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07/21/89 Whiting Corporation, v. Professional Employment

July 21, 1989





542 N.E.2d 829, 186 Ill. App. 3d 705, 134 Ill. Dec. 483 1989.IL.1136

Appeal from the Circuit Court of Cook County; the Hon. John G. Laurie, Judge, presiding.


JUSTICE QUINLAN delivered the opinion of the court. McNAMARA and LaPORTA, JJ., concur.


Plaintiff, Whiting Corporation (Whiting), sued the defendant, Professional Employment, Inc. (Professional), for breach of contract and the recovery of a $5,980 fee which plaintiff had paid to defendant for referring an individual to it for employment as an engineer. The employee that defendant had referred to Whiting was later fired, and plaintiff requested its money back in accordance with defendant's unconditional guarantee. The defendant refused, and after a bench trial, the circuit court of Cook County entered judgment for the plaintiff in the amount of the fee that plaintiff had paid to the defendant, Professional. The trial court, however, denied plaintiff's request for attorney fees for the allegedly false and baseless pleadings and defense of defendant pursuant to section 2-611 of the Code of Civil Procedure. (See Ill. Rev. Stat. 1987, ch. 110, par. 2-611.) Defendant now appeals the court's judgment which awarded plaintiff $5,980, and plaintiff cross-appeals the court's denial of attorney fees under section 2-611.

In 1986, the plaintiff, Whiting, was interested in hiring a field service engineer, and as a result hired the defendant, a firm that specialized in employee placement, to find a suitable candidate. The defendant referred Russel Vogel to plaintiff as a candidate for the position. Vogel was interviewed by the plaintiff's director of employee operations, John Fisher, who, although he believed that Vogel was technically qualified for the job, had some reservations about whether Vogel was properly suited for the position. Whiting decided that it needed a trial period in order to appropriately evaluate Vogel for the job. Thus, Whiting inquired about the defendant's guarantee policy before it hired Vogel, and the defendant told plaintiff it had a 100% unconditional guarantee policy, which plaintiff took to mean a money-back policy. Both plaintiff and defendant thereafter agreed to the terms which provided that, under defendant's unconditional guarantee, plaintiff had 60 days within which to terminate Vogel's employment, as long as plaintiff paid the full fee within 10 days of Vogel's hiring.

On May 19, 1986, plaintiff hired Vogel, and within 10 days, plaintiff paid the defendant the agreed-upon fee of $5,980. A few weeks later, plaintiff determined that Vogel was not suitable for the position, and so, on June 13, 1986, plaintiff fired Vogel. Plaintiff then requested a refund of the $5,980 fee it had paid. As stated above, defendant refused to refund plaintiff's money, and plaintiff filed this lawsuit to recover the fee, alleging that defendant's unconditional guarantee entitled plaintiff to repayment of the fee if plaintiff fired Vogel within a 60-day period and plaintiff had paid defendant's fee within 10 days of Vogel's hiring. The defendant denied that it had ever told or represented to the plaintiff that the guarantee entitled plaintiff to a refund of its money, and asserted that its unconditional guarantee meant only that it would provide a replacement without any additional cost to plaintiff.

Subsequently, the case proceeded to trial before the court, and the plaintiff presented several witnesses who worked at Whiting to explain the agreement between Whiting and the defendant. The plaintiff presented the testimony of Fred Teggelar, Whiting's risk manager; John Fisher, the director of employee relations at Whiting; and David Witthrow, a manager at Whiting. Their testimony basically established that Whiting had negotiated the agreement with defendant through John Culkeen, an employee of defendant, and that Culkeen had assured plaintiff that the guarantee was unconditional if Vogel was fired within 60 days and the fee was paid within 10 days of Vogel's hiring. Whiting's witnesses testified that they accordingly believed that the defendant's unconditional guarantee meant that defendant would refund Whiting's fee if the employee did not work out. However, these witnesses admitted that no one had explicitly told them that "unconditional guarantee" meant a full refund of the fee. On the other hand, Whiting's witnesses further stated that no one from defendant's office ever told them, prior to Vogel's hiring, that "unconditional guarantee" meant only free replacement of the employee.

Whiting's chief financial officer, Jefferey Kahn, also testified and said that he had specifically discussed the defendant's unconditional guarantee with John Fisher. Kahn stated that there was no mention of a replacement-only policy in their Discussion, and that he was only concerned with whether their money would be refunded if they later fired the employee. In addition, Kahn said that in November 1986, several months after the Vogel incident, he had a conversation with Jim Ford, who worked for defendant. Ford had called Kahn to inquire about Whiting using defendant's services to fill financial positions at Whiting. Kahn said that he had told Ford at that time that before he would agree to use defendant's services, he wanted to know what defendant's guarantee policy was and that Ford then told him that if the employee left within 30 days, the client company would not have to pay, and, if the client paid, the fee would be refunded. Kahn then stated that he asked Ford for a written confirmation of this policy, and Ford sent Kahn defendant's brochure, which was admitted at trial. That brochure stated that there was a "Full 30 Day Unconditional Guarantee." Kahn called Ford again and specifically asked him for something in writing to confirm that this guarantee was a refund policy. Ford agreed, but later called Kahn back and told him that his manager would not allow him to do so, and that he, Ford, had misunderstood the policy. Nevertheless, Ford also told Kahn that since most clients did not pay within 30 days, the refund issue really didn't matter anyway.

Plaintiff presented Ms. Joyce Markmann as a witness. Ms. Markmann worked for the Illinois Department of Labor and was, at the time of her testimony, responsible for the licensing and regulation of employment agencies, but not executive search firms, since they did not need to register with the State. *fn1 Ms. Markmann testified that she also handled complaints about these agencies and that these complaints often involved "guarantee" types of issues for both agencies and executive search firms. She testified that in the industry, "unconditional guarantee" means that if the employee is fired within 30 days, the agency will refund 100% of the fee.

Ms. Markmann also testified regarding two of defendant's Illinois Department of Labor applications for registration with the State, *fn2 which it had filed with the Department in 1979 and 1982. These applications, as required by law, she explained, set forth defendant's guarantee policy. The guarantee policy, as stated in the 1979 application, was a 30-day guarantee that provided if the employee was terminated within that time, the fee would be refunded within 24 hours. On its 1982 application, she further testified, the defendant's guarantee policy was described simply as an unconditional guarantee. Markmann also stated that employment agencies that must register with the Department are required to offer a certain minimum amount money-back guarantee.

In its case the defendant presented its president, Douglas Dawson, who testified that the term "unconditional guarantee," by both his own and the industry definition, meant merely replacement, not refund, and he said that he never had nor would he ever promise a cash refund to plaintiff or anyone else. Dawson also testified that before 1982 the defendant was more of an employment agency and, hence, was required to register with the Department of Labor and only as part of those requirements did it offer a refund guarantee. In addition, the defendant presented Mr. Leslie Vaughn, who was the president of his own executive search firm. Mr. Vaughn testified that in the industry "unconditional guarantee" normally means that if the employee doesn't last 30 days, the firm will replace the employee free of charge, or will offer a credit towards a future placement. He stated that it is not customary to refund fees. On cross-examination, however, Mr. Vaughn admitted that he had formerly been employed by the defendant and that he had also signed the defendant's 1982 Department of Labor application for registration in his capacity as the secretary of the defendant's corporation.

Finally, the defense presented Anderson Richardson, who was the defendant's engineering department manager at the time of Vogel's hiring. Richardson testified that John Culkeen had worked in defendant's engineering department and that Culkeen was the employee who had negotiated the arrangement with plaintiff. Richardson stated that Culkeen came to him for approval of the extended, 60-day guarantee with plaintiff and that he had approved the extension. Richardson stated that ...

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