Unpublished Disposition, 872 F.2d 432 (9th Cir. 1989)

Annotate this Case
US Court of Appeals for the Ninth Circuit - 872 F.2d 432 (9th Cir. 1989)


No. 88-3773.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted March 6, 1989.Decided April 3, 1989.

Michael R. Hogan, Magistrate, Presiding.

Before CANBY, DAVID R. THOMPSON, and LEAVY, Circuit Judges.


American States Insurance ("ASI" or "appellee") entered into an agency agreement with Welker's Insurance Center, Inc. ("Welker" or "appellant") which provided that either party to the contract could terminate the relationship by giving ninety days written notice to the other. ASI purported to exercise its termination rights under this provision, whereupon Welker filed the instant action, claiming that the appellee had breached the implied covenant of good faith and fair dealing. The district court entered summary judgment in favor of ASI, and Welker appealed. We review de novo, see Mead Reinsurance v. Granite State Ins. Co., 865 F.2d 992, 993 (9th Cir. 1989) (as amended), and we affirm.

Oregon law implies a covenant of good faith and fair dealing in all contracts. Perkins v. Standard Oil Co., 235 Or. 7, 383 P.2d 107, 112 (1963). The covenant may be invoked to prevent one party to a contract from acting arbitrarily and without a legitimate business purpose, Comini v. Union Oil Co. of Cal., 277 Or. 753, 562 P.2d 175, 176 (1977), and to prevent a party to an at-will contract from exercising its rights under a termination clause in such a way as to deprive the other party of benefits to which it had become entitled. State ex rel. Roberts v. Public Finance Co., 294 Or. 713, 662 P.2d 330, 333 n. 4 (1983) (dictum).

The appellant contends that the implied covenant of good faith and fair dealing should be invoked here to override the express wording of the agency agreement's ninety-day termination clause. Although the Oregon Supreme Court has yet to decide the question of whether and to what extent this covenant may override an explicit contract provision, we need not and do not reach that issue for the reason that the appellant's argument is unsupported by the record.

There is nothing in the record to indicate that ASI acted arbitrarily and without a legitimate business purpose, nor is there any indication that the termination deprived Welker of any benefits to which it was entitled. The reason for ASI's termination of Welker is amply set forth in the record, and while the appellant is free to disagree with that reason, it is clear that any such disagreement involves nothing more than a dispute over business judgment.



This disposition is not appropriate for publication and may not be cited to or by the courts of this circuit except as provided by Ninth Circuit Rule 36-3