Contract – Sprint sued for terminating contract in bad faith

Where a party plausibly alleged another party acted in bad faith when it terminated a contract, its motion to amend its complaint to assert a non-duplicative breach of contract claim based on the implied covenant of good faith and fair dealing was granted.

Background

Plaintiff Eastwood Assisted Living Inc. moves for leave to file an amended complaint. Eastwood’s amended complaint alleges additional facts sufficient to support a non-duplicative breach of contract claim based on the implied covenant of good faith and fair dealing, or GFFD. Defendant Sprint Spectrum LLC opposes the motion.

Amendment

Defendant argues that plaintiff is barred from filing the amended complaint because Virginia law does not allow a standalone claim for breach of GFFD. But plaintiff does not bring a standalone GFFD claim; rather, it alleges a breach of contract based on GFFD. This is a valid claim.

And this claim is not duplicative. Plaintiff’s original claim was on a theory of express material breach. Its amended claim is on a GFFD theory. They might draw on the same facts, but these claims assert different theories. Therefore, plaintiff asserts a cognizable breach of contract claim.

Plausibility

Plaintiff does not plead sufficient facts to claim that defendant breached its covenant of GFFD by dishonest conduct. While operating similar equipment on a premises after claiming that “changed circumstances” made the premises “no longer suitable for their intended purpose” may suggest inconsistency or arbitrariness, it is not enough to give rise to a reasonable inference of dishonesty. Thus, the amended complaint does not plausibly claim bad-faith dishonesty.

However plaintiff does plead facts sufficient, at this stage of the proceedings, to bring a claim for breach of GFFD by bad-faith exercise of contractual discretion. Plaintiff explains that defendant exercised its discretion in bad faith—unfairly and arbitrarily—to determine whether “changed circumstances” had rendered the premises “no longer suitable for their intended purpose.”

The accrual of defendant’s right to terminate the agreement was not committed to the occurrence of an objective, undisputed fact, but rather was committed to defendant’s determination that “changed circumstances” rendered the premises “no longer suitable for their intended purpose” of operating telecommunications equipment. Claiming to make this determination while simultaneously continuing to operate telecommunications equipment on the premises gives rise to a reasonable inference of defendant’s bad faith.

This lease did not allow termination for any reason; rather, it permitted termination only if defendant determined that “changed circumstances” made the premises “no longer suitable for their intended purpose.” Continuing to use the premises for the same purpose after claiming to have made this determination plausibly alleges bad faith.

Plaintiff’s motion for leave to file amended complaint granted.

Eastwood Assisted Living Inc. v. Sprint Spectrum LLC, Case No. 7:24-cv-00666, June 30, 2026. WDVA at Roanoke (Dillon). VLW 026-3-278. 12 pp.

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