER, PLAINTIFF,
JANET CONROY, KEVIN CONROY, MARCK DEBICKI D/B/A P & C RENOVATIONS CO., DEFENDANTS
The opinion of the court was delivered by: John Martin, District Judge
OPINION & ORDER
This opinion marks the final chapter of a long and contentious dispute concerning the correction of water damage to Plaintiff's apartment. The final issue to be resolved is Plaintiff's claim for attorney's fees.
To resolve a dispute with an insurance company concerning the repairs to his apartment, Plaintiff entered into an agreement with the insurance company and a contractor M.J. Minogue Associates, Inc. ("Minogue"), pursuant to which Minogue agreed to perform the repairs. That agreement provided:
In the event that . . . Minogue fails to perform its
obligations set forth in this agreement, and such
failure to perform is not the result of a good faith
disagreement, then the party in breach of this
agreement shall pay the reasonable attorneys' fees
incurred by the other party in connection with such a
Ultimately, a dispute arose and this Court found in favor of Plaintiff on his claim that Minogue failed "to perform its [ Page 2]
The issue to be decided here is whether Minogue's failure to perform was the result of "a good faith disagreement." That question has two parts: 1) Is the good faith standard an objective or subjective one? 2) Under the correct standard was Minogue acting in good faith?
On the first issue, Plaintiff points to decisions applying statutory good faith provisions which conclude that good faith must be measured by an objective standard. See Gale v. Primedia, Inc., No. 00 Civ. 5700, 2001 WL 1537692, *1 (S.D.N.Y. Dec. 3, 2001); Webb v. Bermudez, No. 92 Civ. 7305, 2001 WL 650483, *1 (S.D.N.Y. June 11, 2001). However, while it is reasonable to conclude that when Congress adopts a good faith standard in legislation it intends to apply a consistent standard in all cases, that reasoning does not necessarily apply to the terms negotiated by parties to a contract. A party who agrees to pay attorney's fees if he does not act in good faith would reasonably anticipate that it will be his mental state that will determine his liability. See Leberman v. John Blair & Co., 880 F.2d 1555, 1560 (2d Cir. 1989) ("The determination whether Leberman acted in good faith in reaching his decision not to include the payments of restricted stock and performance units in calculating severance payment is governed by a subjective, rather than an objective standard. Leberman was specifically bound by the [ Page 3]
contract to act in good faith"). Thus, it is appropriate in this case to apply a subjective standard to determine whether Minogue is liable for Plaintiff's attorney's fees.
While the Court is not unsympathetic to the delays and frustration that Plaintiff experienced in his attempts to have his apartment restored to its prior condition, it can not conclude that Minogue did not act in subjective good faith. While there were numerous delays, not all were the fault of Minogue and those delays obviously caused him problems in scheduling the work. Having heard Mr. Minogue's testimony, the Court credits his assertion that he acted in good faith. The fact that the Court concluded that substantial additional work had to be done to bring the apartment back to the very high standards of the original work, does not compel the conclusion that Mr. Minogue did not have a good faith belief that by performing punch list work he could bring the apartment to an acceptable condition.
For the foregoing reasons, the motion for attorney's fees is denied.
SO ORDERED. [ Page 1]
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