the pleading requirements of the Federal Rules.
Plaintiffs will have the opportunity to disprove Hyatt's remaining affirmative defenses at trial or in a motion for summary judgment. Defendant is, however, reminded that its pleading of affirmative defenses is subject to Rule 11. If, in the course of discovery, it appears that there is no good-faith basis for a particular defense, Hyatt may be subject to sanction. Sanctions will be particularly appropriate if Codest is compelled to expend time and money demonstrating the frivolousness of Hyatt's affirmative defenses.
III. Plaintiff's Motion to Dismiss Counterclaim
A. Allegations of the Counterclaim
In its counterclaim, Hyatt asserts two claims: breach of contract and breach of the duty of good faith. Count I, for breach of contract, makes the following allegations. Hyatt signed the 1990 Letter Agreement as the disclosed agent of Volage. Under the terms of the Letter Agreement, Hyatt and Volage were required to "exercise best efforts to secure the financing of the Project." (Counterclaim, P 9). Codest was required "to provide support in the relations with SACE [the Italian export credit agency]" in order to help secure financing for the hotel project, and to confirm its firm price at or below a target minimum level for the construction services to be provided. (Id. P 9). While Hyatt complied with the terms of the Letter Agreement, "Codest failed to provide the required support in relations with SACE." (Id. PP 11-12). Furthermore, Codest failed to confirm with Volage and Hyatt the price for services it was to provide in connection with the planned hotel complex, thereby adversely affecting the project's ability to obtain needed financing. This failure to confirm the price for its services was a proximate cause of the failure of Volage to complete the hotel complex project.
Hyatt's claim for breach of the duty of good faith in Count II relies on the same factual allegations and portions of the Letter Agreement upon which Count I is based. Hyatt alleges that Codest breached its duty by failing "to provide the necessary support in relations with SACE and other project lending banks to allow for and maximize the likelihood that the hotel complex would receive the guaranteed tranche of the loan facilities, . . . with the knowledge that failing to provide such necessary support would adversely affect Hyatt's interests and the success of the hotel complex project." (Counterclaim, P 17).
Codest challenges both counts of the counterclaim on the grounds that: (1) the breach of contract claim improperly relies upon the original Letter Agreement executed by Codest, Volage, and Hyatt before any amendment, and (2) the breach of the duty of good faith claim does not assert an independent cause of action.
B. Legal Standards for Motions to Dismiss
A motion to dismiss pursuant to Rule 12(b)(6) does not test whether the plaintiff will prevail on the merits but instead whether the claimant has properly stated a claim. See Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S. Ct. 1683, 1686, 40 L. Ed. 2d 90 (1974). The court may dismiss a complaint for failure to state a claim under Rule 12(b)(6) only if "it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations." Hishon v. King & Spalding, 467 U.S. 69, 73, 104 S. Ct. 2229, 2232, 81 L. Ed. 2d 59 (1984); see also Conley v. Gibson, 355 U.S. 41, 45-46, 78 S. Ct. 99, 102, 2 L. Ed. 2d 80 (1957). The court must accept as true all well-pleaded allegations and draw all reasonable inferences in favor of the plaintiff. Antonelli v. Sheahan, 81 F.3d 1422, 1427 (7th Cir. 1996). However, the court need not strain to find favorable inferences which are not apparent on the face of the complaint. Coates v. Illinois St. Bd. of Educ., 559 F.2d 445, 447 (7th Cir. 1977). Similarly, the court is not required to accept legal conclusions either alleged or inferred from pleaded facts. Northern Trust Co. v. Peters, 69 F.3d 123, 129 (7th Cir. 1995) (citing Nelson v. Monroe Regional Medical Ctr., 925 F.2d 1555, 1559 (7th Cir.), cert. denied, 502 U.S. 903, 112 S. Ct. 285, 116 L. Ed. 2d 236 (1991)). Finally, the complaint need not specify the correct legal theory nor point to the right statute to survive a Rule 12(b) motion to dismiss, provided that "relief is possible under any set of facts that could be established consistent with the allegations." Bartholet v. Reishauer A.G., 953 F.2d 1073, 1078 (7th Cir. 1992). The complaint must, however, state either direct or inferential allegations concerning all material elements necessary for recovery under the chosen legal theory. See Glatt v. Chicago Park Dist., 847 F. Supp. 101, 103 (N.D. Ill. 1994).
1. Count I
Codest argues that Hyatt's breach of contract claim is based on a superseded contract, in violation of the Illinois rule that, where a contract is modified by a subsequent agreement, suit must be brought on the contract as modified and not on the original agreement. See Northwest Lincoln-Mercury v. Lincoln-Mercury Div., Ford Motor Co., 158 Ill. App. 3d 609, 613, 511 N.E.2d 810, 813, 110 Ill. Dec. 633 (1st Dist.), appeal dismissed, 116 Ill. 2d 562, 113 Ill. Dec. 303, 515 N.E.2d 112 (1987). Thus, Codest argues that the 1991 Amendment took the place of the 1990 Letter Agreement and that Hyatt may not rely solely on the provisions of the latter document.
In response, Hyatt notes that the Amendment signed by Codest, Volage, and Hyatt in January 1991, while modifying the scope, design, and cost of the project and providing for a payment schedule to Codest by Volage, explicitly stated that "Except as expressly amended hereby, the terms of the Letter shall remain in full force and effect."
This argument, in combination with other evidence presented by Hyatt and this court's disposition of the issues related to the motion to strike the affirmative defenses, supports the conclusion that there may be facts which, if proven by Hyatt, would entitle it to recovery on its breach of contract counterclaim. Thus, Codest's motion to dismiss Count I is denied. Of course, as this court stated in its Minute Order of May 7, 1996, "Codest is free to move for summary judgment on the counterclaim concerning Hyatt's agency status." Such a motion, however, should await the conclusion of all discovery.
2. Count II
Codest argues that Hyatt's claim for breach of the duty of good faith should be dismissed as duplicative because an alleged breach of an express contract term does not give a contract party two independent claims for relief: one for breach of contract and one for breach of the duty to deal in good faith. A claim for breach of the duty to deal in good faith that merely reiterates the allegations of a separate breach of contract claim should be dismissed. See Pepsico, Inc. v. Vita-Fresh Vitamin Co., Nos. 85 C 1794, et al., 1986 WL 4456, at *2 (N.D. Ill. 1986). This rule is based on the principle that an obligation to deal in good faith is implied in all Illinois contracts as an "aid and furtherance of other terms of the agreement of the parties." LaScola v. US Sprint Communications Corp., 946 F.2d 559, 565 (7th Cir. 1991) (citation omitted). This principle precludes separate claims for breach of implied good faith duties that allege only violation of express contractual terms.
In this case, both Count I and Count II rely on the same provisions of the 1990 Letter Agreement. Therefore, Count II will be dismissed as duplicative.
WHEREFORE, for the foregoing reasons, plaintiff's motion to strike defendant's affirmative defenses is granted in part and denied in part. Defendant's fifth and seventh affirmative defenses are dismissed without prejudice. Defendant has until January 15, 1997 to amend its pleadings to cure the defects noted above. Plaintiff's motion to dismiss defendant's counterclaim is granted in part and denied in part. Count II of defendant's counterclaim is dismissed with prejudice.
David H. Coar
U.S. District Judge
Dated: December 12, 1996