Even assuming, dubitante, that Fremont is correct in his assertion that Gould overestimated the weaknesses in the case, the result would be no different. The duty of good faith in this context calls for reasonable, not extraordinary, efforts. See USX, Inc., 988 F.2d at 438; Wilgus, 498 A.2d at 159.
Defendants have produced evidence indicative of such reasonable efforts, and plaintiff has failed to offer any contrary evidence. As noted above, the Gould affidavit indicates (1) that upon a consideration of the risks and expenses of litigation, DuPont's counsel advised settlement on terms that would, over time, at least cover costs already incurred, and (2) that DuPont acted accordingly. With evidence that DuPont settled according to the advice of counsel -- and no evidence indicating that DuPont, in so doing, engaged in any identifiable form of bad faith such as was wilfully rendering imperfect performance or slacking off--no reasonable jury could conclude that DuPont breached its duty of good faith by deciding to settle the lawsuit.
Fremont also advances the contention that DuPont should have conducted the patent litigation "with plaintiff's interests in mind." At the same time, however, plaintiff disavows any argument that he was entitled to control the litigation. In this situation, as pointed out previously, DuPont's own interests coincide with its duty to prosecute the litigation reasonably. Consequently, the duty urged by plaintiff -- that defendant conduct its litigation "with plaintiff's interests in mind" -- can only have meaningful effect if, in the event that the interests of plaintiff and DuPont diverge, the duty of good faith, or another unspecified implied duty, required the corporation to conduct the litigation in Fremont's interests irrespective of the cost and risk carried by DuPont. This is so because it is only when the two interests diverge that keeping "plaintiff's interests in mind" would affect the outcome of the decision whether to press forward with litigation (and thus risk increasing sunk costs) or to settle in such a way as to break even or cut losses.
Plaintiff cites no authority supporting such an understanding of the duty of good faith. Nor can the court discern either reason or authority for the imposition of such a onerous duty. Implied duties of good faith are supplied "where it is clear that an obligation is within the contemplation of the parties at the time of the contracting or is necessary to carry out their intentions." Slater v. Pearle Vision Center, Inc., 376 Pa. Super. 580, 546 A.2d 676, 679 (Pa. Super. Ct. 1988); accord Dave Greytak Enterprises, Inc. v. Mazda Motors of America, Inc., 622 A.2d 14, 22-23 (Del. Ch. 1992) ("The duty arises only where it is clear from what the parties expressly agreed, that they would have proscribed the challenged conduct as a breach of the implied covenant of good faith had they thought to negotiate with respect to the matter."). Thus the duty of good faith is implied in order to conform to the reasonable expectations of parties. In Judge (later Justice) Cardozo's classic formulation: "A promise may be lacking, and yet the whole writing may be 'instinct with an obligation,' imperfectly expressed." Wood v. Lucy, Lady Duff-Gordon, 222 N.Y. 88, 118 N.E. 214 (N.Y. 1917). Consequently, it is fair to inquire whether such an obligation can, though imperfectly articulated, fairly be thought to have been within the contemplation of the parties.
In this case, it is clear that the duty as urged by plaintiff is neither one for which the parties would have bargained nor one that lay within the parties' reasonable expectations. Plaintiff would naturally incline to a much less risk-averse position than defendant with respect to the costs of the patent litigation since, of course, DuPont bore those costs. Because of the contingent nature of the agreement, plaintiff stands only to gain from pressing the litigation forward or holding out for a settlement well above the break-even point. Thus even an infinitesimal chance of success on the merits would be worth pursuing from plaintiff's standpoint, since plaintiff was not in the position of having to bear the risk of losing those sunk costs. In such a context as this one, a reading of the duty of good faith and fair dealing of the kind hinted at by plaintiff would do one of two things: (1) require DuPont to litigate to the utmost claims that have the slenderest chances of success, or (2) encourage DuPont to discontinue fulfillment of its duty of good faith to Fremont at the point at which its litigation costs begin to exceed the highest potential amount of Fremont's recovery for DuPont's breach of the duty. Such a perverse result could hardly be assumed to be intended by rational contracting parties; therefore, I conclude that no implied duty required DuPont to continue litigation in contemplation of plaintiff's interests when DuPont perceived that its interests favored settlement. In sum, I find no violation of the duty of good faith and fair dealing in DuPont's decision to settle its patent case with GAF.
2. DuPont's Decision Not to Award a Bonus
Plaintiff suggests that DuPont "arbitrarily denied him the benefit of the bonus consideration." Although it is unclear what manner of contract violation plaintiff is alleging, this appears to be an argument that DuPont breached its duty of good faith by failing to consider Fremont for a bonus or by improperly denying him a bonus. These possibilities implicate, respectively, the "evasion of the spirit of the bargain" and the "abuse of power to specify terms" species of bad faith.
The contract specified that Fremont remained eligible for a bonus after retirement but was silent on the subject of whether DuPont was required to give the bonus issue any particular quantum of consideration. Consequently, the duty of good faith quite properly would supply a term requiring that DuPont exercise reasonable care in making the determination. See Gilbert v. El Paso Co., 490 A.2d 1050, 1055 (De. Ch. 1984) ("If one party is given discretion in determining whether the condition in fact has occurred that party must use good faith in making that determination."). Thus a review of the record with respect to the decision not to award a bonus is necessary to determine whether DuPont failed to consider Fremont's potential entitlement to a bonus. Defendant has offered several documents--affidavits, a letter to Fremont, and an interoffice memorandum--indicating that DuPont officials both considered whether to award Fremont a bonus and supplied Fremont with reasons why the award was not granted. As plaintiff has pointed to no evidence suggesting otherwise, defendant has successfully demonstrated that it did not fail in its duty to consider the bonus issue.
Plaintiff's argument may also be understood to challenge the reasonableness of DuPont's exercise of discretion in deciding whether to award a bonus. As noted above, the contract provided that Fremont would be eligible for a bonus if DuPont won or successfully settled the litigation. Defendant argues that (1) DuPont enjoyed unfettered discretion under the contract to determine whether to award a bonus and (2) because the litigation did not conclude successfully, the decision to deny the bonus was proper.
Although I conclude, in agreement with the second of these arguments, that no implied duty was breached here, nothing in this opinion should be understood as endorsing the contention that DuPont had complete discretion to deny the bonus. As explained at length above, both Pennsylvania and Delaware would impose the duty of good faith and fair dealing in this setting. From its earliest appearance in contract law, the implied duty was held to require "reasonable efforts" when a contract allows one party discretion that affects the other party's benefit from the contract. See Wood v. Lucy, Lady Duff-Gordon, 222 N.Y. 88, 118 N.E. 214 (N.Y. 1917). However, it is clear from the record that defendant satisfied the implied duty here.
Defendant has offered affidavits, memoranda, and account sheets showing that at the time of the settlement, DuPont's expenditures for the GAF litigation, including fees paid to the corporation's outside counsel, amounted to $ 1,118,742.00. Defendant's documentary evidence also indicates that the savings from the settlement have now been fully realized and that those savings, less DuPont's out-of-pocket legal expenses, amounted to approximately $ 6,000.00.
Finally, defendant's evidence indicates that as a result of this settlement, no DuPont employee was found deserving of a bonus in connection with the GAF litigation. Plaintiff has raised no substantial challenge to these documents, much less proffered any evidentiary material casting any doubt on them. Therefore, it is apparent from this record that DuPont made a reasonable determination that the litigation was not successful, and accordingly satisfied its duty of good faith.
D. Remaining Contract Arguments
Plaintiff's memorandum in opposition to summary judgment also raises a number of other contract law arguments: (1) that the writings proffered by defendant do not identify themselves as a contract, (2) that no single document bears both parties' signatures, (3) that there is no evidence that the parties intended such writings to constitute an integrated agreement, and (4) that there are further oral terms of the contract. These issues merit less discussion.
No support is offered, nor could the court find any, for the implicit proposition that a contract evidenced by a writing requires (1) that the writing identify itself as a contract or (2) that a single document bear both parties' signatures. Furthermore, although defendant argues that there is no agreement beyond that which is evidenced by the writings, the integration issue is inapposite, as there is no disagreement on the terms of the contract.
Finally, plaintiff's suggestion that there are additional oral terms fails as he has not specifically alleged any such terms, let alone offered evidence in support thereof. To defeat a motion for summary judgment a party may not simply rest on allegations in the pleadings without "any significant probative evidence tending to support the complaint." First National Bank of Arizona v. Cities Service Co., 391 U.S. 253, 290, 20 L. Ed. 2d 569, 88 S. Ct. 1575 (1968).
Plaintiff contends that he must be allowed to proceed to discovery in order to gather such evidentiary support. This argument, too, fails to persuade. Although a court might be hesitant to grant summary judgment on an undeveloped record where there appear to be significant differences between the parties on the relevant facts, no such situation is presented here. First, as noted above, plaintiff's essential construction of the agreement does not vary in any material way from defendant's. DuPont has accepted the existence of an agreement with the same relevant terms articulated by the plaintiff. To the extent that plaintiff appears to be arguing that there were as-yet unspecified oral terms of the contract, the argument has even less appeal. Since such oral terms must, by definition, have been communicated to the plaintiff, no discovery would be necessary to support the existence of such terms; such terms could be testified to by Fremont. No such support has been forthcoming from plaintiff. In fact plaintiff has failed to provide any exhibits, documents, or affidavits in this matter. Moreover, plaintiff does not allege, and there is no indication, that discovery could not have been pursued heretofore during the pendency of this case.
In sum, upon consideration of the briefs and the record, it is apparent that DuPont has violated no contractual duty, express or implied, owing to plaintiff. Therefore, defendant's motion for summary judgment will be granted.
December 31, 1997
For the reasons given in the accompanying memorandum, it is ORDERED that the summary judgment motion of defendant DuPont DeNemours is hereby GRANTED.
Louis H. Pollak