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RAZDAN v. GMC

October 3, 1997

HARI RAZDAN, an Illinois resident, Plaintiff,
v.
GENERAL MOTORS CORPORATION, a Delaware corporation, Defendant.



The opinion of the court was delivered by: MORAN

 Plaintiff Hari Razdan brings this suit against the General Motors Corporation (GM), claiming breach of fiduciary duty, fraud, constructive fraud, and breach of contract. Defendant moves to dismiss the complaint for failure to state a claim, pursuant to Fed.R.Civ.P. 12(b)(6). For the following reasons, we grant the motion in part and deny it in part.

 FACTS1

 In March of 1992, plaintiff Hari Razdan, a 56-year old mechanical/electrical engineer, was seeking work as a designer of electrical components for locomotives. The Electro-Motive Division of General Motors expressed interest in plaintiff, and sent him plane tickets so that he could travel from his home in Erie, Pennsylvania to the GM plant in LaGrange, Illinois for an interview. GM apparently decided that it wanted to hire plaintiff, and entered into negotiations with him through two employment agencies that acted as its agents, Dymanex and Mid-Tech. GM indicated that, due to a hiring freeze, it wanted plaintiff to work as a contract employee for a two-to-three month period before coming on as a full-time employee. Plaintiff responded that he would have to be paid $ 50.18 per hour as a contract employee to remain on a par with the salary he had received at his last position. Ultimately, GM offered to hire plaintiff as a full-time employee making $ 72,800.00 per year on the condition that he first work as a contract employee making $ 35.00 per hour for a two-to-three month period. GM also offered to pay plaintiff's residual moving expenses once he became a full-time employee.

 Shortly after plaintiff accepted GM's offer, GM asked him to sign an employment contract with a company called Contract Personnel Resources, or CPR, Inc. Although plaintiff had never heard of this company, he agreed to sign the agreement because GM told him that his compensation had to be "run through" CPR to avoid problems with the hiring freeze. On June 7, 1992, plaintiff began working at GM. After several months passed, he began asking when he would be made a full-time employee. GM put him off for several months, but finally offered him a full-time position in May of 1993. But GM did not offer plaintiff the salary he had originally been promised. Rather, it offered to pay him $ 5,300 per month (or $ 63,600 per year), plus a $ 5,000 signing bonus for the first year. This salary was significantly lower than the wage plaintiff was earning as a contract employee, and so he refused the offer. In response, GM told plaintiff that he could work as an independent contractor for as long as he wished. But this last promise turned out to be false. On November 17, 1995 GM terminated plaintiff without cause.

 Plaintiff then brought this suit in Illinois state court, claiming that GM had breached its fiduciary duty and its employment contract, and had committed fraud and constructive fraud. GM removed the case to federal court on the basis of diversity of citizenship, and now moves to dismiss the case. We have jurisdiction pursuant to 28 U.S.C. ยง 1332.

 DISCUSSION

 We will not dismiss a complaint "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." Conley v. Gibson, 355 U.S. 41, 45-46, 2 L. Ed. 2d 80, 78 S. Ct. 99 (1957); see also Gorski v. Troy, 929 F.2d 1183, 1186 (7th Cir. 1987). In considering a motion to dismiss we must assume the truth of all well-pleaded factual allegations, and make all possible inferences in favor of the plaintiff. Cruz v. Beto, 405 U.S. 319, 322, 31 L. Ed. 2d 263, 92 S. Ct. 1079 (1972); Vaden v. Village of Maywood, Illinois, 809 F.2d 361, 363 (7th Cir.), cert. denied, 482 U.S. 908, 96 L. Ed. 2d 381, 107 S. Ct. 2489 (1987). We will consider each of plaintiff's claims in turn.

 I. Breach of Fiduciary Duty and Constructive Fraud (Counts I and III)

 In Illinois, a fiduciary relationship may arise either as a matter of law or in a situation "where trust and confidence, by reason of friendship, agency and experience, are reposed by one person in another so the latter gains influence and superiority over the former." Pottinger v. Pottinger, 238 Ill. App. 3d 908, 605 N.E.2d 1130, 1137, 179 Ill. Dec. 116 (Ill.App. 2d Dist. 1992). In determining whether such a relationship exists, courts consider "the degree of kinship of the parties; the disparity in age, health, and mental condition; education and business experience between the parties; and the extent to which the allegedly subservient party entrusted the handling of her business affairs to the other and reposed faith and confidence in him." 605 N.E.2d at 1137-1138 (citations omitted). Where the alleged relationship does not arise as a matter of law, "facts from which a fiduciary relationship arises must be pleaded and proved by clear and convincing evidence." Id. at 1138 (citations omitted).

 Plaintiff acknowledges that fiduciary obligations do not automatically arise between employers and employees by virtue of the employment relationship. See Gross v. University of Chicago, 14 Ill. App. 3d 326, 302 N.E.2d 444, 454 (Ill.App. 1st Dist. 1973); Vargas v. Esquire, 166 F.2d 651, 654 (7th Cir.), cert. denied, 355 U.S. 813 (1948). Rather, he argues that a fiduciary relationship arose between himself and General Motors because of the circumstances under which his employment contract was made. At the time he was hired Mr. Razdan was 56 years old and unemployed, with little bargaining power. Knowing this, GM induced him to move across the country by promising him that in two-to-three months it would give him a full-time job at an annual salary of $ 72,800. By inducing Razdan to put himself in its hands, GM made itself his fiduciary.

 Plaintiff's argument is not convincing. Although Mr. Razdan may have been economically vulnerable at the time he was hired, nothing in the pleading or the evidence indicates that other than an arms-length transaction took place between the parties. Plaintiff is a highly educated professional with significant business experience, and he negotiated the terms of his employment contract before taking the job. He did not entrust the handling of his business affairs to GM, except to the extent that he relied on its promise to give him a full-time job in a few months. Such a promise may have created duties on GM's part (an issue we consider below); but they did not create fiduciary duties. We dismiss Count I of plaintiff's complaint.

 For similar reasons, we dismiss plaintiff's claim of constructive fraud. Constructive fraud "is a breach of a legal or equitable duty that the law declares fraudulent because of its tendency to deceive others, irrespective of the moral guilt of the wrongdoer." Beaton & Associates, Ltd. v. Joslyn Manufacturing & Supply Co., 159 Ill. App. 3d 834, 512 N.E.2d 1286, 1291, 111 Ill. Dec. 649 (Ill.App. 1st Dist. 1987)(citations omitted). An essential element of the claim is "a breach of duty, especially fiduciary duty." Kohler v. Leslie Hindman, Inc., 80 F.3d 1181, 1188 (7th Cir. 1996); see also Beaton & Associates, 512 N.E.2d at 1291 (breach of fiduciary duty); Chicago v. Roppolo, 113 Ill. App. 3d 602, 447 N.E.2d 870, 878, 69 Ill. Dec. 435 (Ill.App. 1st Dist. 1983)(breach of duty to secure permission of Landmark Commission before demolishing landmarked building); Estate of Neprozatis, 62 Ill. App. 3d 563, 378 N.E.2d 1345, 1349, 19 Ill. Dec. 470 (Ill.App. 1st Dist. 1978) (great inequality between the parties and evidence of overreaching so extreme as to "shock the conscience"). The mere breach of an employment contract is insufficient to give rise to a claim of constructive fraud. Nor does the fact ...


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