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Posted by: Tanja Trezise on Jan 17, 2013

Head Comment: With concurring opinion.

Court: TN Supreme Court

Attorneys 1:

Robert S. Stone, Knoxville, Tennessee, for the appellant, Oak Ridge FM, Inc., and ComCon Consultants.

Attorneys 2:

John A. Lucas, Alcoa, Tennessee, for the appellant, John W. Pirkle.

John A. Day and Brandon E. Bass, Brentwood, Tennessee, for the appellee, Dick Broadcasting Company, Inc., of Tennessee.

Judge(s): LEE

The legal issues in this appeal revolve around the assignment of three agreements. The first is a Right-of-First-Refusal Agreement that allowed for an assignment with the consent of the non-assigning party. The agreement was silent as to the anticipated standard of conduct of the non-assigning party in withholding consent. The other two agreements—a Time Brokerage Agreement and a Consulting Agreement—were assignable without consent. The primary issue we address is whether the implied covenant of good faith and fair dealing applies to the non-assigning party’s conduct in refusing to consent to an assignment when the agreement does not specify a standard of conduct. Oak Ridge FM, Inc. (“Oak Ridge FM”) contractually agreed for Dick Broadcasting Company (“DBC”) to have a right of first refusal to purchase Oak Ridge FM’s WOKI-FM radio station assets. The agreement was assignable by DBC only with the written consent of Oak Ridge FM. When DBC requested Oak Ridge FM to consent to the assignment of the Right-of-First-Refusal agreement to a prospective buyer, Oak Ridge FM refused to consent. Oak Ridge FM also refused to consent to the assignment of the Consulting Agreement and Time Brokerage Agreement, neither of which contained a consent provision. DBC sued Oak Ridge FM and the other defendants, alleging breach of contract and violation of the implied covenant of good faith and fair dealing. The trial court granted the defendants a summary judgment. DBC appealed, and the Court of Appeals vacated the summary judgment. We hold that where the parties have contracted to allow assignment of an agreement with the consent of the non-assigning party, and the agreement is silent regarding the anticipated standard of conduct in withholding consent, an implied covenant of good faith and fair dealing applies and requires the nonassigning party to act with good faith and in a commercially reasonable manner in deciding whether to consent to the assignment. Because there are genuine issues of material fact in dispute, we affirm the judgment of the Court of Appeals and remand to the trial court.