CARMICHAEL V. ADIRONDACK BOTTLED GAS CORP.
161 Vt. 200 (1993)
NATURE OF THE CASE: Adirondack (D) appealed a court decision in favor of Carmichael (P)
on P's breach of the covenant of good faith and fair dealing.
FACTS: Ps bought an existing petroleum gas distributorship from Granger. The transaction
required Ps to enter into a contractor's agreement D. In general, the agreement described
the terms under which D would supply Ps with the product which they, in turn, would retail
to their customers. The agreement contained a 'key man' clause, which provided in part: This
Agreement shall automatically terminate without written notice upon the sale or assignment
of P's business, the death of P, husband, or upon any change in the capital structure,
management or ownership of contractor. Eventually Ps explored with D the possibility of
selling their distributorship for $60,000. D offered P $38,500. Ps declined the offer.
Husband died in a snowmobile accident, triggering the 'key man' termination provision. At
the funeral D asked Wife about her intentions toward the business. She indicated an
intention to stay in business, and D replied that they would get together at a future time
to discuss how she would operate the distributorship. D again sent a letter to Wife's
attorney, again offering to purchase the business for $38,500. Wife promptly instructed her
attorney to inform D that she still wished to stay in business. D gave an ultimatum that the
offer would expire in 5 days and even if she didn't accept the buyout offer, she would be
out of business. Concluding that D would no longer supply her with fuel as of Monday, Wife
laid off her employees Friday afternoon. She sold much of her business equipment for $35,000
to Blue Flame Gas, a local competitor. On Monday, Wife returned to her work place and began
closing up shop. The phone rang repeatedly that morning with calls from customers needing
fuel deliveries. D stopped by to see Wife, who told him she had sold her trucks and
discharged her employees. She then handed him a list of customers who required immediate
attention. D's attorney called. The attorney became extremely upset. A final meeting was
held to tie up loose ends. Wife's attorney would not be present and she announced upon her
arrival that she would not discuss legal questions without her lawyer present. D repeatedly
asked wife to accept and sign a written agreement for the transfer of Wife's remaining
business assets. She eventually relented and signed after the meeting. D also handed over
the requested documents. D then immediately began servicing the customers. Disputes
magnified and eventually Wife sued D. The court ordered arbitration for some of the claims.
The parties stipulated to the entry of an arbitration award. Wife was awarded $4,922.26. The
arbitration proceedings did not address any claim regarding bad faith and unfair dealing. It
dealt only with accounting disputes. Wife initiated suit against D in federal district court
on January 5, 1990, alleging federal antitrust violations. The district court dismissed
Wife's antitrust suit with prejudice. D moved for summary judgment in state court. The state
court denied summary judgment and the parties proceeded to trial. All claims were dismissed
except for the breach of the implied covenant of good faith and fair dealing. The jury gave
wife a verdict in the amount of $60,000 compensatory and $100,000 punitive damages. D
appealed after several post-verdict motions were denied.
ISSUE:
RULE OF LAW:
HOLDING AND DECISION:
LEGAL ANALYSIS:
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