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GORDON v. MATTHEW BENDER & CO.

April 29, 1983

JOEL GORDON, PLAINTIFF,
v.
MATTHEW BENDER & COMPANY, INC., A NEW YORK CORPORATION, DEFENDANT.



The opinion of the court was delivered by: William T. Hart, District Judge.

MEMORANDUM OPINION AND ORDER

The plaintiff Joel Gordon ("Gordon"), a citizen of Illinois, has brought a twelve-count First Amended Complaint ("complaint") against Matthew Bender & Company, Inc. ("Matthew Bender"), a New York corporation with its principal place of business in New York. The Court has subject matter jurisdiction based on diversity of citizenship and the existence of a federal question. 28 U.S.C. § 1331 and 1332. Now before the Court is Matthew Bender's motion to dismiss eight of the twelve counts of the complaint. For the reasons given below, the motion is granted in part and denied in part.

Facts

The Court here will briefly review the facts common to all counts of the complaint, and will discuss the facts relevant to each particular contested count below.

Gordon began working for Matthew Bender on November 5, 1973, as one of its law book sales representatives in a territory which included parts of Chicago and the surrounding areas. The employment agreement between Gordon and Matthew Bender stated no definite period during which the parties remained obligated to each other. Gordon developed into a commendable employee who reached or exceeded the goals set for him by his employer.

On July 24, 1980, Gordon was informed by his superior at Matthew Bender that his territory would be reduced on September 1, 1980. On October 7, 1980, he was told that he would be terminated if he failed to achieve in his new territory the same sales goals which had been set for the territory he worked in prior to the September 1 change. Thus though Gordon's territory had been diminished, his sales goals remained the same. He did not meet the goals and was fired on January 8, 1981.

Counts IV and V of the complaint allege violations of the Age Discrimination in Employment Act, 29 U.S.C. § 621 et seq. Count VII alleges that Matthew Bender has failed to pay Gordon commissions due him. Count X alleges an action for an account stated. Matthew Bender has answered these four counts by denying the essential allegations, and has moved to dismiss the balance of the complaint.

Each of the eight counts Matthew Bender challenges here allege causes of action which arguably arise under state law. The parties have not expressly addressed the initial issue of which state's law applies. However, Gordon and Matthew Bender each have relied heavily on Illinois decisions. Further, Gordon is a citizen of Illinois who has worked for Matthew Bender in this state. The Court assumes that Illinois law governs the state law causes of action asserted here.

The standard applied by a federal court in ruling on a motion to dismiss a complaint for failure to state a claim upon which relief may be granted, brought under Fed. R.Civ.P. 12(b)(6), is stated in Conley v. Gibson, 344 U.S. 41, 45-46, 78 S.Ct. 99, 101-02, 2 L.Ed.2d 80 (1957): "[A] complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." In ruling on Matthew Bender's motion to dismiss, the Court applies this firm principle.

Count I

In addition to the general allegations described above, Gordon states that "Matthew Bender maliciously manipulated circumstances to make Mr. Gordon's job impossible [and that t]his bad faith conduct of Matthew Bender is actionable . . ." (Plaintiff's Response, at 6). In Count I, Gordon claims to sue under both tort and contract theories for the breach by Matthew Bender of its duty and covenant, implied in law, to deal with Gordon in good faith. He says that in Illinois, "every contract includes a duty of good faith and fair dealing. `Even though the express words are absent, performance in good faith will be implied by the court.' (Dasenbrock v. Interstate Restaurant Corp. (1972), 7 Ill.App.3d 295, 300, 287 N.E.2d 151, 154, leave to appeal denied, 55 Ill.2d 601.)." Pierce v. MacNeal Memorial Hospital Association, 46 Ill.App.3d 42, 51, 4 Ill.Dec. 615, 622, 360 N.E.2d 551, 558 (1st Dist. 1977).

In this case, Gordon and Matthew Bender had an employment contract terminable at will by either party at any time (see discussion and rulings on motions to dismiss Counts II and VI, infra). The essence of Gordon's legal argument is that Matthew Bender's alleged breach of the obligation (implied in law) to deal in good faith creates an independent cause of action. No decision of which this Court is aware has held this to be true. Instead, the principle of performance in good faith comes into play in defining and modifying duties which grow out of specific contract terms and obligations. It is a derivative principle.

The four cases which Gordon cites (none of which deals with the "good faith" obligation in the context of an at will employment) point to this conclusion. See Pierce, supra, 4 Ill.Dec. at 622, 360 N.E.2d at 558 (defendants required by settlement agreement to obtain legal opinion; "good faith and fair dealing" principle is an aid in interpreting a specific contractual obligation); Stevenson v. ITT Harper, Inc., 51 Ill.App.3d 568, 9 Ill.Dec. 304, 310, 366 N.E.2d 561, 567 (1st Dist. 1977) (plaintiff fired prior to vesting date for receiving pension benefits; Pierce principle "does not aid plaintiff because the record does not suggest that plaintiff's termination was a bad faith effort by ITT Harper to avoid its conditional duty [under the contract] to pay pension benefits."); Ledingham v. Blue Cross Plan for Hospital Care, Inc., 29 Ill.App.3d 339, 330 N.E.2d 540, 548 (5th Dist. 1975), rev'd on other grounds, 64 Ill.2d 338, 1 Ill.Dec. 75, 356 N.E.2d 75 (1976) (in a "life and health insurer-insured relationship there is a duty upon both parties to act in good faith and deal fairly with the other party to the contract.");*fn1 Hardin v. Eska Company, 127 N.W.2d 595 (Iowa 1964) (the defendant granted plaintiff the exclusive right to market items in a specific territory and then began to compete in that same territory, thereby destroying the basis of plaintiff's bargain; "good faith" obligation prevents defendant from interfering with plaintiff's firm contract right).

Thus none of the cases upon which Gordon relies hold that in the context of an employment at will, the obligation to deal in good faith which is implied in law is an independent basis for an action. A very recent decision of the New York Court of Appeals squarely holds that no such cause of action will lie.

In Murphy v. American Home Products Corp., No. 35 (N.Y. March 29, 1983), the plaintiff, whose employment was for no definite duration, was fired. Murphy brought suit alleging several theories for recovery, including a tort action for wrongful discharge and a breach of contract action for the employer's breach of the obligation, implied in law, to deal with an employee in good faith. The court first found that no action for wrongful discharge of an employee at will could be stated under New York law. It then went on to address the plaintiff's assertion

  that in all employment contracts the law implies an
  obligation on the part of the employer to deal with
  his employees fairly and in good faith and that a
  discharge in violation of that implied obligation
  exposes the employer to liability for breach of
  contract.

Slip op. at 10. While holding that New York law recognizes that an obligation of good faith and fair dealing may be implied in a contract, the court stated:

Slip op. at 11 (emphasis added).

The decision in Murphy strongly suggests that this Court has correctly interpreted the nature of the obligation to deal in good faith, implied in all Illinois contracts. Such an obligation "is in aid and furtherance of other terms of the agreement of the parties." Id. It does not create an independent cause of action. See also Martin v. Federal Life Ins. Co., 109 Ill.App.3d 596, 65 Ill.Dec. 143, 150, 440 N.E.2d 998, 1005 (1st Dist. 1982) (the good faith and fair dealing principle "is essentially used as a construction aid in determining the parties' intent"; court dismisses tort action based on alleged bad faith termination of employment at will).

Illinois, like New York, does not allow for an action based on a discharge from an employment at will (except in certain circumstances, discussed infra with regard to Count VI, which are not applicable here). If the implied obligation to deal in good faith created such a cause of action, it would eviscerate the at will doctrine altogether. Murphy v. American Home Products, supra. The Court believes that Murphy reflects the decision an Illinois court would reach on these facts.

Since Gordon was an at will employee, the duty to deal in good faith was appended to nothing which had independent life. Therefore no cause of action predicated only on the good faith principle may stand, and Count I is dismissed.

Count II

Gordon alleges in Count II that it was "Matthew Bender's policy and practice . . . to condition its sales representatives' continued employment on `acceptable sales performance'" (para. 17). He refers to a letter (Ex. D, attached to the complaint) from Matthew Bender to Gordon placing him on probationary status. This letter states that if Gordon meets his goals, he will be "restored to the same status of acceptable sales performance as other Matthew Bender sales representatives." Gordon alleges that this letter created a contract for continuous employment conditioned upon acceptable sales performance, which Matthew Bender breached by firing him even though he met or exceeded the requirement of acceptable sales performance.

Matthew Bender has moved to dismiss Count II on a variety of grounds, including: (1) this was a contract terminable at will, and therefore Gordon's discharge is not actionable; (2) the contract lacks mutuality and therefore is not actionable; (3) the oral contract is unenforceable under the statute of frauds since it is for an indefinite period. Since the Court finds that this was a contract terminable at will, the other arguments will not be addressed.

Gordon claims that though this was a contract for no definite period, it was not a contract without terms governing its duration. Gordon's length of employment would depend on his "satisfactory performance" or "acceptable sales performance." Therefore, the argument goes, so long as the condition of acceptable performance was being met — and this is a fact issue which precludes the granting of a motion to dismiss, since the Court must accept the plaintiff's allegations as true — the contract could not be terminated. See Donahue v. Rockford Showcase & Fixture Co., 87 Ill. App.2d 47, 230 N.E.2d 278 (2nd Dist. 1967) (contract of employment with no definite period not an employment at will; existence of specified condition — contract terminable by either party if shipments fall below $25,000 — makes it not a contract terminable at will, but one terminable upon the existence of a particular condition). Gordon relies heavily on Scaramuzzo v. Glenmore Distilleries, Co., 501 F. Supp. 727 (N.D.Ill. 1980).

In Scaramuzzo, the fired plaintiff alleged that the defendant-employer had promised that Scaramuzzo "would be discharged only for good cause, and [that] he would retain all corporate responsibilities assigned to him as long as he competently executed such responsibilities." Id. at 732. Defendant moved for summary judgment on grounds that this was an employment agreement terminable at will. The court denied the motion, stating that "[a] contract that fails to specify the length of the term of employment, but that does set conditions upon which termination may be based, is not terminable at will — it is terminated upon the existence of those conditions." Id. Since there existed a fact question as to whether such conditions existed — whether the plaintiff could be discharged only for good cause, and whether he would retain his responsibilities as long as he executed them competently — summary judgment could not be granted.

Gordon argues that there existed a condition to his employment contract with Matthew Bender — "acceptable sales performance" — so that, as in Scaramuzzo, a legal claim exists which at the very least precludes a dismissal of this count of the complaint. But Gordon cannot distinguish two other cases precisely on point. In Buian v. J.L. Jacobs and Company, 428 F.2d 531 (7th Cir. 1970), the court found that the following contract language did not raise any fact issue, and that a contract terminable at will existed: "It is scheduled that your assignment in Saudia Arabia will continue for a period of eighteen (18) months. . . . It is intended that all staff associates assigned to the Saudi Arabia projects will remain in Saudia Arabia . . . throughout the duration of the specified assignments. This of course presumes satisfactory service by each associate Id. at 532 (emphasis added).

In Payne v. AHFI/Netherlands, B.V., 522 F. Supp. 18 (N.D.Ill. 1980), the court construed terms similar to those at issue in Buian and also found that a contract at will existed. The duration of the Payne contract was to depend on factors such as "individual performance." Id. at 22.

Buian and Payne clearly stand for the proposition that satisfactory or acceptable performance language does not transform a contract with no definite period — one at will — into a contract which cannot be terminated by either party at any time for any reason. The Court finds that these cases control. Further, Scaramuzzo is not contrary authority. It is distinguishable on its facts — no discharge except "for good cause" (an objective criterion) has a different ...


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