California Civil Jury Instructions (CACI)
2424. Breach of the Implied Covenant of Good Faith and Fair Dealing - Good Faith Mistaken Belief Defense
[Name of defendant] claims that [he/she/it] did not breach the duty to act fairly and in good faith because [he/she/it] believed that there was a legitimate and reasonable business purpose for the conduct.
To succeed, [name of defendant] must prove both of the following:
1. That [his/her/its] conduct was based on an honest belief that [insert alleged mistake]; and
2. That, if true, [insert alleged mistake] would have been a legitimate and reasonable business purpose for the conduct.
Sources and Authority
"[B]ecause the implied covenant of good faith and fair dealing requires the employer to act fairly and in good faith, an employer's honest though mistaken belief that legitimate business reasons provided good cause for discharge, will negate a claim it sought in bad faith to deprive the employee of the benefits of the contract." (Wilkerson v. Wells Fargo Bank (1989) 212 Cal.App.3d 1217, 1231 [261 Cal.Rptr. 185], internal citation omitted, disapproved on other grounds in Cotran v. Rollins Hudig Hall International, Inc. (1998) 17 Cal.4th 93, 96 [69 Cal.Rptr.2d 900, 948 P.2d 412].)
"The jury was instructed that the neglect or refusal to fulfill a contractual obligation based on an honest, mistaken belief did not constitute a breach of the implied covenant." (Luck v. Southern Pacific Transportation Co. (1990) 218 Cal.App.3d 1, 26 [267 Cal.Rptr. 618].)
"[F]oley does not preclude inquiry into an employer's motive for discharging an employee. . . ." (Seubert v. McKesson Corp. (1990) 223 Cal.App.3d 1514, 1521 [273 Cal.Rptr. 296].)
"[T]he jury was asked to determine in its special verdict whether appellants had a legitimate reason to terminate [plaintiff]'s employment and whether appellants acted in good faith on an honest but mistaken belief that they had a legitimate business reason to terminate [plaintiff]'s employment." (Seubert v. McKesson Corp. (1990) 223 Cal.App.3d 1514, 1521 [273 Cal.Rptr. 296] [upholding jury instruction].)
10 California Points and Authorities, Ch. 100, Wrongful Termination and Discipline, Form 16 (Matthew Bender)
(New September 2003)