GRUBMARKET INC v. Jian He, respondent. (2026)

DECISION & ORDER

In an action, inter alia, to recover damages for breach of contract, the plaintiff appeals from an order of the Supreme Court, Queens County (Frederick D.R. Sampson, J.), entered March 11, 2025.  The order, insofar as appealed from, denied those branches of the plaintiff's motion which were pursuant to CPLR 3211(a) to dismiss the first and second counterclaims of the defendant Jian He.

ORDERED that the order is modified, on the law, by deleting the provision thereof denying that branch of the plaintiff's motion which was pursuant to CPLR 3211(a) to dismiss the second counterclaim of the defendant Jian He, and substituting therefor a provision granting that branch of the motion;  as so modified, the order is affirmed insofar as appealed from, with costs to the plaintiff.

The defendant Jian He (hereinafter the defendant) was employed by the plaintiff until his termination in July 2023.  Thereafter, the plaintiff commenced this action against, among others, the defendant.  The defendant asserted counterclaims alleging, inter alia, that the plaintiff breached its employment agreement with the defendant (first counterclaim), as well as the implied covenant of good faith and fair dealing (second counterclaim).  The plaintiff moved, among other things, pursuant to CPLR 3211(a) to dismiss the first and second counterclaims.  In an order entered March 11, 2025, the Supreme Court, inter alia, denied those branches of the motion.  The plaintiff appeals.

“Under CPLR 3211(a)(1), a dismissal is warranted only if ‘the documentary evidence utterly refutes plaintiff's factual allegations, conclusively establishing a defense as a matter of law’ ” (Hansen v. New York Archdiocese, 227 AD3d 683, 683–684, quoting Goshen v Mutual Life Ins. Co. of N.Y., 98 NY2d 314, 326).  “To constitute documentary evidence, the evidence must be unambiguous, authentic, and undeniable, such as judicial records and documents reflecting out-of-court transactions such as mortgages, deeds, contracts, and any other papers, the contents of which are essentially undeniable” (IPA Asset Mgt., LLC v. Schuman, 239 AD3d 619, 621 [internal quotation marks omitted];  see Fabi v. Prudential Ins. Co. of Am., 241 AD3d 648, 649).  “ ‘An unambiguous contract provision may constitute documentary evidence warranting the dismissal of the complaint pursuant to CPLR 3211(a)(1)’ ” (7 Mansion, LLC v. Calvano, 226 AD3d 730, 732, quoting Wilson v Poughkeepsie City Sch. Dist., 147 AD3d 1112, 1113).

“ ‘In reviewing a motion to dismiss a counterclaim pursuant to CPLR 3211(a)(7), a court must accept as true the facts as alleged in the pleading, accord the pleader the benefit of every possible favorable inference, and determine only whether the facts as alleged fit within any cognizable legal theory’ ” (Heres v. Reese, 244 AD3d 702, 703–704, quoting Liptis Pharms.  USA, Inc. v Liptis for Pharms.   & Med. Prods., SAE, 228 AD3d 927, 928).  “ ‘[A]ffidavits may be used freely to preserve inartfully pleaded, but potentially meritorious, claims’ ” (Maursky v. Latham, 219 AD3d 473, 474, quoting Rovello v. Orofino Realty Co., 40 NY2d 633, 635).

Pursuant to a choice-of-law provision, the parties' employment agreement was to be governed by California law.  “Under California law, ‘[t]he elements of a cause of action for breach of contract include the existence of a contract, the plaintiff's performance or excuse for non-performance, the defendant's breach, and resulting damages to the plaintiff’ ” (CRC Ins. Servs., Inc. v. Kullman, 244 AD3d 684, 685, quoting J.B.B. Inv. Partners Ltd. v. Fair, 37 Cal App 5th 1, 9, 249 Cal Rptr 3d 368, 377).

Here, the Supreme Court properly denied that branch of the plaintiff's motion which was pursuant to CPLR 3211(a) to dismiss the first counterclaim.  The counterclaim adequately stated a cause of action to recover damages for breach of contract under California law (see CPLR 3211[a][7];  J.B.B. Inv. Partners Ltd. v. Fair, 37 Cal App 5th at 9, 249 Cal Rptr 3d at 377), and the plaintiff's submissions failed to utterly refute the defendant's material allegations or conclusively establish a defense to that cause of action as a matter of law (see CPLR 3211[a][1];  Hansen v. New York Archdiocese, 227 AD3d at 683–684).  The plaintiff's contention that it is entitled to dismissal of a portion of the first counterclaim, “to the extent” it seeks to recover for “post-termination compensation,” is raised for the first time on appeal, and we decline to consider it.

Under California law, “[e]very contract includes an implied covenant that neither party will do anything which will injure the right of the other to receive the benefits of the agreement” (California Dental Assn. v. Delta Dental of California, 115 Cal App 5th 142, 153, 337 Cal Rptr 3d 801, 809 [internal quotation marks omitted];  see VFLA Eventco, LLC v William Morris Endeavor Entertainment, LLC, 100 Cal App 5th 287, 312, 318 Cal Rptr 3d 844, 865).  “[T]he implied covenant ‘exists merely to prevent one contracting party from unfairly frustrating the other party's right to receive the benefits of the agreement actually made’ ” (Rattagan v. Uber Tech., Inc., 17 Cal 5th 1, 26 n 7, 324 Cal Rptr 3d 433, 451 n 7, 553 P3d 1213, 1228 n 7, quoting Guz v. Bechtel Natl. Inc., 24 Cal 4th 317, 349, 100 Cal Rptr 2d 352, 375, 8 P3d 1089, 1110).  “In essence, the covenant is implied as a supplement to the express contractual covenants, to prevent a contracting party from engaging in conduct which (while not technically transgressing the express covenants) frustrates the other party's rights to the benefits of the contract” (Berlanga v. Univ. of San Francisco, 100 Cal App 5th 75, 88, 318 Cal Rptr 3d 782, 793 [emphasis and internal quotation marks omitted];  see Rattagan v. Uber Tech., Inc., 17 Cal 5th at 26 n 7, 324 Cal Rptr 3d at 451 n 7, 553 P3d at 1228 n 7).

Under California law, compensation for breach of the implied covenant of good faith and fair dealing is limited to “ ‘contract rather than tort remedies’ ” (Hearn v. Pacific Gas & Elec. Co., 108 Cal App 5th 301, 313, 329 Cal Rptr 3d 213, 222, quoting Foley v. Interactive Data Corp., 47 Cal 3d 654, 684, 254 Cal Rptr 211, 227, 765 P2d 373, 389).  Damages awarded for breach of the implied covenant of good faith and fair dealing should only reflect the loss of express contractual benefits, not additional injuries actionable under tort law (see Welch v. MGM, 264 Cal Rptr 353, 353, 782 P2d 594, 594, vacating Welch v Metro–Goldwyn–Mayer Film Co., 254 Cal Rptr 645, 658–663).  Moreover, if the allegations supporting a cause of action to recover damages for breach of the implied covenant of good faith and fair dealing “do not go beyond the statement of a mere contract breach and, relying on the same alleged acts, simply seek the same damages or other relief already claimed in a companion contract cause of action, they may be disregarded as superfluous as no additional claim is actually stated” (Levy v Only Cremations for Pets, Inc., 57 Cal App 5th 203, 215, 271 Cal Rptr 3d 250, 260 [emphasis and internal quotation marks omitted];  see Guz v. Bechtel Natl. Inc., 24 Cal 4th at 352–353, 100 Cal Rptr 2d at 377–378, 8 P3d at 1112).  Further, an “implied covenant of good faith and fair dealing cannot contradict the express terms of a contract” (Coyote Aviation Corp. v. City of Redlands, 111 Cal App 5th 955, 978, 333 Cal Rptr 3d 273, 290 [internal quotation marks omitted] ), and “imposes no independent limits on an employer's prerogative to dismiss employees” (Guz v. Bechtel Natl. Inc., 24 Cal 4th at 351, 100 Cal Rptr 2d at 376, 8 P3d at 1111).

Here, the defendant's allegations that the plaintiff made false statements about him after his termination cannot support recovery on the second counterclaim, as such allegations seek tort remedies rather than contractual remedies (see Foley v. Interactive Data Corp., 47 Cal 3d at 663, 254 Cal Rptr at 212, 765 P2d at 374;  Welch v. MGM, 264 Cal Rptr at 353, 782 P2d at 594), and the defendant's remaining allegations in support of the second counterclaim are either duplicative of the first counterclaim, alleging breach of contract, or contradicted by the terms of the employment agreement, which permitted termination at will (see Guz v. Bechtel Natl. Inc., 24 Cal 4th at 351–353, 100 Cal Rptr 2d at 376–378, 8 P3d at 1111–1112).

The defendant's remaining contentions are without merit.

BARROS, J.P., CHAMBERS, TAYLOR and GOLDBERG VELAZQUEZ, JJ., concur.