Summary
granting summary judgment for employer where employee was told that he would be "eligible to participate" in the company's bonus plan depending upon his handling of the German office, his efforts in signing up dealers, and his ability to meet job objectives
Summary of this case from Nathan v. Morgan Stanley Renewable Dev. Fund, LLCOpinion
Case Number 85 C 5822.
November 20, 1986.
MEMORANDUM OPINION AND ORDER
Plaintiff, Colin Cresswell ("Creswell"), brings this suit against his former employer, defendant, Bausch Lomb, Inc. ("BL"), seeking damages and other relief for breach of an oral employment contract and for breach of an implied contractual covenant of good faith and fair dealing under Illinois law. The cause is before the court on BL's motion for summary judgment. For the reasons stated herein, the motion is granted.
BACKGROUND
The following facts are taken from defendant's statement of material facts as to which no genuine issue exists. Pursuant to a general order entered December 16, 1983 (effective January 2, 1984), these facts are deemed admitted due to plaintiff's failure to serve and file a concise statement of genuine issues "setting forth all material facts as to which it is contended there exists a genuine issue necessary to be litigated, including with that statement references to the affidavits, parts of the record and other supporting materials relied upon to support such statement." Plaintiff did file his own "statement of additional material facts which no genuine issue exists." This statement is not required by the rules and does not contradict any of the statements in defendant's statement. Nonetheless, the facts contained in plaintiff's "additional genuine issues to which no genuine issue exists" are not admitted by defendant as Rule 12 does not require the moving party to respond to such a statement.
Cresswell was employed by the Bruning Division of AM International Corporation until December 1983, when he voluntarily resigned to accept an offer of employment with the Interactive Graphics Division ("IG") of BL (Creswell dep. at 9 — 11, 45, 54, 61).
Cresswell was initially approached by John Schwan ("Schwan"), the past Vice President and General Manager of the IG division of BL. Both Schwan and Cresswell were at a meeting of the International Reprographics Association in Dallas, Texas in May, 1983 when Schwan asked Cresswell if he would be interested in returning to work in international sales. Schwan did not actually offer Cresswell a position with BL. Cresswell told Schwan that he was not interested (Cresswell dep. at 21, 23).
In September of 1983, Cresswell and Schwan had a telephone conversation concerning the possibility of Cresswell going to work for BL. Schwan telephoned Cresswell and asked him if he had given any more thought to working for BL. Cresswell was told that the available job was as an international director. Schwan explained to Cresswell that the international director would be responsible for setting up international distributors to sell computer — aided drafting equipment. Cresswell again told Schwan that he was not seriously interested but also indicated that he would consider an offer, if made (Cresswell dep. 24 — 27).
Approximately two weeks later Schwan telephoned Cresswell again and made him a tentative offer of employment. Schwan further stated that the salary for the position would be in the fifties with a bonus structure, relocation expenses and a customer car. Schwan also told Cresswell that the Austin, Texas area was a high tech area and that BL was committed to staying in the computer — aided drafting industry to gain a large share of the market (Cresswell dep. at 27 — 30).
Sometime in the fall of 1983, Schwan telephoned Cresswell for a third time. During this conversation Schwan asked Cress — well to give further consideration to the employment offer. He also informed Cresswell that BL was experiencing problems in the West German sales office. Cresswell told Schwan that once he completed an assignment for Bruning he would write to accept BL's offer. On October 17, 1983, Cresswell received a "relocation package" from BL's Human Resoures Department. He wrote to Schwan on October 18, 1983 and formally accepted BL's offer (Cresswell dep. at 30 — 31, 35; dep. ex.3 — 4, 56).
Schwan and Cresswell had numerous telephone conversations during October and November of 1983. During these conversations Schwan and Cresswell discussed:
i) Cresswell's training, which was to be conducted in Illinois;
ii) the salary for the position;
iii) Cresswell's eligibility for a bonus based upon managerial and financial objectives;
iv) BL'S dedication to the computer — aided drafting industry;
v) BL's problems in the West German sales office; and
vi) Schwan's prediction that Cresswell would do well in the company if he so desired.
Schwan also indicated to plaintiff that his job would be permanent and continuous if he performed his duties as laid out (Cresswell dep. 42 — 43, 46 — 51, 113).
During November 1983, Cresswell and his wife visited Austin, Texas. Cresswell met with Robert Zuzack ("Zuzack"), the Vice President of Human Resources and Administrative Services for IG. Zuzack confirmed that Cresswell's salary would be $53,000 per year. The only people with whom Cresswell discussed the terms and conditions of his employment with BL were Schwan and Zuzack (Cresswell dep. at 77 — 80).
On November 29, 1983, Zuzack sent Cresswell a letter confirming his employment with BL. Zuzack enclosed the same relocation papers previously sent to Cresswell by Schwan.
Cresswell began work for BL at the company's Chicago area office on December 5, 1983. During his employment with BL Cresswell did not relocate to Texas. Subsequent to his training in Illinois, Cresswell commuted from Illinois to Texas if he was not traveling in Europe (Cresswell dep. 52 — 53, 59, 70).
Following a financial and structural review of operations, BL decided to reduce its staff and operating positions at IG. Cresswell's position was eliminated as a result of this decision (Affidavit of Harris). Diane Harris ("Harris"), the acting General Manager of IG, advised Cresswell of the company's decision to eliminate his position. On June 25, 1984, Zuzack met with Cresswell and gave him a letter concerning the elimination of his position and a Separation of Employment Summary which detailed the benefits that Cresswell would receive upon termination (Cresswell dep. 9, ex.12).
During his employment with BL, Cresswell never had a written contract (Harris affidavit). Other than the documents identified as exhibits 2 through 14 to his deposition, Cresswell received no other documents from BL concerning his employment. No one at BL ever told Cresswell that he would be employed for a specific period of time or that he would receive advance notice or additional benefits if his job was eliminated (Cresswell dep. 80, 121 — 122, 134 — 135).
Based on these facts, Cresswell filed a five — count complaint in the Circuit Court of Cook County, Law Division. BL removed the action to this district court. Specifically, Cresswell's complaint seeks the following relief: compensatory damages for breach of contract (Count I); punitive damages for breach of contract (Count II); recovery of an anticipated thirty percent of his base salary as a bonus and severance pay (Count III); damages for breach of covenant of good faith and fair dealing (Count IV); and specific performance of the contract based on promissory estoppel theory (Count V).
DISCUSSION Breach of Oral Employment Contract
Under Illinois law an employment relationship is generally terminable at will with or without cause by either party. Sargent v. Illinois Institute of Technology, 78 Ill. App.3d 397 N.E.2d 443, 475 (1st Dist. 1979). Under certain circumstances, however, an agreement for permanent employment is enforceable in Illinois if it is both clear and definite and supported by sufficient consideration. Ladesic v. Servomation Corp., 140 Ill. App.3d 489, 488 N.E.2d 1355 (1st Dist. 1986).
Defendant anticipates in its motion for summary judgment that plaintiff may argue that Texas law governs the resolution of this dispute. Plaintiff states in his response that "Illinois law applies to the case at bar." n. 1, p. 2. The court shall assume that Illinois law governs this case as it is well settled in this circuit that where the parties fail to raise a possible conflict of substantive laws the substantive law of the forum controls. Klimas v. International Telephone Telegraph Corp., 297 F. Supp. 937, 939 (DRI 1969) cited recently with approval in Gonzalez v. Volvo America Corp., 752 F.2d 295 (7th Cir. 1985).
This court has declined to follow the predictive approach to resolving diversity actions. In a case such as this, this court will follow the cases from the Illinois Supreme Court where the court has ruled on the precise issue and the law of the Appellate Court for the First District (the district in which this case was originally filed) where the Illinois Supreme Court has not yet spoken. This court is of the opinion that this approach, referred to as the "internal choice of law approach" is the proper rule in keeping with the essential thrust of Erie v. Thompkins, 304 U.S. 64 (1938): that a federal court must decide substantive questions in diversity cases in the same way that a state trial judge counterpart sitting in the same location would, see, e.g.,Commercial Discount Corp. v. King, 552 F. Supp. 841 (N.D. Ill. 1982).
By failing to contradict BL's "Statement of Material Facts As To Which No Genuine Issue Exists", Cresswell admits several facts which compel the court to conclude that he did not enter into a specific or definite agreement for permanent employment. Specifically, the court is persuaded by Cresswell's admission of the following significant facts: he had no written contract with BL; he was not told by anyone that he would be employed for a specific period of time or that he would receive a certain amount of advance notice or additional benefits if his job was eliminated; and that BL decided to eliminate his position after completing a financial and structural review of its operations. These admissions support BL's assertion that it did not expressly or impliedly promise to employ Cresswell for a specific period of time.
Cresswell's only argument appears to be that Schwan purportedly assured him that his position at BL would be permanent and continuous if he performed his duties as they were laid out. However, the court finds that the fact Schwan chose to qualify his use of the words permanent and continuous is significant under Illinois law. In Ladesic, supra, an employer communicated a policy of guaranteed job security to its employees with discharge occurring only for good cause. Ladesic, rejected a competing company's offer of employment in exchange for his employer's promise of permanent employment which was to end only if Ladesic retired, or gave four weeks notice, or if the defendant found that he was performing unsatisfactorily. Ladesic was discharged sometime later without justification. The Appellate Court for the First District held that Ladesic's employment was terminable at will even though Ladesic's employer used the words "permanent employment" and "guaranteed job security" in making its offer to Ladesic. Although the primary issue inLadesic appeared to be whether the permanent employment agreement was supported by consideration, in resolving that issue the court did consider an issue that is relevant to the instant situation. In denying Ladesic relief the court considered the fact that Ladesic's employer gave up "nothing" in making the agreement because he was still free to terminate Ladesic at will based on the fact that the offer of permanent employment was contingent on Ladesic's satisfactory performance. The court cited Kendall v. West, 196 Ill. 221, 63 N.E. 683 (1902); Ray v. Georgetown Life Ins. Co., 94 Ill. App.3d 863, 419 N.E.2d 721 (3rd Dist. 1981); Gordon v. Matthew Bender, 562 F. Supp. 1286 (M.D. Ill. 1983), for the principle that a satisfactory performance contract may be terminable at will where the satisfaction is measured on a subjective basis. In applying the analysis of Ladesic, the court concludes that Cresswell's employment was terminable at will since it was conditioned on his performance of "the duties as laid out. BL was free to conclude at anytime that Cresswell was not performing the duties "as laid out." Hence, by Cress — well's own admission BL did not promise to unconditionally employ him on a permanent basis.
Schwan testified at his deposition that he told Cresswell that as long as Cresswell did well he would be compensated well and would have a good future with BL (Schwan dep. at 29). For purposes of this motion, the court will consider Cresswell's view of the conversation and will assume that Schwan told him that his employment with BL would be permanent and continuous if he performed his duties as laid out (Cresswell dep. at 113).
There can be no dispute that Cresswell's evaluation was to be subjective. The determination of whether he fulfilled his job responsibilities (to turn around the situation in Germany, to make a concentrated effort in signing up dealers and to meet plan objectives) was to be made by Schwan on a subjective basis, i.e., Schwan was free to determine that Cresswell did not meet BL's expectations. In fact, Schwan met with Cresswell "constantly" for ongoing management reviews wherein Schwan would advise Cress — well of his progress (Schwan dep. 41 — 43).
The court recognizes that one case cited in Ladesic, Ray v. Georgetown Ins. Co., supra, would render the agreement terminable only if Cresswell failed to perform satisfactorily. However, the Ray decision is cited by the Ladesic court for the principle that a satisfactory performance contract may be terminable at will and to that extent it is cited improperly. The court will follow Ladesic. See, also, Gordon,supra (cited by Ladesic) wherein the court held "that a condition of satisfactory or acceptable performance theoretically could be implied in every employment contract. Such an end — run around the at will doctrine would eviscerate it altogether and the Illinois courts do not seem inclined to do so."
Similarly, Schwan's remark that BL was dedicated to the computed — aided drafting industry and his prediction that Cress — well could probably do well in the company cannot serve to transform a presumably at will employment relationship into a specific or definite contract for permanent employment. These comments were merely Schwan's opinion and do not under any circumstances bind the company to employ permanently Cresswell. When a company seeks to recruit an individual it is not unusual for the company to reveal its plans, goals, or predictions for the future. The fact that BL was dedicated to the computer — aided industry at the time it recruited Cresswell does not preclude BL from redirecting its interests where no specific or definite promise was made to remain dedicated to that industry. Further, Schwan's belief that Cresswell could do well in the company is merely his opinion and not a promise. Cresswell conceded that the terms and conditions of his employment were reflected in Zuzack's November 29, 1983 letter to him. The letter makes no mention of any duration of employment and does not mention any specific or definite intent of BL to remain interested in the international market. Cresswell chose to subjectively interpret Schwan's comments to mean BL would employ him on a permanent basis. His claim for breach of contract fails, however, because he can supply no objective proof that BL offered him a contract that was not terminable at will.
Having determined that Cresswell did not enter into a specific or definite contract for permanent employment, the court need not address the issue of whether adequate consideration supported the agreement. The court does note, however, that it perceives this case to be factually distinguishable from both Martin v. Federal Life Ins. Co., 109 Ill. App.3d 596, 440 N.E.2d 998 (1st Dist. l982) and Ladesic v. Servomation Corp., 140 Ill. App.3d 489, 488 N.E.2d 1355 (1st Dist. l986), with respect to the issue of consideration. Although the court declines to rule on this point it would appear that Cresswell might succeed in arguing that sufficient consideration existed to support his promise based on the fact that unlike Martin and Ladesic, he was recruited to leave his place of employment to accept the offer with BL. Similarly, the fact that Cresswell promised to relocate could support the conclusion that sufficient consideration existed to support a promise of permanent employment. The court need not address this point, however, since Cresswell did not enter into a clear or definite permanent employment contract.
Martin held that foregoing other employment is sufficient consideration to support a promise of permanent employment. Martin, Ill. App.3d 596, 602 — 03 440 N.E.2d 998.
Ladesic held that foregoing other employment is not sufficient consideration to enforce a promise of permanent employment. Ladesic, 95 Ill. Dec. 12, 488 N.E.2d 1355.
If forced to choose between these two cases the court would obviously follow Ladesic, the more recent case that explicitly criticizes the reasoning in Martin as faulty. See, Ladesic, 488 M.E.2d at 1357.
Neither court held that relinquishing other employment to accept an offer of permanent employment is not sufficient consideration to enforce a promise of permanent employment.
Accordingly, the court concludes that Cresswell did not enter into a clear or definite contract of permanent employment with BL and, therefore, his employment was terminable at will. Since neither Cresswell nor BL has pointed to any Genuine Issues of Material Fact, the court finds that summary judgment is appropriate. As the Seventh Circuit has admonished, "with the ever increasing burden on the judiciary, persuasive reasons exist for the utilization of summary judgment procedure whenever appropriate." Kirk v. Home Indemnity Co., 431 F.2d 554, 560 (7th Cir. 1970). Based on the undisputed facts, it is clear that judgment should be entered in favor of BL on Cresswell's breach of permanent employment contract claim.
Breach of Implied Covenant of Good Faith and Fair Dealing
Cresswell's claim for breach of an implied covenant of good faith and fair dealing also fails. Under Illinois law implied covenants of good faith and fair dealing do not extend to at will employees. Scott v. Sears Roebuck Co., 798 F.2d 210 (7th Cir. 1986). Since the court has determined that Cresswell's contract with BL was terminable at will, BL is entitled to judgment as a matter of law on this claim.
Severance Pay
In his deposition Cresswell acknowledges that he was not told by anyone that he would receive additional benefits if his job was eliminated (Cresswell dep. at 122, 134). The gist of his claim for severance pay is that Schwan purportedly told him that a person at his level would normally be entitled to nine to twelve months severance pay (Schwan dep. 30 — 31). Further, Schwan told Cresswell that BL felt a strong responsibility toward its employees and would give adequate compensation for dislocations.
The court finds, however, that Schwan's comments did not create a contract to award severance pay. Cresswell was never told during any of his conversations with Schwan that he personally would receive severance pay. The terms of his employment did not include severance pay. Accordingly, based on Cresswell's own admissions, judgment is entered in favor of BL on Cress — well's claim for severance pay.
Bonus
Under Illinois law when a binding contractual obligation to pay a bonus exists and when the employee is terminated through no fault of his own, the employee is entitled to a proportionate share of the bonus according to the time served even where the employment could be terminated at will. Tidwell v. Toyota Auto Mart, Inc., 59 Ill. App.3d 378, 375 N.E.2d 540 (2nd Dist. 1978) citing 28 A.L.R. 346 (1924).
At issue in the case is whether BL entered into a binding contractual obligation to pay Cresswell a bonus. Cresswell argues that Zuzack's letters and Schwan's remarks served to bind BL to pay him a bonus. BL contends that Zuzack and Schwan's comments were nebulous and, alternatively, that any oral contract to pay a bonus would be barred by the statute of frauds.
The court agrees with BL that Zuzack and Schwan's comments did not create a binding contractual obligation requiring BL to pay Cresswell a bonus under the facts of this case. First, the letter of November 29, 1983 only informed Cresswell "that he would be eligible to participate in the 1984 Sales Inventive Plan with the sales revenue goals to be mutually developed. The use of the words "eligible to participate" by no means guaranteed Cresswell a bonus. Further, Schwan's remarks that Cress — well's right to a bonus would be dependent upon his handling of the German office, his efforts in signing up dealers, and his ability to meet job objectives do not guarantee Cresswell a bonus. Rather, these remarks are indefinite and place the award of a bonus in the discretion of BL. Similarly, Schwan's prediction that if Cresswell did better than expected he would be entitled to a bonus of higher than thirty percent also leaves the decision of whether to award a bonus and the amount in the discretion of BL. Hence, Zuzack's letters and Schwan's remarks do not contractually bind BL to pay Cresswell a bonus.
Cresswell points out that as a director he was eligible for a bonus under the Manager Incentive Plan. This correction does not change the above analysis.
Accordingly, since Zuzack and Schwan's remarks left the determination of whether to award a bonus in BL's discretion, the court finds that BL was under no contractual obligation to pay Cresswell a bonus.
STATUTE OF FRAUDS
BL also argues that Cresswell's alleged contract for permanent employment is barred by the statute of frauds because it was not capable of being performed within one year.
The statute of frauds provides in pertinent part:
"No action shall be brought ... upon any agreement that is not to be performed within the space of one year from the making thereof unless the promise or agreement upon which such action shall be brought or some memorandum or note thereof, shall be in writing, and signed by the party to be charged thereunto by him lawfully authorized."
Recently the Seventh Circuit explained that "the contract must be incapable of being performed within one year if it is to fall within the statute of frauds; "if performance within one year though unlikely is possible, that is enough to take the agreement outside of the grasp of the statute." Goldstick v. ICM Realty, 788 F.2d 456 (7th Cir. 1986). InMartin v. Federal Life Ins. Co, 109 Ill. App.3d 596, 940 N.E.2d 998 (1st Dist. 1982), the Appellate Court for the First District held that the statute of frauds did not bar the enforcement of an employment agreement to retain the plaintiff until he retired from all business pursuits or no longer wished to be employed by defendant. The facts of Martin are analogous to the instant case as it is undisputed that Cresswell was free to leave BL's employ at anytime.
Further, the cases cited by BL involve promises to employ until an employee reaches a certain age or retires. These promises literally could not be performed within one year. Evans v. Flour Dist. Companies, slip op. (7th Cir. Aug. 26, 1986) (Evans) (promise to employ until age 65); Burdnicki v. GE, 535 F. Supp. 84 (M.D. Ill. 1982) (promise to employ until retirement at age 65); Payne v. AFHI Netherlands B.V., 522 F. Supp. 18 (M.D. Ill. 1980) (promise to employ for more than 2 years); Gilliland v. Allstate Ins. Co., 69 Ill. App.3d 630, 388 N.E.2d 68 (1st Dist. 1979) (promise to employ plaintiff until time of retirement at age 62).
PROMISSORY ESTOPPEL
The theory of promissory estoppel can be used to safeguard the interests of employees when the promises of their employers do not have contractual status. Patkus v. Sangamon Cass Consortium, 769 F.2d 1251 (7th Cir. 1985). To be successful under the theory of promissory estoppel, an employee must show the following: 1) an unambiguous promise made to him; 2) reliance on that promise; 3) that the reliance was expected and foreseeable; and 4) injury resulting from that reliance.Id. at 1264.BL argues that Cresswell's claim under promissory estoppel must fail because it never unambiguously promised to employ Cresswell in terms more restricted than at will. The court agrees. As discussed above, Schwan's promise of permanent employment to Cresswell was contingent on BL's subjective appraisal of Cresswell's progress. Under such circumstances BL did not unambiguously promise Cresswell permanent employment. BL only agreed to retain Cresswell until it subjectively determined that Cresswell was not performing his duties as laid out. Cresswell was not justified in believing that BL's offer was for permanent employment. Therefore, any reliance on that promise would also be unreasonable and unexpected.
Accordingly, the court finds that Cresswell cannot state a claim under the theory of promissory estoppel for the same reason that his breach of contract claim fails.
CONCLUSION
The court finds that judgment should be granted in BL's favor on all counts of Cresswell's complaint. Neither party has pointed to any genuine issues of material fact which would preclude the court from entering summary judgment in defendant's favor. The issues presented in this case have been the subject of recent decisions in the appellate court and the result of this case is for the most part dictated by those decisions. Therefore, based on this court's interpretation and application of the relevant case law, judgment is enter in favor BL.
IT IS SO ORDERED.
Jury Verdict. This action came before the Court for a trial by jury. The issues have been tried and the jury has rendered its verdict.
Decision by Court. This action came to trial or hearing before the Court. The issues have been tried or heard and a decision has been rendered.
IT IS ORDERED AND ADJUDGED that defendant's motion for summary judgment is granted. Summary judgment is entered in favor of defendant BAUSCH LOMB, INC. and against plaintiff, COLIN CRESSWELL.
19 November 1986
H. STUART CUNNINGHAM, Clerk
Donald Walker, Deputy Clerk _________________ HARRY D. LEINENWEBER, Judge United States District Court