LEGAL MEMOS

California Dental Association v. Delta Dental of California ( 2025) 115 Cal.App.5th 142. In this case plaintiffs, individual parties who were also providers under a dental plan with the defendant, claimed a change by the defendant to the provider agreement’s fee provisions violated the covenant of good faith and fair dealing. The provider agreements specifically allowed the defendant to make changes to future fee payments so long as sufficient notice was given as described in the agreement. The Court of Appeal held that when a contract expressly entitles a party to engage in discretionary conduct, in this case to make fee changes that would take effect after a 120 day notice period, the contract interpretation principle of upholding the language of the contract as written prevails over using the covenant of good faith and fair dealing to restrict the exercise of discretion, which is a necessary interpretation to keep the contract from being illusory.

/lsa