Brunswick Hills Racquet Club (Brunswick) owned a tennis club on property that it leased from Route 18 Shopping Center Associates (Route 18). The lease ran for 25 years, and Brunswick had spent about $1 million in capital improvements. The lease expired, and Brunswick had the option of either buying the property or purchasing a 99-year lease, both on very favorable terms. To exercise its option, Brunswick had to notify Route 18 no later than September 30, and had to pay the option price of $150,000. If Brunswick failed to exercise its options, the existing lease automatically renewed as of September 30, for 25 more years, but at more than triple the current rent.

Nineteen months before the option deadline, Brunswick’s lawyer wrote to Rosen Associates, the company that managed Route 18, stating that Brunswick intended to exercise the option for a 99-year lease. He requested that the lease be sent well in advance so that he could review it. He did not make the required payment of $150,000.

Rosen replied that it had forwarded Spector’s letter to its attorney, who would be in touch. In April, Spector again wrote, asking for a reply from Rosen or its lawyer.

Over the next six months, the lawyer continually asked for a copy of the lease, or information, but neither Route 18’s lawyer nor anyone else provided any data. Eventually, the September deadline passed.

Route 18’s lawyer notified Brunswick that it could not exercise its option to lease, because it had failed to pay the $150,000 by September 30. Brunswick sued, claiming that Route 18 had breached its duty of good faith and fair dealing. The trial court found that Route 18 had no duty to notify Brunswick of impending deadlines, and gave summary judgment for Route 18. The appellate court affirmed, and Brunswick appealed to the state supreme court.

Questions:

1. Did Route 18 breach its duty of good faith and fair dealing?

2. Brunswick failed to pay the option price of $150,000 when it notified Route 18 of its exercise of the 99-year lease option. Why doesn’t that end the case, in favor of Route 18?

3. The definition of good faith is nebulous. What standard does the court apply?

4. What does that mean in practical terms?

5. It seems in these cases that courts could wind up interfering with legitimate competitive business practices.