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May 28, 1993



The opinion of the court was delivered by: JAMES B. MORAN

Plaintiff James Strzelecki (Strzelecki) has filed a ten-count complaint against defendants Schwarz Paper Company (Schwarz) and Andrew McKenna (McKenna), president and principal shareholder of Schwarz. The controversy concerns plaintiff's dismissal from Schwarz and Schwarz's refusal to pay him certain severance benefits and sales commissions to which he says he was entitled. Specifically, plaintiff claims that defendants breached a contract concerning the sale of company stock (count I); that they violated the Employee Retirement Income Security Act (ERISA), 29 U.S.C. § 1001 et seq., by dismissing him to avoid paying certain benefits (count II), by not paying him those benefits (count III), by failing to follow certain rules in administering a benefit plan (count IV), and by breaching fiduciary duties owed to him as a participant in a benefit plan they were administering (count V); that they breached a covenant of good faith and fair dealing with respect to stock and employment contracts (count VI); that they are estopped from breaking certain promises relating to the sale of company stock (count VII); that they breached their employment contract with plaintiff (count VIII); that they breached their sales commissions contract with plaintiff (count IX); and that they discriminated against plaintiff on the basis of his age, in violation of the Age Discrimination in Employment Act (ADEA), 29 U.S.C. § 621 et seq. (count X). Defendants now move to dismiss the entire complaint. Their motion is granted in part and denied in part.


 For the purpose of this motion the court assumes the truth of the allegations made in Strzelecki's complaint. Schwarz is a privately-held Chicago-based company engaged primarily in the fields of paper distribution, printing, and advertising. Strzelecki began working for Schwarz in 1968, following his graduation from college. He began as a sales representative, earning a promotion to sales manager in 1977 and to manager of national accounts in 1979. He became a vice president in 1983. Throughout Strzelecki's tenure at Schwarz, McKenna served as company president and owned over 90 percent of the company's outstanding stock. Strzelecki and McKenna enjoyed an excellent working relationship and McKenna went so far as to state on several occasions that he expected Strzelecki to spend his entire career with Schwarz.

 In 1970 and 1971, Strzelecki purchased a total of 15 shares of Schwarz stock. In 1978 he used his 15 shares as collateral for a loan from the Lake Shore National Bank. He also listed the shares as assets in loan applications submitted to other institutions. As a result of those financial dealings, McKenna became concerned that a lender might demand to look into Schwarz's financial records. To prevent such an inquiry, McKenna asked Strzelecki to sell his shares back to the company. Strzelecki agreed and sold the stock for $ 75,000 (the value of the shares at that time, based on the company's book value) plus, significantly, any appreciation in the value of the shares from the date of the sale to the date of Strzelecki's "retirement from Schwarz." In effect, Strzelecki was to retain ownership in "phantom stock." The sales agreement was not put into writing, but over the years McKenna offered repeated assurances that no written documentation was necessary.

 As an older salesperson with considerable seniority, Strzelecki had by that time become one of the more highly paid employees at Schwarz and was entitled to significant benefits -- above and beyond the appreciated value of the "phantom stock" that he expected to receive upon his retirement. In June 1990, as a cost-cutting measure, McKenna asked Strzelecki to train a younger salesperson to help with his accounts. McKenna's request, along with other employment decisions at Schwarz that benefited younger employees at the expense of older employees, convinced Strzelecki that Schwarz was discriminating on the basis of age. Strzelecki refused to share his accounts with a younger salesperson.

 Strzelecki was discharged in February 1991. He was forty-four years old. The company then denied him commission payments on business he had developed or obtained for it before he left. In addition, the company refused to pay him the appreciated value of his "phantom stock," which by then amounted to the considerable sum of $ 375,000. (From 1980, when Strzelecki sold his stock to McKenna, to February 1991, when he left the company, the value of an individual share of Schwarz stock rose from $ 5,000 to $ 30,000.) Strzelecki then filed this lawsuit.


 The Stock Sale Claims (Counts I, VI and VII)

 Defendants argue that two separate statutes of fraud apply to this case, one found in the Illinois Commercial Code, the other in the Illinois Frauds Act, and that both preclude enforcement of the oral contract between Strzelecki and Schwarz for the sale of securities. In the same vein, they argue that no implied covenant of good faith and fair dealing attached to the sale, and that there can be no estoppel against their refusal to pay the stock's appreciated value.

 The Commercial Code provides:

A contract for the sale of securities is not enforceable by way of action or defense unless:
(a) there is some writing signed by the party against whom enforcement is sought or by his authorized agent or broker, sufficient to indicate that a contract has been made for sale of a stated quantity of described securities at a defined or stated price;
(b) delivery of a certificated security or transfer instruction has been accepted, or transfer of an uncertificated security has been registered and the transferee has failed to send written objection to the issuer within 10 days after receipt of the initial transaction statement confirming the registration, or payment has been made, but the contract is ...

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