United States District Court, Northern District of Illinois, E.D
July 16, 1980
BEN MANUEL, PLAINTIFF,
INTERNATIONAL HARVESTER COMPANY, MARTIN TRETHEWAY, AND W. GRANT CHANDLER, DEFENDANTS.
The opinion of the court was delivered by: Aspen, District Judge:
MEMORANDUM OPINION AND ORDER
Plaintiff, a black male, was hired as Supervisor, Equal
Opportunity, by defendant International Harvester Company
("Harvester") in May, 1977. He worked in that capacity at
Harvester until June, 1978, when he was terminated during a
company-wide reduction in force. Plaintiff, believing his
discharge to be racially discriminatory, pursued his various
administrative remedies. After receiving a Notice of Right to
Sue from the Equal Employment Opportunity Commission dated
February 14, 1979, he filed this action.
In his twelve-count complaint, plaintiff advances a number
of legal theories upon which relief may be premised. Five of
the counts (I, II, VII, VIII, X) allege racial discrimination
in violation of Title VII, 42 U.S.C. § 2000e et seq., 42 U.S.C. § 1981,
and Executive Order 11246. The remaining counts, before
this Court under the doctrine of pendent jurisdiction, seek
recovery under Illinois tort and contract theories as well as
Illinois antidiscrimination law. This case now is before the
Court on defendants' motions for judgment on the pleadings as
to seven counts of the complaint, and to amend the answer to
add a third affirmative defense.
I. Judgment on the Pleadings*fn1
A. Counts IX-X
Counts IX and X of the complaint are based on Executive
Order 11246. Count X seeks damages for violation of 11246
under a theory of implied federal right of action, whereas
Count IX alleges that plaintiff may sue under state law as a
third-party beneficiary of the 11246 requirements incorporated
in contacts between Harvester and the federal government.
Defendants contend that Count X must be dismissed for the
reason that 11246 does not give rise to an implied right of
action. This Court agrees. The Seventh Circuit has so held,
Cohen v. Illinois Institute of Technology, 524 F.2d 818, 822
n.4 (7th Cir. 1975), cert. denied, 425 U.S. 943, 96 S.Ct. 1683,
48 L.Ed.2d 187 (1976), as has virtually every federal court to
consider the issue.*fn2 Plaintiff's lengthy discussion on the
Supreme Court's implication of a private right of action in
Cannon v. University of Chicago, 441 U.S. 677, 99 S.Ct. 1946,
60 L.Ed.2d 560 (1979), has not persuaded the Court that a
different result now should obtain. Cannon clearly was not the
Supreme Court's last word on implied private rights of action.
See Transamerica Mortgage Advisors, Inc. v. Lewis,
444 U.S. 11, 100 S.Ct. 242, 62 L.Ed.2d 146 (1979); Touche Ross & Co. v.
Reddington, 442 U.S. 560, 99 S.Ct. 2479, 61 L.Ed.2d 82 (1979).
As this Court has observed, Transamerica and Touche Ross have
established congressional intent as the pivotal factor in
determining the existence of an implied private right of
action. Stone v. Saxon & Windsor Group, Ltd., 485 F. Supp. 1212
(N.D.Ill. 1980). In examining the administrative scheme of
enforcement, the language of the executive order, and
legislative history of related civil rights provisions, the
Court can find no evidence of a congressional intent to create
a private right of action directly under 11246.*fn3 Thus, even
were this Court writing
on a clean slate, it would not construe 11246 as providing for
an implied right of action.
Defendants' position with respect to the third-party
beneficiary theory contained in Count IX is derivative of
their argument as to Count X. Defendants observe that one
reason federal courts have declined to read into 11246 an
implied right of action is that such an action might disrupt
the administrative procedures established for the enforcement
of that executive order. Defendants contend that this
disruption would be even greater if state law contract actions
were permitted as a means of enforcement of 11246.
The judicial refusal to imply a private right of action
under 11246, however, does not suggest that private
enforcement of that executive order never may be obtained
through a lawsuit. Indeed, in Jones v. Local 520, International
Union of Operating Engineers, 603 F.2d 664 (7th Cir. 1979),
cert. denied, 444 U.S. 1017, 100 S.Ct. 669, 62 L.Ed.2d 647
(1980), the Seventh Circuit held that an employee could sue
under section 1981 to enforce an 11246 contract establishing
preferential minority hiring:
In our view, the agreements create third party
beneficiary rights in the white and black
operating engineers who stand to benefit from the
operation of the referral plan.
603 F.2d at 665. The court found that so long as the complaint
stated the essential elements of a section 1981 claim, an
employee could maintain an action to enforce 11246. Thus, it
is evident that judicial enforcement of 11246 will not
necessarily contravene the administrative machinery.
Defendants' second argument that application of state law
principles to enforce 11246 would disrupt unduly the
administrative scheme-also is unavailing. In Miree v. DeKalb
County, Ga., 433 U.S. 25, 97 S.Ct. 2490, 53 L.Ed.2d 557 (1977),
the Supreme Court permitted plaintiff to sue under a contract
theory for alleged breach by defendant of a Federal Aviation
Administration agreement. In rejecting the argument that the
overriding federal interest required application of a uniform
federal common law, the Court stated:
The operations of the United States in connection
with FAA grants such as these are undoubtedly of
considerable magnitude. However, we see no reason
for concluding that these operations would be
burdened or subjected to uncertainty by variant
state law interpretations regarding whether those
with whom the United States contracts might be
sued by third party beneficiaries to the
433 U.S. at 30, 97 S.Ct. at 2494. The Court also observed that
Congress' failure to indicate an express intent to displace
state law further supported the conclusion that application of
state law principles would not be in derogation of federal
policy. Id. at 32, 97 S.Ct. at 2495.
Similarly, this Court does not believe that state law
actions will create uncertainty as to the obligations of those
who are subject to the important policies of 11246 by virtue
of their contracting with the federal government. Nor has
Congress exercised its authority to render state law
inapplicable to actions involving 11246. Thus, under the
authority of Miree, the Court finds no bar to plaintiff's state
law claim based on his rights as a third-party beneficiary to
the 11246 contract.*fn4 For this reason, the motion for
judgment on the pleadings is denied as to Count IX.
B. Counts III IV
In Counts III and IV, plaintiff seeks recovery for alleged
discrimination under the Illinois Fair Employment Practice Act
("FEPA").*fn5 Defendants, however, correctly
point out that plaintiff may not maintain his action against
them directly under the FEPA. Under the enforcement scheme
established by the FEPA, any claim within the coverage of the
Act must be filed with the Fair Employment Practices
Commission ("Commission"). Ill.Ann.Stat. ch. 48, § 858(a).
Thereafter, the Commission investigates the complaint to
determine if there is substantial evidence of a violation. If
so, and if conciliation of the complaint proves unsuccessful,
the Commission issues a complaint. § 858.01(a). After a hearing
and recommended order filed by a hearing examiner, the
Commission upon review adopts all orders not contrary to the
manifest weight of the evidence. § 858.02(d). Under section 860
of the FEPA, either an employer or employee may obtain judicial
review of Commission findings. Moreover, section 861 authorizes
the Commission to sue in state court to enforce its orders. The
only other authorization of state court jurisdiction is found
in section 858.01a, which permits an employee to sue an
employer on claims filed with the Commission prior to March 30,
1978, so long as the claims have not been settled or have not
been the subject of a complaint issued by the Commission.
Inasmuch as plaintiff first filed claims against defendants
in May, 1978, he does not qualify for the limited right of
action against an employer conferred by section 858.01a.
Plaintiff appears to suggest that because his claims were
filed only two months after the March 30 deadline, his action
should be permitted. However, whether plaintiff failed to meet
the March 30 cutoff by two days, two months, or two years is
irrelevant. The Illinois legislature has established a clear
limit on actions by employees against employers, and this
Court is bound to respect that limit.*fn6
Plaintiff further suggests that his private action against
defendants is sanctioned by the reasoning in Klein v. Fair
Employment Practices Commission, 31 Ill.App.3d 473,
334 N.E.2d 370, 374 (1st Dist. 1975). All that Klein held, however, is
that judicial review under section 860 is available where the
Commission dismisses a claim without issuing a complaint.
Neither the holding nor the reasoning of that opinion suggest
that employees may avoid the plain limitation contained in
section 858.01a. Finally, plaintiff argues that these counts
should not be dismissed solely because there is no Commission
record upon which to base section 860 review. The problem,
however, stems not from the absence of a record, but rather
more basically from plaintiff's statutory inability to bring
suit against his employer. Accordingly, the Court grants
defendants' motion for judgment on the pleadings as to Counts
III and IV.
C. Counts VIII, XI
In Count VIII, plaintiff seeks to impose individual
liability on defendants Chandler and Tretheway under section
1981 for their role in his termination. Count XI seeks damages
against these same two defendants on the state law theory of
interference with a contractual relationship.
As to Count VIII, defendants contend that individual
employees of a corporate defendant cannot be held liable under
section 1981 for the same acts that allegedly give rise to
corporate liability. Defendants argue that such "double
liability" should not be countenanced under section 1981. In
general, however, it is well established that
[a] director, officer, or agent of a corporation
is liable in damages for injuries suffered by
third persons because of his torts, regardless of
whether he acted on his own account or on behalf
of the corporation and regardless of whether or
not the corporation is also liable.
I.L.P. Corporations § 352 at 509; Murphy Tugboat v. Shipowners
& Merchants Towboat, 467 F. Supp. 841, 852 (N.D.Cal. 1979).
Indeed, the Supreme Court in Sullivan v. Little Hunting Park,
Inc., 396 U.S. 229, 236-237, 90 S.Ct. 400, 404, 24 L.Ed.2d 386
(1969), applied this principle to litigation under section
1982, the companion statute to section 1981. There, the Court
permitted plaintiffs to sue under section 1982 a recreational
corporation as well as its directors for a refusal to permit
the assignment of membership rights to a black lessee.
Subsequently, a number of courts have permitted suits under
section 1981 against both corporations and corporate directors
or officers who authorize, direct, or participate in the
alleged discriminatory conduct. Tillman v. Wheaton-Haven
Recreation Ass'n, Inc., 517 F.2d 1141, 1146 (4th Cir. 1975);
Faraca v. Clements, 506 F.2d 956, 959 (5th Cir.), cert. denied,
422 U.S. 1006, 95 S.Ct. 2627, 45 L.Ed.2d 669 (1975); Garcia v.
Rush-Presbyterian St. Luke's Medical Center, 80 F.R.D. 254,
266-267 (N.D.Ill. 1978).
In Count VIII, paragraph 89, plaintiff alleges that
defendants Chandler and Tretheway "were the individuals who
determined that plaintiff would be terminated from his
position with Harvester." The remainder of the count describes
the elements that allegedly went into the decision to
terminate plaintiff. The Court believes these allegations to
be sufficient to state a claim against the individual
defendants under section 1981.*fn7 Moreover, defendants'
argument with respect to Count XI is premised on the
assumption that Count VIII fails to state a claim under
section 1981, thereby robbing the Court of pendent party
jurisdiction over them. Inasmuch as the Court has denied the
motion for judgment on the pleadings as to Count VIII, it
denied the motion as to Count XI as well.
D. Count XII
Count XII alleges that in terminating plaintiff, the
defendants breached the duty of good faith and fair dealing
implicit in all contracts. See I.L.P. Contracts § 217 at 380.
Defendants submit that they are entitled to judgment on the
pleadings on the ground that plaintiff was an employee at will
and thus could be terminated at any time for any reason.
Plaintiff does not dispute that he was hired by Harvester as
an employee at will rather than for a specific term. Under
[s]uch an employment relationship is
intrinsically a very fragile thing, which either
party may end with or without cause. (Cites
omitted). The termination, then, may permissibly
be for a good reason, a bad reason, or no reason
at all. A court may be sympathetic to hardship
inflicted on a discharged employee and
unsympathetic to "bad" reasons motivating a
discharge, but it is not the judicial business to
rewrite a fragile employment contract to which
the parties have agreed.
Loucks v. Star City Glass Co., 551 F.2d 745
, 747 (7th Cir.
1977). See also Kelsay v. Motorola, Inc., 74 Ill.2d 172
Ill.Dec. 559, 566, 384 N.E.2d 353
, 360 (1978); Roemer v. Zurich
Insurance Co., 25 Ill.App.3d 606, 323 N.E.2d 582
, 585 586 (1st
Dist. 1975). This absolute right may be limited by public
policy, as in Illinois, which prohibits even employees at will
from being terminated for certain impermissible reasons such as
invidious discrimination. This limitation, however, arises not
from the employment relationship itself, but from the
particular statute. Thus, in Kelsay, the Illinois Supreme Court
observed that the Workman's Compensation Act limited an
employer's right to terminate with impunity an employee at will
who filed a claim under the Act. The court observed that if
employers could exercise their "otherwise absolute
power to terminate an employee at will," employers could
pressure employees to forego their exclusive right to recovery
under the Act by threatening them with discharge. 384 N.E.2d
As is evident from the multi-count complaint in this case,
plaintiff has a full panoply of federal and state law remedies
from which to choose in seeking redress against defendants.
The Court need not impose a limitation on the employment at
will relationship in order to provide another. Indeed, the
Illinois courts never have relied upon this duty to limit the
right of an employer to terminate an employment at will
relationship. Criscione v. Sears, Roebuck & Co., 66 Ill. App.3d 664,
23 Ill.Dec. 445, 448-449, 384 N.E.2d 91, 94-95 (1st Dist.
1978); Stevenson v. ITT Harper, Inc., 51 Ill.App.3d 568, 9
Ill.Dec. 304, 310, 366 N.E.2d 561, 567 (1st Dist. 1977).
Rather, these decisions discussed the duty of good faith and
fair dealing only as a means for recovery of damages where an
employee at will is discharged so that the employer may avoid
payment of benefits due under a contractual agreement. The
court in Criscione, for example, observed that limiting an
employer's right to discharge an employee at will
would be to destroy the mutuality of obligation
that exists in an employment at will
relationship. An employee at will may quit his
employment for any reason at any time and is not
bound to make his decision on the basis of
whether or not it is a good business decision.
The obligation of the employer should be no more
384 N.E.2d at 95.
Thus, Insofar as Count XII seeks damages for plaintiff's
discharge, defendants are entitled to judgment on the
pleadings. However, a fair reading of Count XII reveals that
plaintiff also alleges that defendants discharged him so as to
avoid payment of a bonus and raise to which he was entitled by
contract. See Count XII, Paragraphs 138(a), 139(a). This is
sufficient to state a claim for relief under Illinois law.
Therefore, the motion for judgment on the pleadings is denied
as to this allegation in Count XII.
II. Amendment to the Answer
Defendants' motion to amend their answer is based on the
discovery of evidence that plaintiff allegedly misrepresented
the salaries he received in his past employment positions.
Their proposed third affirmative defense alleges that
plaintiff's damage claims are barred because he secured the
employment relationship by fraudulent means.
Under Fed.R.Civ.P. 15(a), leave of the court to amend a
pleading "shall be freely given when justice so requires."
See Foman v. Davis, 371 U.S. 178, 181, 83 S.Ct. 227, 229, 9
L.Ed.2d 222 (1962); Stern v. United States Gypsum, Inc.,
547 F.2d 1329, 1334 (7th Cir.), cert. denied, 434 U.S. 975, 98
S.Ct. 533, 54 L.Ed.2d 467 (1977). Such leave, however, is
inappropriate where there is "undue delay, bad faith or
dilatory motive on the part of the movant, repeated failure to
cure deficiencies by amendments previously allowed, undue
prejudice to the opposing party by virtue of the allowance of
the amendment, futility of amendment, etc." Foman, 371 U.S. at
182, 83 S.Ct. at 230; Mertens v. Hummel, 587 F.2d 862, 865 (7th
Cir. 1978). The determination as to whether leave to amend
should be granted is committed to the discretion of the trial
court. Mertens, id.
Plaintiff argues that due to defendants' delay in raising
this motion, he will be prejudiced if at this time the Court
permits the requested amendment. However, the Court does not
believe that defendants delay in seeking to amend their answer
can be characterized as undue, coming as it did little more
than one month after the close of discovery and prior to the
filing of the final pretrial order. Moreover, the Court does
not believe that plaintiff will be prejudiced due to an
inability to conduct further discovery. First, plaintiff was
aware that defendants were conducting discovery in this area.
Thus, he should not be surprised that defendants now are
raising this issue.
Second, to the extent that further discovery on this defense
is necessary, the Court believes that a reopening of discovery
for 45 days for this limited purpose will provide plaintiff
with an adequate opportunity to address this defense.
Plaintiff also suggests that the proposed amendment should
be denied because it is insufficient as a matter of law. As
Foman and Mertens recognize, futility is a basis for denying a
motion to amend. Here, however, the Court is far from convinced
that the matters defendants seek to raise by their proposed
third affirmative defense are without merit. If defendants can
prove that plaintiff obtained his job through fraudulent
representations and that this defense is not merely a pretext
for discrimination, Williams v. Boorstin, 451 F. Supp. 1117,
1122 (D.D.C. 1978), they may escape liability. Moreover,
fraudulent representations by plaintiff, if proven, at the very
least will be relevant to the issue of damages. Williams, id.
at 1126-1127. Thus, the Court cannot say that the amendment
should be denied as futile.
Accordingly, the motion for judgment on the pleadings is
granted as to Counts III, IV, and X in their entirety.
Judgment on the pleadings also is granted as to that part of
Count XII which seeks damages for discharge. The motion is
denied as to the remainder of Count XII, as well as to Counts
VIII, IX, and XI. In addition, the defendants' motion to amend
the answer by adding a third affirmative defense is granted.
Discovery will be opened for 45 days, limited to the issues
raised by the amendment. Thereafter, the parties will have ten
days to amend the final pretrial order. This cause will be
placed on the Court's status call for October 10, 1980, at
10:00 a. m. It is so ordered.