On August 16, 2010, Wachovia Bank, N.A. won dismissal of the final count of a multiple-count lawsuit brought against it by a Jersey hedge fund that accused the bank of breaching its covenant of good faith and fair dealing by demanding more collateral than the $10 million value of a credit default swap entered into between the hedge fund and bank.  In addition to dismissing the case against Wachovia, the U.S. District Court for the Southern District of New York ordered the hedge fund to pay the bank the outstanding balance owed plus legal fees, in an amount to be determined.  This article discusses the factual background of the case and the court’s legal analysis.  For additional background, see “Hedge Fund VCG Special Opportunities Fund Loses CDS Dispute with Citigroup Unit,” Hedge Fund Law Report, Vol. 3, No. 12 (Mar. 25, 2010); “Growing Wave of Credit Default Swap Litigation: Judge Rules Citigroup Did Not Cheat VCG Hedge Fund on Swap and Trims Claims in VCG/Wachovia Litigation,” Hedge Fund Law Report, Vol. 2, No. 31 (Aug. 5, 2009).