Racine & Laramie, Ltd. v. Department of Parks & Recreation

Racine & Laramie, Ltd., Inc. (Racine) is a concessionaire occupying and operating premises in Old Town San Diego State Historic Park under a contract, which bears many attributes of a long-term lease, with the California Department of Parks and Recreation (Department). The contract was executed in 1974 for a term of 40 years, thus extending until the year 2014. Over a period of several years in the 1980’s Racine negotiated, with the Department for modifications in the concession contract which would permit expanded operations of the premises. Originally limited to the operation of a tobacco shop and wine tasting facility, the negotiations contemplated operation of a restaurant and the on-premises sale of alcoholic beverages.

When negotiations broke down in 1988, Racine brought suit against the Department. Of the several initial causes of action, only one survived demurrers: a cause of action denominated “Breach of Implied Covenant of Good Faith and Fair Dealing.” Tried to a jury, the case was submitted on special verdicts. The jury found that the Department was guilty of “breach [of] the covenant of good faith and fair dealing in its negotiations of an amendment/new…