2018-0060, Pro Done, Inc. v. Teresa Basham & a.

Teresa Basham, Terrence Lee Hoo per, and Timothy John Hooper. Ransmeier, Trustee of the Paul R. Hooper 1997 Trust, joined in the brief of Ransmeier & Spellman, P.C., of Concord (Biron L. Bedard), for John C.

John Hooper. Paul R. Hooper 1998 GST Exempt Trust, Terrence Lee Hooper, and Timothy orally), for Teresa Basham, Individually and as Non - Independent Trustee of the McLaughlin, and Alexander W. Campbell on the brief, and Mr. McLaughlin Shaheen & Gordon, P.A., of Concord (William E. Christie, Timothy J.

Done, Inc. Bartholomew, and R. Terry Parker on the brief, and Mr. Lewis orally), for Pro Rath, Young and Pignatelli, P.C., of Concord (Michael S. Lewis, Kenneth

No. 2018 - 0060 Merrimack

address of the court ’ s home page is: http://www.courts.state.nh.us/supreme. available on the Internet by 9:00 a.m. on the morning of their release. The direct by e - mail at the following address: reporter@courts.state.nh. us. Opinions are corrections may be made before the opinion goes to pre ss. Errors may be reported Doe Drive, Concor d, New Hampshire 03301, of any editorial errors in order that requested to notify the Reporter, Supreme Court of New Hampshire, One Charles formal revision before publication in the New Hampshire Reports. Readers are NOTICE: This opinion is subject to motions for rehearing under Rule p. 2 22 as well as 2

settlement agreement with the plain tiff and is not a party to this appeal. Hooper 1998 GST Exempt Trust. Bank of America was dismissed from this lawsuit following a The complaint also named as a defendant Bank of America, N.A., as trustee of the Paul R. 1

International, Inc. In May p. 2 2014, three unrelated companies, collectively known Inc., acquired another Pro - Cut entity. It then changed its name to Pro - Cut After these transactions, one of the Pro - Cut entities, Brake Solutions,

transaction s. Each sibling defendant received approximately $750,000 as a result of the

into in r elation to the equity of the Company. future transaction that the Company or any unit holder may enter the Seller, including but not limited to any claim based on any connection with any prior ownership interest in the Company by . . . of, from, and with respect to any and all claims . . . in agents, and representatives as well as their successors and assigns respective officers, directors, managers, members, employees, action, right, title or interest . . . against, the Company, its not to sue and otherwise agrees not to enforce any claim, cause of finally and forever releases, discharges, quit claims and covenants Other than as set forth in the Agreement, the Seller hereby fully,

which state s, in pertinent part: the sib ling defendant s a document attached to each SRA entitled “Release,” successors and assigns of the parties.” Ransmeier also executed on be half of of which were stated to be binding upon “the heirs, personal representatives, Securities Redemption Agreements (SRAs) with the Pro - Cut entities, the terms November p. 2 2013, Ransmeier, on the sibling defendants’ behalf, e xecuted fifteen ownership interest s. They eventually agreed upon a sale price, and in with Joseph Willey, another owner of the Pro - Cut entities, to sell the ir held in trust by John Ransm eier. In 2012, the sibling defendants negotiated ownership interest in three companies known as the Pro - Cut entities, to be (sibling defendants) each received a portion of their father’s one - third father’s death i n 2009, Teresa Basham, Timothy Hooper, and Terrence Hooper The plaintiff’s amended complaint alleges the following facts. Upon their

plaintiff’s claims. We reverse and remand. violation of a certain contractual provision does not provide a basis for the Specifically, the plaintiff challenges the trial court’s ruling that an alleged contract, tortious interference with contractual relations, and civil conspiracy. and John R ansmeier, t rustee o f the Paul R. Hooper 1997 Trust, for breach of 1 t he Paul R. Hooper 1998 GST Exempt Trust, Terrence Hooper, Timothy Hooper, defendants, Teresa Basham, individually and as non - independent trustee of the Superior Court (Kissinger, J.) dismissing its amended complaint against the HANTZ MARCONI, J. The plaintiff, Pro Done, Inc., appeals an order of p. 3 3

duties to the P laintiff.” the Releases maintained a contractual relationship that imposed ongoing permit recovery” because those claims “rest on a theory that the parti es... to conspiracy were “not reasonably susceptible of a construction that would alternative claims of tortious interference with contractual relations and civil breach of contract action. The trial court also concluded that the plaintiff’s therefore a violation of the release agreements could not constitute a basis for a agreements operated as release s rather than covenant s not to sue, and award[ed] as a result of their breach,” the trial court concluded that the r elease the Releases that the parties contemplated consequential damages to be covenant. See Kaye, 1 p. 3 35 A.3d at 904, 9 06 - 07. Finding “no clear indication in consequential dama ges incurred as a result of the obligor’s failure to honor the clearly demonstrates that the parties intended for the obligee to recover a promise of future forbearance that may be breached, unless the agreement that a covenant not to sue functions only as a n immediate release, rather than Wilson - Gaskins, 135 A.3d 892, 906 - 07 (Md. Ct. Spec. App. 2016), concluded dismissing the plaintiff’s amended complaint, the trial court, relying on Kaye v. therein, do not give rise to a cause of action for breach of contract. In alia, that the release agreements, including the covenant not to sue contained The defendants moved to dismiss the plaintiff’s action, arguing, inter

reasonable attorney’s fees and costs in litigating the present action. affiliates, exemplary and punitive damages to deter future illegal conduct, and defendants from participating in any action against the plaintiff and its consequential damages,” as well as a permanent injunction barring the sust ained or will sustain by reason of D efendant s ’ conduct, including any plaintiff’s amended complaint sought “any and all such damages as it has tortious interference wi th contractual relations and civil conspiracy. The defendants, asserting claims of breach of contract, and, in the alternative, T he plaintiff subsequently filed this action in s uperior c ourt against the

the plaintiff. of that lawsuit. Snap - o n has also assert ed rights to indemnification against defendants have se rved subpoenas on the plaintiff and Snap - on entities as part transaction. Although the plaintiff is not a party to the federal action, the that were members of the Pro - Cut e n tities at the time of the Snap - o n Court for the District of New Hampshi re against Willey and trustees of trusts filed a law suit, with the assistance of Ransmeier, in the United States District After Snap - on’s purchase of the Pro - Cut entities, the sibling defendants

assignee of the Pro - Cut entities that were parties to the SRAs. th e plaintiff in this case, alleges it is a resulting company, successor, or Pro - Cut International, Inc. was then renamed Pro Done, Inc. Pro Done, Inc., as Snap - o n, purchased the Pro - Cut entities for approximately $ p. 4 41. p. 3 3 million. 4

Found. for Seacoast Health v. Hosp. Corp. of America, 165 N.H. 168, 172 give an agreement the meaning inten ded by the parties when they wrote it. whole. Town of Pembroke v. Town of Allenstown, 171 N.H. 65, 70 (2018). We context in which the agreement was negotiated, and reading the document as a the agre ement its reasonable meaning, considering the circumstances and the interpreting a written agreement, we give the language used by the parties to N.H. 537, 5 p. 4 41 (2016); Moore v. Grau, 171 N.H. 190, 194 (2018). When general rules of contract interpretation. See McDonough v. McDonough, 169 Because the release agreements are part of a contract, we apply the

damages for breach of the covenant. We hold that it does. expressly provide that the non - breaching party is entitled to consequential contract based upon a covenant not to sue where the contract does not court: whether New Hampshire law recognizes a cause of action for breach of The parties’ arguments present a question of first impression for this

breach of contract. court properly concluded that the plaintiff f ailed to state a cause of action for damages.” Based upon this principle, t he defendants contend that the trial covenant would entitle the non - breaching party to recover consequential the covenant “include [s] language evidencing an intent that a breach of the of a covenant not to sue does not give rise to a breach of contract action unless operates only as a release. T herefore, they argue, the act of suing in violation The defendants argue that, as a matter of law, a covenant not to sue

law. consequential damages for breach of the contract, contrary to New Hampshire against the plaintiff — and denied the plaintiff the opportunity to seek “covenant[ed] not to sue and otherwise agree[d] not to enforce any claim” ignored express terms of the r elease agreem ents — in which the defendants central arguments may be distilled into one contention: the trial court’s order challenging the trial court’s dismissal of its breach of contract claim. Its On appeal, the plaintiff makes numerous, yet related, arguments

to grant the motion to dismiss. Id. allegations constitute a basis for legal relief, we must hold that it was improper the facts alleged by the plaintiff against the applicable law, and if the favorable to the plaintiff. Id. We then engage in a threshold inquiry that tests pleadings are true and construe all reasonable inferences in the light most Apple dore Med. Grp., 170 N.H. 738, 7 p. 4 41 (2018). We a ssume that the plaintiff’s susceptible of a construction that would permit recovery. Slania Enter s. v. of review is whether the allegations in the plaintiff’s pleadings are reasonably In reviewing the trial court ’s grant of a motion to dismiss, our standard

plaintiff’s motion, and t his appeal followed. The plaintiff moved for reconsideration. The trial court denied the p. 5 5

damages. The defendants point to no authority in New Hampshire that expressly allowing for the non - breaching party to recover consequential provide a basis for a breach of contract action in the absence of language contend that the covenant not to sue i n the release agreements do es not Despite the express terms in the r elease agreements, the defendants

Lassonde, 1 p. 5 57 N.H. at 588. and assigns, which, in the absence of legal excuse, may be breached. See directors, managers, members, employees, agents, representatives, successors, bring an action against the Pro - Cut entities or their respective officers, Health, 165 N.H. at 172, the covenant not to sue consti tute s a promise not to upon the pla in meaning of the terms of the r elease agreements, see Seacoast continuation of the obligation or liability.” Stateline, 150 N.H. at 338. Based instead of extinguishing a claim, a covenant not to sue “recognizes the promise, usu. in a contract or deed, to do or not do a particular act”). Thus, Dictionary 443 (10 th ed. 2014) (defining “covenant” a s “[a] form al agreement or or claim based upon the obligation.” (quotation omitted)); see also Black’s Law (“[T] he party making the covenant not to sue agrees only not to assert any right promise of future forbearance from suing the other pa rty on certain claims. Id. (quotation omitted)). A covenant not to sue constitutes an agreement or sue does not relinquish a right or claim, or extinguish a cause of action.” release. See Stateline, 150 N.H. at 338 (“Unlike a release, a covenant not to (2003). W e have also recognized a covenant not to sue as distinct from a 372 (1836); see also Stateline Steel Erectors v. Shields, 150 N.H. 332, 338 ext inguishment of a debt or obligation. See Du rell v. Wendell & a l., 8 N.H. 3 69, We have recognized a release or discharge of a claim as an absolute

from a mere “release[].” “agree[] not to enforce any claim” constitute promises separate and distinct and assigns. The plaintiff argues that the words “covenant[] not to sue” and directors, managers, members, employees, agents, representatives, successo rs, ownership interest s against the Pro - Cut entities and its respective officers, otherwise agree[] not to enforce any claim” relating to the sibling defendants’ forever release[], discharge[], quit claim[] and co venant[] not to sue and may have against the Pro - Cut entities — they agreed to “full y, finally and defendants agreed to several terms relating to any current or future claims they and brackets omitted). Purs uant to the r elease agreements here, the sibling part of a contract.” Lassonde v. Stanton, 1 p. 5 57 N.H. 582, 588 (2008) (quotation failure without legal excuse to perform any promise which forms the whole or Under New Hampshire law, “[a] breach of contract occurs when there is a

contract de novo. Id. 1 p. 6 69 N.H. at p. 5 541. Accordingly, we review a trial court’s interpretation of a contract is ultimately a question of law for this court to decide. McDonough, meaning of the language used in the contract. Id. The interpretatio n of a (2013). Absent ambiguity, we determine the parties’ intent from the plain 6

lawsuit brought in violation of the covenant. Bellefonte Re Ins. Co. v. Argonaut initially did not recognize a covenant not to sue as an affirmative defense to a defense to a lawsuit brought by the party who released the claim, courts However, u nlike a release, which could be raise d as an affirmative

against the remaining joint obligors. See id. settle with one joint obligor while still maintaining its ability to pursue claims Jenkins, supra § p. 6 67.14, at 143. This construction enabled the injured party to release “as a mere contract not to sue the one rather than a release” as to all. reserv[ed] all rights against the other joint obligors,” courts interpret ed the 99 (1827). Nevertheless, where a release of one joint obligor “expressly party to the release. Cf. Durell, 8 N.H. at 372; Parker v. Holmes, 4 N.H. 97, 98 a lawsuit brought by the releasing party, even if the joint obligor was not a 77, a joint obligor could ostensibly utilize a release as an affirmative defense to claimant to enforce[] the right previously released,” Jenkins, supra § 67.9(1), at discharges the whole”). Because a release “is a defense in any action by the the contract “operates as a release of one of the signors of th e note, it Jenkins, supra at 143; see also, e.g., Durell, 8 N.H. at 372 (explaining that if construed the release of one joint obligor as a release of all other joint obligors. I n circumstances involving joint obligors, courts at early common law

Jenkins, Corbin on Contracts § p. 6 67.14, at 143 - 45 (rev. ed. 2003). that arose in litigation between parties to the covenant. See 13 Sarah Howard contractual promises in order to avoid the problem of the “circuity of action” in early case s involving joint obligors; and (2) are no longer recognized as defendants assert that covenants not to sue: (1) carried legal significance only on the historical context of releases described in Corbin on Contracts, the assert that a covenant not to sue is now, essentially, legally obsolete. Relying a release, the defendants point to general principles in early common law to To support their assertion that a covenant not to sue operates merely as

discharges the duty.”). effect on delivery... and, subject to the occurrence of any condition, Restatement (Second) of Contracts § 284(2), at 392 (1981) (“The re lease takes basis for a breach of contract action. See Kaye, 135 A.3d at 904; see also violation of a release nor a violation of a covenant not to sue can provide the moment a release is effectuated, the defendants contend that neithe r a release cannot be breached because complete performance is tendered at t he the parties intended otherwise. Because, according to the defendants, a a release in the absence of express contractual language demonstrating that defendants contend that the covenant not to sue carries the same meaning as act and the extent and amount of such damages). Nevertheless, the evidence, that the d amages were caused by the defendant’s alleged wrongful claiming dam ages for breach of contract must show, by a preponderance of the of contract claim. Cf. Audette v. Cummings, 1 p. 6 65 N.H. p. 7 763, 770 (2013) (a party requires a contract to contain such language in order to su stain a valid breach 7

T hese cases also established that, conversely, a release of one joint obligor one of several debtors will not operate to discharg e all the debtors....”). tortfeasor); Snow v. Chandler, 10 N.H. 92, 93 (1839) (“[A] covenant not to sue to sue,” the agreement does not bar subsequent claims against another rights against third parti es, or if the document takes the form of a covenant not (1934) (explaining that if a settlement agreement contains “a reservation of would discharge the other signers”); see also Colby v. Walker, 86 N.H. 568, 5 p. 7 70 promis s ors, a covenant not to sue one is never construed as a release, as that N.H. at 3 72 (explaining that “where there are two or more obligors, or in jured party to maintain claims against the other joint obligors. See Dur ell, 8 early cases established that a covena nt not to sue one joint obligor allowed the The defendants draw too broad an inference from this precedent. Our

order for the covenant to give rise to an action for breach of contract. would entitle the non - breaching party to recover consequential damages” in sue... include language evid encing an intent that a breach of the covenant “this evolution over time” that “courts now require t hat... a covenant not to to sue as releases” in general. According to the defendants, it is because of the absence of joint obligors, “common law courts began to treat covenants not sue to be pled in the same manner as releases, the defendants contend that, in Based upon the circumstances in which courts allow covenants not to

to allow the covenant to be pleaded as a bar.”). suits prohibited by a covenant no t to sue, and the law courts eventually came obvious inefficiency of this two step process led the courts of equity to enjoin “read[] as a covenant not to sue”); Bellefonte, 586 F. Supp. at 128 p. 7 7 (“The (applying law that recognizes a release as an affirmative defense to terms that circuity of action be pleaded as a release.”); see also Moore, 171 N.H. at 194 - 9 5 the obligee covenants not to sue the obligor at all, such covenant may to avoid bet wixt the actual parties to the contract....”); Parker, 4 N.H. at 98 (“[W] hen such a covenant may be pleaded as a release, but it can be so pleaded only as they would a release. S ee Durell, 8 N.H. at 372 (“[T] o avoid circuity of action to a covenant not to sue to plead the covenant as an affirmative defense, just For this reason, many courts, including this c ourt, came to allow parties

the “unnecessary and highly undesirable circuity of action”). obtain in the original, unlawful lawsuit. See Jenkins, supra at 145 (describing against the breaching party to recover the dama ges the breaching party might affirmative defense, the defendant’s only remedy was to bring a countersuit action”: beca use the defendant could not plead a covenant not to sue as a n recognize the covenant as an affirmative defense resulted in a “circuity of sues the other party in violation of the covenant, the refusal of courts to 19 p. 8 85). In lawsuits involving the two parties to the covenant, where a party Ins. Co., 586 F. Supp. 1286, 128 p. 7 7 (S.D.N.Y. 1984), aff’d, 757 F.2d 523 (2d Cir. 8

same claim unless its terms expressly so provide.” that a release under t hese circumstances “does not discharge any other person liable upon the releases “given in good faith to one of 2 or more persons liable in tort for the same injury,” such We note that the enactment of RSA 507:7 - h (2010) altered this common law rule as applied to 2

affirmative defense, we cited a policy reason for doing so — avoid ing the Additionally, in permitting parties to plead covenants not to sue as an

Seacoast Health, 165 N.H. at 172. that the parties instead intended this promise to constitute a release. See cannot presume, contrary to the meaning of the language in the agreement, When language to the agreement contains an express promise not to sue, we reasonably possible, Robbins v. Salem Radiology, 145 N.H. 415, 41 9 (2000). Seacoast Health, 165 N.H. at 172, including all parts of a contract wherever of a contract their reasonable meaning to determine the parties’ intent, with our rules of contractual int erpretation w hich instruct us to give the words principle is unclear. See i d. Moreover, t his principle stands in sharp contrast supported by citation s to any authority, case law or otherwise, the scope of this Jenkins, supra at 144. Beca use this assertion set forth in Corbin is not joint obligor” as a result of the problem created by the “circuity of action.” See “indicat[ing] an intention to discharge the obligor in any cas e not involving a contend that courts now construe “a contract never to sue” generally as Nevertheless, relying on a principle set forth in Corbin, the defendants

violation of the covenant. covenant does not, by itself, foreclose a breach of contract action based upon a covenant not to sue may be raise d as an affirmative defense by a party to the sue with its assertion as an affirmative defense. Thus, our recognition that a covenant). Nor have we supplanted an action for breach of a covenant not to of a covenant not to sue and the legal effect of a release on the parties to the 150 N.H. at 333 - 34, 33 p. 8 8 - 39 (recognizing the distinction between the legal e ffect covenant and joint obligors who are not parties to the covenant. See Stateline, covenants not to sue and releases solely to disputes between a party to the However, we have not limited our recognition of the distinction between parties to the release or covenant. S ee, e.g., Durell, 8 N.H. at 371 - 72. we predominantly dealt with situations involving joint obligors who were not It is true that, in cases distinguishing covenants n ot to sue from releases,

with the manifest intention of the parties”). covenant not to sue against a joint obligor as a release “would directly conflict discharge the debt.”); Dur ell, p. 8 8 N.H. at 372 (explaining that construing a covenant [not to sue one of several debtors] that it was the intention to agreements. See, e.g., Snow, 10 N.H. at p. 9 93 (“[I] t cannot be inferred from such a focused on the intent of the parties as evidenced by the language in the 8 N.H. at 3 72. In distinguishing covenants not to sue from releases, we would extinguish the claims against all other joint obligors. See, e.g., Du rell, 2 9

whenever reasonably possible.” Robbins, 145 N.H. at 41 p. 9 9 (quotation omitted). longstanding principle that all parts of an agreement are to be given a meaning i nterpretation, we decline to adopt a rule that would “run contrary to our release, see Stateline, 150 N.H. at 33 8, and our canons of contract recognized the distinction between an express covenant not to sue and a B ased upon our clearly established case law that has consistently

violation of a covenant not to sue. we foreclose a breach of contract action seeking consequential da mages for a plead a covenant not to sue as an affirmative defense does not command that violation of the covenant). Therefore, the policy reason for allowing a party to consequential damages incurred as a result of defending the action brought in award the breaching party obtained by violating the covenant not to sue and p. 9 906 - 07 (acknowledging the distinction between damages in the form of the breaching party adhered to its p romise. See id.; see also Kaye, 135 A.3d at necessary to put itself in the same position it would have been in had the action; rather, it permits the non - breaching party to pursue remedies based upon a breach of a covenant not to sue does not create a circuity of See Audette, 165 N.H. at 770. Thus, under these circumstances, an act ion same position it would have been in if the contract had been fully performed. contract damages in New Hampshire — putting the non - breaching party in the brought in violation of an express covenant f all squarely within the goal of from a breach of contract.”). Consequential damages for defending the action (1985) (“Consequential damages are reasonably foreseeable losses that flow See Drop Anchor Realty Tr ust v. Hartford Fire Ins. Co., 126 N.H. 674, 678 amount of any judgment obtained by the defendants in the original lawsuit. from the defendants’ alleged violation of the covenant, rather than solely the where, as here, the plaintiff seeks consequential damages that have resulted upon a covenant not to sue does not create the “circuity of action” problem Furthermore, a s a practical matter, a breach of contract action based

covenant not to sue and a release). discussion in Stateline, 150 N.H. at 338, regarding the distinction between a covenant not to sue” to be raised as an affirmative defense, but noting th e see also Moore, 171 N.H. at 1 p. 9 94 - 95 (permitting a provision which “read[] as a “recognizes the continuation of the obligation or liability” (quotation omitted)); relinquish a right or claim, or extinguish a cause of action,” but instead N.H. at 338 (explaining that, “[u] nlike a release, a covenant not to sue does not covenants not to sue to be raised as an affirmative defense. See Stateline, 150 between an express covenant not to sue and a release, even as we have allowed Parker, 4 N.H. at 98. Instead, we have continuously recognized the distinction express covenant not to sue as that of a release. See Durell, 8 N.H. at 372; W e did not adopt this permissive rule by construing the legal effect of an “circuity of action” problem. See Durell, 8 N.H. at 372; Parker, 4 N.H. at 98. p. 10 10

157, 163 (Colo. 1990) (en banc). For the reasons that follow, we conclude that Corp., 363 F.2d p. 10 1002, 10 06 - 08 (2d Cir. 1966); Bunnett v. Smallwood, 793 P.2d include a n express provision for d amages. See Artvale Inc. v. Rugby Fabrics contract claims based upon a violation of a covenant not to sue that do es not We recognize, however, two other lines of cases that reject breach of

that Kaye supports their position. to litigate,” distinguishing Kaye). Theref ore, we disagree with the defendants meaning and which would render superfluous the express ongoing promise not release and a covenant not to sue, “in a manner that is contrary to its plain law, that the court “decline to interpret the contract,” which contained both a (unpublished magistrate recommendation) (recommending, under Maryland Servs. Inc., No. 14 - 3770 - GLR, 2016 WL 4536291, at * 4 (D. Md. Aug. 31, 2016) covenant not to sue. See i d. at 903, 906 - 07; s ee also Cook v. SCI Md. Funeral reached the same conclusion if the agreement in Kaye contained an express the facts here, w e are unconvinced that the court would necessarily have disagree with the defendants that the holding in Kaye is equally applicable to covenant not to sue, or both.” (quotation omitted)). Thus, not only do we it was effectuated to determine whether the parties sought a release, a a reasonable person in the position of the parties would have meant a t the time covenant. See i d. (“[I] n construing the parties’ contract, we aim to discern what the parties’ intent to impose consequential damages for failure to honor the containing an express covenant not to sue would be sufficient to demonstrate c ourt appear s to have left open the question of whether an agreement objective understanding of the parties’ intent.” Id. at 907. In doing so, the impose a bright - line rule that m ay, in some circumstances, undermine an terms of the agreement. See i d. at 906 - 07. On this basis, it “decline[d] to Appeals focused on the intent of the parties based upon the meaning of the Furthermore, in reaching its conclusion, the Maryland Court of Special

the defendants ask us to do here. See i d. at 903, 9 07. construe an express covenant not to sue as having the effect of a release, which construed an express release as having the effect of a release; it did not plaintiff’s breach of contract claim. See i d. To that extent, the Kaye court constitute an implied promise not to sue, thereby providing a basis for the whether a release and disch arge of present and future claims was sufficient to the Maryland Court of Special Appeals addressed a different question — discharge,” rather than an express promise not to sue. Id. at 90 2 - 0 3. Thus, the agreement at issue in Kaye contained only the terms “[r] elease and forever in Corbin persuasive. See id. (quoting Jenkins, supra at 144 - 45). However, acknowledge that the Maryland Court of Special Appeals found the discussion oblig [or] ’s failure to honor” that agreement. Kaye, 135 A.3d at 907. We intend for the oblig [ee] to recover consequential damages as a result of the be given “the effect of a discharge unless the parties clearly ex press that they Appeals in Kaye, which held that an agreement “never to pursue a claim” will The defendants rely on the ruling of the Maryland Court of Special p. 11 11

no case in which we have required a party to allege “bad faith” or an “obvious damages for a breach of other types of contractual terms. Finally, we know of of a breach of an express promise not to sue differently from those who suff er W e see no reason why we should treat parties who suffer damages as a result for damages in order for an injured party to bring a breach of contract claim. 15 0 N.H. at 338 - 39. Nor have we held that contract s must expressly provide covenant not to sue should be construed merely as a release. See Stateline, A s discussed previously, we reject the contention than an express

covenant as a promise that may be b reached. See i d. suits brought in bad faith or in obvious breach — suggest that it recognizes the equivalent to that of a release. See id. Yet, the exceptions to its holding — appears to construe the purpose of a covenant not to sue as generally joint tort - feasors.” Id. In setting forth this reasoning, the Second Circuit release to avoid the common law rule with respect to the e ffect of a release on s erve as a shield rather than a s a sword, often being employed instead of a going too far” because the “primary function” of the covenant not to sue “is to further notes that “distill[ing] all this out of the usual formal covenant would be including the most certain of all — defendant’s litigation expense.” Id. It terms as to make clear that any breach will entail liability for damages, “it is not beyond the powers of a lawyer to draw a covenant not to sue in such adopting this rule. See Artvale, 363 F.2d at 1008. However, it concludes that Artvale provides little discussion of the Second Circuit’s reasoning for

477 A.2d 939, 944 (R.I. 1984). (D.N.J. 1981) (decided under New Jersey law); Quill Co., Inc. v. A.T. Cross Co., law); Borbely v. Nationwide Mut. Ins. Co., 547 F. Supp. 959, 966 n.12, 980 - 81 Inc., 748 F. Supp. 10 p. 11 11, 1026 - 28 (W.D.N.Y. 1990) (de cided under New York 1985) (decided under New York and California law); Cefali v. Buffalo Brass Co., Bellefonte Re Ins. Co. v. Argonaut Ins. Co., 757 F.2d 523, 527, 529 (2d Cir. 957 F.2d 1302, 1305 - 07 (5th Cir. 1992) (decided under New York law); (5th Cir. 2013) (decided under New York law); Lubrizol Corp. v. Exxon Corp., law); Dallas Gas Partners, L.P. v. Prospect Energy Corp., 733 F.3d 148, 15 8 - 5 9 (con cluding the result would be the same under both federal and New York which the Second Circuit interpreted, in part, in Artvale. See i d. at 1006 - 08 approach, though many of these cases involve the application of New York law, otherwise bad faith.” Id. Courts in a number of jurisdictions have used this evidence demonstrating that the lawsuit was filed “in ob vious breach or contained no express provision providing for such damages and there was no Artvale, 363 F.2d at 1008. It reached this conclusion because the agreement incurred in defending an action brought in violation of a covenant not to sue. declined to permit a claim for damages in the form of attorney’s fees and costs In Artvale, the United States Court of Appeals for the Second Circuit

Hampshire, and we therefore decline to follow them. the reasoning of these decisions is inconsistent with the law in New p. 12 12

opinion. Id. at 159 n.2. would use the word “release” to refer to the relevant contractual provision for the purposes of the “release,” “covenant not to sue,” and “settlement agreement” interchangeably and stated that it sue.” Bunnett, 793 P.2d at 159. However, the c ourt noted that the parties used the words prevailing party in a lawsuit can reco ver attorney fees and costs for breach of an agreement not to The Colorado Supreme Court framed the question presented in Bunnett as follows: “whether the 3

should apply to covenants not to sue under the law in New Hampshire. and our breach of contract doctrine, we are un convinced that this reasoning insurance claim). However, b ased up on our canons of contract interpretation 417 A.2d 969, 970 - 71, 975 - 76 (Me. 1980) (oral agreement to settle an n.4 (release and agreement not to sue); Dodge v. United Services Auto. Ass ’n, agreements generally as a “release”); Shumate, 675 N.E.2d at 751, 754 - 55, 754 signed by the plaintiff as a “Covenant Not to Sue,” but referring to such 200 N.E.2d 751, 75 2 - 5 4 (Ill. App. Ct. 1964) (referring to t he specific agreement Illinois law; release and covenant not to sue); Child v. Lincoln Enterprises, Inc., release); In re Weinschneider, 395 F.3d 401, 404 (7th Cir. 2005) (decided under LLC, 592 F.3d 255, 265 - 67 (1st Cir. 2010) (decided under Massachusetts law; involving releases and covenants not to sue. See Bukuras v. Mueller Group, Numerous jurisdictions have adopted Bunnett or similar rules in cases

exceptions). parties pay their own attorney’s fees absent statutorily or judicially - created P’ship, 169 N.H. 469, 482 (2016) (explaining that, under the American Rule, “principled way to contain [it].” Id. at 161; see Jesurum v. WBTSCC Ltd. “exception” to the American Rule would expand the rule without any damages,” and (2) permitting attorney’s fees under these circumstances as a n prevails in a lawsuit and does not have a successful counterclaim for violation of a release “is no different from that of any other defendant who damages because (1) a party’s position as a defendant in a law suit brought in to sue. See Bunnett, 793 P.2d at 161 - 63. Rather, it rejected the claim for 3 the distinction between the legal effect of a release and that of a covenant not (Ind. Ct. App. 1997). In Bunnett, the Colorado Supreme Court did not rely on 793 P.2d at 16 3; see, e.g., Shumate v. Lycan, 675 N.E. 2d 749, 751, 754 - 55 is “contractual, statutory or rule authorization for such an award.” Bunnett, conse quential damages in the form of attorney’s fees and costs only when there litigate in violation of a release or agreement not to sue to recover The cases that follow Bunnett, on the other hand, allow a party forced to

New Hampshire law, and we decline to adopt it. Therefore, we conclud e that the rule set forth in Artvale is inconsistent with contract.” Lassonde, 157 N.H. at 588 (quotation and brackets omitted). without legal excuse to perform any promise which forms the whole or part of a Rather, we have said that “[a] breach of contract occurs when there is a failure breach” of express terms in a contract to maintain a breach of contract action. p. 13 13

prevailing party attorney’s fees and costs for suits brought in bad faith. See Colorado law, see id., New Hampshire law permits trial courts to award a protect the non - breaching party.” Bunnett, 793 P.2d at 162. Similar to statutory and rule - based exceptions to the American Rule would “adequately Furthermore, we disagree with the Colorado Supreme Court that the

165 N.H. at 770. claim for damages pursuant to ordinary contractual principles. See Audette, exception to the American Rule; rather, we are permitting a party to pursue a consequential damages in these circumstances, we are not creating a new not to sue”). Therefore, by recognizing a breach of contract action for lawsuit which [the plaintiff] instituted purportedly in violation of the covenant actual damages which [the defendant] i ncurred in defending against the not apply where the defendant’s claim for attorney’s fees was “a measure of the F.2d 1067, 10 71 - 72 (6th Cir. 1983) (determining that the American Rule did agreement”); Anc hor Motor Freight, Inc. v. Intern. Broth. o f Teamsters, 700 but in defending against the... action foun d to have breached the... “fees at issue here were incurred not in the current breach of contract action F.3d 1024, 1049 (9th Cir. 2015) (noting t he “critical factor” that the attorney’s occurred. See Audette, 165 N.H. at 770; Microsoft Corp. v. Motorola, Inc., 795 non - breaching party in the position it would have been in had the breach not Rather, under these circumstances, attorney’s fees and costs help to put the not seek an award of attorney’s fees within the mean ing of the American Rule. consequential damages for breach of a covenant not to sue, this request do es when a party requests attorney’s fees and costs in defending the action as defend ing the action. See Drop Anchor Realty, 126 N.H. at 67 8. Moreover, to sue may include, bu t are not limited to, attorney’s fees and costs in N.H. at 482, consequential damages resulting from a breach of a covenant not and recognize the statutory and common law exceptions, see Jesurum, 169 American Rule. See id. While we follow the American Rule in New H ampshire express covenant not to sue does not create an untenable exception to the Second, an action for consequential damages caused by a breach of an

who violated an express term of a contract. recourse if it is prohibited from bringing an action for breach against a party in violation of a covenant not to sue loses the benefit of the bargain with no unlike defendants in other types of lawsuits, a defendant in a lawsuit brought the lawsuit itself is the object that the bargain intended to prohib it. Therefore, promise that it would forbear from bringing suit. Under these circumstances, bargained to receive, and exchanged consideration for, the opposing party’s a defendant in an action brought in v iolation of a covenant not to sue damages. See Bunnett, 793 P.2d at 161. U nlike defendants in other lawsuits, prevail in defending against the lawsuit but do not have a counterclaim for covenant, is different from the position of defendants in other lawsuits who of a covenant not to sue, who brings a counterclaim for breach of th at First, a party’s position as a defendant in a lawsuit brought in violation p. 14 14

to sue. See, e.g., Anchor Motor, 700 F.2d at 1072; Paper, Allied, Chem ical v. contract claim for consequential damages based upon an express covenant not Artvale and Bunnett and join instead those courts that permit a breach of Accordingly, we decline to adopt the approach taken by the courts in

term of a contract to which the y agreed. See id. parties from the consequen ces that may result from the breach of an express contract accordingly. However, w e see no reason why we should shield the risk of liability for another party’s consequential damages, they are free to Karting Assoc., 128 N.H. 102, 106 (1986). If parties do not wish to bear the parties should be able to contract freely about their affairs.” Barnes v. N.H. to depart from our view that, “as a matter of efficiency and freedom of choice, sue would preclude a claim for breach. Absent this, however, we find no basis therefore note that a successful challenge to the validity of a cove nant not to appellant disputed in good faith the existence of the covenant not to sue). We 1966) (concluding that each party should bear its own costs where the Drive - In Th. v. Wa rner Bros. Pictures Dis t. Corp., 358 F.2d 432, 436 (9th Cir. absence of an express contractual provision would be unfair.”); Winchester the agreement itself is ambiguous, [an] award of attorney fees and costs in the see also Bunnett, 793 P.2d at 163 (“[W] here, as here, the nature and scope of validity” of a covenant not to sue, “they [cannot] be penalized for so doing.”); (D.D.C. 1988) (“When parties challenge in good faith the very existence or covenant not to sue. See, e.g., Wolcott v. Ginsburg, 697 F. Supp. 540, 547 grounds for rejecting claim s for consequential damages for breach of a challenges in “good faith” the existence or validity of the covenant not to sue, as Other jurisdictions have pointed to such lawsuits, where the plaintiff unenforceable where there was no meeting of the minds on an essential term). Syncom Indus. v. Wood, 155 N.H. 73, 82 - 83 (2007) (finding contract covenant not to sue is void ab initio or otherwise unenforceable. See, e.g., not to sue may do so in good faith, where, for example, the party believes the We recognize that a party bringing suit in contravention of a covenant

has been injured by a breach of a covenant not to sue. exception to the American Rule may not provide complete relief to a party who for a successful breach of contract action, an aw ard of fees and costs under an successful party to have brought the action). Thus, unlike a damages award obdurate or obstinate, and where it should have been unnecessar y for the reasons, where th e litigant’s conduct can be characterized as unreasonably where one party has acted in bad faith, vexatiously, wantonly, or for oppressive award of attorney’s fees is appropriate under the bad faith litigation exception recognized exception. See, e.g., Frost, 163 N.H. at 378 (explaining that an fees and costs only if the trial court finds that the circumstances fall within a fees and costs in defending the unlawful action, the party may receive those attorney’s fees and costs. Further, even whe n the party seeks only attorney’s exceptions provide no recourse, however, for parties seeking relief in addition to Frost v. Comm’r, N.H. Banking Dep’t, 163 N.H. 365, 377 - 78 (2012). These p. 15 15

LYNN, C.J.