CARBON DIRECT FUND II BLOCKER LLC v. LANZATECH GLOBAL INC (2026)

Order, Supreme Court, New York County (Jennifer G. Schecter, J.), entered July 7, 2025, which, to the extent appealed from as limited by the briefs, granted defendant's motion to dismiss the complaint, unanimously affirmed, without costs.

Supreme Court properly dismissed the breach of contract claim.  Here, the sophisticated parties “set down their agreement in a clear, complete document” and the court properly enforced that agreement according to its terms (Nomura Home Equity Loan, Inc., Series 2006–FM2 v. Nomura Credit & Capital, Inc., 30 N.Y.3d 572, 581, 69 N.Y.S.3d 520, 92 N.E.3d 743 [2017], quoting W.W.W. Assoc. v. Giancontieri, 77 N.Y.2d 157, 162, 565 N.Y.S.2d 440, 566 N.E.2d 639 [1990]).  Plaintiff loaned over $40 million to defendant pursuant to a Convertible Note Purchase Agreement, which, as relevant here, provided for the conversion of the debt into equity interest in defendant's company upon a qualifying equity transaction prior to maturity.  Specifically, the convertible promissory note required defendant, upon such a qualifying event, to issue plaintiff “Conversion Shares,” which are defined as “shares of Common Stock or convertible preferred stock.”  This provision is not ambiguous.  “The word ‘or’ is a disjunctive [p]article that generally indicates a choice between one of two alternatives” (Hamburg v. New York Univ. Sch. of Medicine, 155 A.D.3d 66, 87, 62 N.Y.S.3d 26 [1st Dept. 2017];  accord Festa v. Leshen, 145 A.D.2d 49, 59–60, 537 N.Y.S.2d 147 [1st Dept. 1989];  Colbert v. International Sec. Bur., 79 A.D.2d 448, 463, 437 N.Y.S.2d 360 [2d Dept. 1981], lv denied 53 N.Y.2d 608, 442 N.Y.S.2d 1025, 425 N.E.2d 899 [1981]).  As such, the issuance by defendant of common stock satisfied its contractual obligation under the note.

Contrary to plaintiff's argument, the note did not require defendant to issue the same class of stock to plaintiff that was issued to a third-party investor in the triggering qualifying equity transaction, i.e. convertible preferred stock.  If plaintiff wanted such a term, plaintiff should have included it in the Note. When parties to a contract omit terms, “the inescapable conclusion is that the parties intended the omission” (Quadrant Structured Prods. Co., Ltd. v. Vertin, 23 N.Y.3d 549, 560, 992 N.Y.S.2d 687, 16 N.E.3d 1165 [2014];  see also 2138747 Ontario, Inc. v. Samsung C & T Corp., 31 N.Y.3d 372, 381, 78 N.Y.S.3d 703, 103 N.E.3d 774 [2018];  Vermont Teddy Bear Co. v. 538 Madison Realty Co., 1 N.Y.3d 470, 475, 775 N.Y.S.2d 765, 807 N.E.2d 876 [2004]).

Supreme Court also properly dismissed the claim for breach of the implied covenant of good faith and fair dealing as duplicative of the breach of contract claim as both claims arise from the same set of facts – namely, defendant's decision to issue plaintiff common stock instead of convertible preferred stock on the same terms given to the third-party investor – and seek the same damages for the alleged breach (see New York Univ. v. Continental Ins. Co., 87 N.Y.2d 308, 319–320, 639 N.Y.S.2d 283, 662 N.E.2d 763 [1995];  Mill Fin., LLC v. Gillett, 122 A.D.3d 98, 104, 992 N.Y.S.2d 20 [1st Dept. 2014];  Board of Mgrs. of Soho N. 267 W. 124th St. Condominium v. NW 124 LLC, 116 A.D.3d 506, 507, 984 N.Y.S.2d 17 [1st Dept. 2014];  Amcan Holdings, Inc. v. Canadian Imperial Bank of Commerce, 70 A.D.3d 423, 426, 894 N.Y.S.2d 47 [1st Dept. 2010], lv denied 15 N.Y.3d 704, 2010 WL 3397330 [2010]).  Even if the claim were not duplicative, it nonetheless fails because “[t]he covenant of good faith and fair dealing cannot be used to add a new term to a contract, especially to a commercial contract between two sophisticated commercial parties represented by counsel” (D & L Holdings v. Goldman Co., 287 A.D.2d 65, 73, 734 N.Y.S.2d 25 [1st Dept. 2001], lv denied 97 N.Y.2d 611, 742 N.Y.S.2d 604, 769 N.E.2d 351 [2002];  see also SalesCare, Inc. v. SEIU 1199 Natl. Benefits Fund, 222 A.D.3d 465, 466, 201 N.Y.S.3d 37 [1st Dept. 2023], lv denied 41 N.Y.3d 909, 2024 WL 2334032 [2024]).

We have considered plaintiff's remaining arguments and find them unavailing.