Can a jury find breach of implied covenant but not express contract terms? Olé Mexican Foods v. J & W Distribution Explained

In Olé Mexican Foods v. J & W Distribution, the Utah Court of Appeals addressed whether a jury’s finding of breach of the implied covenant of good faith and fair dealing while simultaneously finding no breach of express contract terms creates an inconsistent verdict requiring a new trial.

Background and Facts

Olé Mexican Foods, a tortilla manufacturer, and J&W Distribution had a distributor agreement. When accounting disputes arose over alleged debts, Olé sued J&W for $499,000, claiming breach of contract. J&W counterclaimed for $350,000 in unpaid commissions. The jury found that J&W did not breach a contract with Olé and that Olé did not breach express contract terms with J&W, but did find that Olé breached the implied covenant of good faith and fair dealing, awarding J&W $140,000 in damages.

Key Legal Issues

Olé moved for a new trial, arguing the verdict was internally inconsistent because breach of the implied covenant is simply breach of contract. The court also addressed whether sufficient evidence supported the damages award and whether the contract’s attorney fees provision applied to J&W as the prevailing party.

Court’s Analysis and Holding

The Court of Appeals applied the strict duty to reconcile jury answers when inconsistency is raised after jury discharge. The court found the verdict could reasonably be interpreted as distinguishing between breach of express contractual terms (Question 7) and breach of the implied covenant (Question 8). Since J&W pleaded these as separate claims and received separate jury instructions, the jury could have understood Question 7 as addressing express terms only. The court also found sufficient evidence supported the $140,000 award within the range of competing damage theories, and that J&W was the prevailing party having successfully defended against Olé’s $499,000 claim.

Practice Implications

This decision reinforces that courts will work to reconcile apparently inconsistent verdicts through reasonable interpretation. When pleading breach of implied covenant separately from general breach claims, practitioners should ensure jury instructions and special verdict forms clearly distinguish the claims to avoid confusion. The decision also demonstrates the broad discretion juries have in assessing damages within the range supported by evidence, even when selecting figures not specifically advocated by either party.