Peter Dalton Case

Peter Dalton v. Educational Testing Service
Court of Appeals of New York
Dec. 7, 1995.
(87 N.Y.2d 384,*386, 663 N.E.2d 289,**290, 639 N.Y.S.2d 977,***977)
FACTS Brian Dalton (plaintiff) took the SAT test in May administered by Educational Testing Service (ETS) (defendant). In November, he took again and scored 410 points higher. Because the increased score fell within the ETS category of discrepant scores, the ETS did a handwriting comparison examined by a document examiner who opined that they were completed by separate individuals. The ETS made a preliminary decision to cancel Dalton’s November score. In registering for the November test, Dalton had signed an agreement granting the ETS the right to cancel any test score if ETS has reason
to question the score’s validity. The contract also provided five options for plaintiff in the event the score is questioned. Dalton exercised his contractually guaranteed right to submit additional information to the board. Despite substantial evidence that Dalton took both tests, ETS continued to question the validity of his November score based on the opinion of a second document examiner. The plaintiff’s father, Peter Dalton initiated this action to prevent ETS from canceling plaintiff’s score. The Supreme Court concluded the ETS breached its contract with Dalton and ordered ETS to release SAT score. Appellate Division affirmed. The Court of Appeals affirmed the order of the trial court, holding that ETS breached its contract with Dalton. The remedy is the specific performance of good faith compliance with ETS’s stated procedures, not the release of the questioned score ordered by the lower courts.
ISSUE Did a party who drafted the contract exercised a good faith effort to comply with the procedures specified its contract with the person?
Opinion No. Implicit in all contracts is a covenant of good faith and fair dealing in course of contract performance. The implied obligation to act in good faith requires that “neither party shall do anything which will have the effect of destroying or injuring the right of the other party to receive the fruits of the contract.” When a contract contemplates the exercise of discretion, this includes a promise not to act arbitrarily or irrationally in exercising that discretion. Here, the defendant has no duty implied to express, or to initiate an external investigation into a questioned score. However, the contract required that the defendant consider any relevant material that the plaintiff supplied to the defendant. By failing to evaluate or investigate the relevant information furnished by plaintiff, and considering only the report of its own document examiners, the defendant failed to act in good faith with its own test security procedures in determining the legitimacy of plaintiff’s score, thereby breaching its contract. As a remedy for the contractual breach, the trial court ordered ETS to release the November score. The Appellate Division affirmed.
DISSENT The dissent would reverse the lower court, dismissing Dalton’s suit for two reasons.
First, the lower court’s factual determinations are based on an erroneous legal standard, in assuming that ETS has an implied duty to investigate Dalton’s evidence. The majority rejected that standard as well. The dissent concluded that the lower court’s decision, at minimum, should be a reversal and remittal for new findings based on the proper legal standard. Second, as a matter of law, ETS fulfilled its contractual obligation. Both the majority and dissent agree a covenant of good faith exists. The differences appear to be a result of facts, not the law. The specific factual dispute is whether ETS adequately considered Dalton’s evidence regarding his presence in the room on the test day. The dissent concluded that each ETS Board of member gave a reason why he or she found Dalton’s submission was irrelevant. Therefore, a breach of the implied covenant of good faith and fair dealing could only be established if the reason the Board members gave to deem irrelevant Dalton’s submissions was arbitrary, capricious or irrational. Each Board member testified that the evidence did not explain the crucial doubt, the disparate handwriting. The reason to deem irrelevant Dalton’s evidence of presence was not irrational, arbitrary or capricious, and it cannot form the basis of a breach of the implied covenant of good faith. The majority is simply substituting its own judgment for that of
ETS.