The opinion of the court was delivered by: Richard Mills, District Judge.
If you do not want another to tell your secrets, you
must not tell them yourself.
On May 10, 1989, Plaintiff Southwest Whey, Inc., ("Southwest
Whey") and Defendant Nutrition 101, Inc., ("Nutrition 101")
entered into a written agreement to operate a joint venture.
Southwest Whey agreed to obtain whey from dairies and Nutrition
101 agreed to market whey to hog farmers in the region east of
the Mississippi River and in other areas by mutual agreement. The
joint venture was dissolved by Southwest Whey on September 16,
For most of the 1980's, Southwest Whey's business largely
consisted of obtaining and selling whey west of the Mississippi
River. Jack Muse ("Muse"), Southwest Whey's president, wanted to
expand the business geographically. However, his efforts to
obtain contracts with dairies or pork producers east of the
Mississippi prior to the commencement of the joint venture
produced little, if any, success.
Neither Southwest Whey nor Nutrition 101 had a written
compilation of claimed trade secrets prior to or during the joint
venture. The farmer and dairy contracts used by the parties did
not contain any confidentiality or non-disclosure provisions.
Moreover, Southwest Whey did not impose any confidentiality
restrictions upon the dairies to prevent the disclosure of
information learned by them from the joint venture regarding the
sale, storage, transfer, or delivery of whey. Similarly, no
confidentiality restrictions were imposed upon the truck drivers
who transported the whey regarding any knowledge they had or may
acquire because of their dealings with the joint venture.
By late 1992, a conflict had arisen between the partners to the
joint venture. Southwest Whey suggested to Nutrition 101 that the
parties consider shutting down the business. In January 1993, the
parties met to discuss a proposed buy-sell agreement to wind up
the joint venture. Nutrition 101's proposal was not acceptable to
Southwest Whey. Southwest Whey's proposal included a restrictive
covenant preventing Nutrition 101 from competing with them for
ten years. This proposal was rejected by Nutrition 101. The
parties were unable to agree to any of the proposals.
By the summer of 1993, Muse began to inform dairies of his plan
to end Nutrition 101's interest in the joint venture. Muse
visited farmers who purchased whey from the joint venture in St.
Louis, Missouri, during the first week of September of 1993. He
inquired as to whether farmers would continue to purchase whey at
the same terms and prices if the joint venture ended and
Southwest Whey ended up with the business. Muse indicated that
each farmer agreed that they would continue to purchase from
On September 16, 1993, Southwest Whey informed Nutrition 101
that it had decided to cease operations as a joint venture, and
that Nutrition 101 would no longer have access to whey from
dairies under contract with the joint venture. One month later,
Southwest Whey notified the customers of the dispute and
solicited their continued business. Southwest Whey had no written
contracts with pork producers who had no obligation to continue
to take whey and could at any time "come and go."
This case was originally filed on September 11, 1998. On March
31, 2000, Southwest Whey filed its eight-count amended complaint
against Nutrition 101, alleging (I) Breach of Contract; (II)
Interference with Prospective Advantage; (III) Violation of
Illinois Trade Secrets Act ("ITSA") (765 ILCS 1065/1 et. seq.
(West 1998)); (IV) Violation of Illinois Trade Secrets Act —
Exemplary Damages, (765 ILCS 1065/4(b) (West 1998)); (V)
Conversion; (VI) Breach of Fiduciary Duty; (VII) Breach of
Fiduciary Duty — Exemplary Damages; and (VIII) Breach of Good
Faith and Fair Dealing.
Nutrition 101 has moved for summary judgment on four counts:
Count II, Interference with Prospective Advantage; Count III,
Violation of ITSA; Count IV, Violation of ITSA — Exemplary
Damages; and Count VIII, Breach of Good Faith and Fair Dealing.
II. Standard for Summary Judgment
Federal Rule of Civil Procedure 56(c) provides that summary
judgment "shall be rendered forthwith if the pleadings,
depositions, answers to interrogatories, and admissions on file,
together with the affidavits, if any, show that there is no
genuine issue as to any material fact and that the moving party
is entitled to judgment as a matter of law." Fed.R.Civ.Pro.
56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548,
91 L.Ed.2d 265 (1986). In conducting this inquiry, the evidence
non-movant is to be believed, and "all justifiable inferences
drawn in his favor." Matsushita Elec. Indus. Co. v. Zenith Radio
Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986).
The moving party has the burden of producing documentary evidence
to show the absence of a genuine issue of material fact. A
genuine issue of material fact exists when "there is sufficient
evidence favoring the nonmoving party for a jury to return a
verdict for that party." Anderson v. Liberty Lobby, Inc.,
477 U.S. 242, 249, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).
In determining whether a genuine issue of material fact exists,
the court must consider the evidence in the light most favorable
to the nonmoving party. See Adickes v. S.H. Kress & Co.,
398 U.S. 144, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970). Once the moving
party has met its burden, the opposing party must come forward
with specific evidence, not mere allegations or denials of the
pleadings, which demonstrates that there is a genuine issue for
trial. See Howland v. Kilquist, 833 F.2d 639 (7th Cir. 1987).
III. Breach of Good Faith and Fair Dealing (Count VIII)
The Court will address the counts in the order addressed by the
parties. Count VIII of Southwest Whey's complaint alleges Breach
of Good Faith and Fair Dealing. Nutrition 101 moves for summary
judgment on Count VIII.
A duty of good faith and fair dealing is implied in every
contract in Illinois. See Saunders v. Michigan Avenue National
Bank, 278 Ill. App.3d 307, 315, 214 Ill.Dec. 1036, 662 N.E.2d 602
(1996). Pursuant to the duty, a party vested with contractual
discretion is required to exercise that discretion reasonably and
not arbitrarily, capriciously, or in a manner inconsistent with
the parties' reasonable expectations. See Northern Trust Co. v.
VIII South Michigan Associates, 276 Ill. App.3d 355, 367, 212
Ill.Dec. 750, 657 N.E.2d 1095 (1995). However, an independent
claim based upon a breach of any implied duty of good faith
generally is not recognized in Illinois. See Echo, Inc. v.
Whitson Co., Inc., 121 F.3d 1099, 1106 (7th Cir. 1997); See
also Brooklyn Bagel Boys, Inc. v. Earthgrains Refrigerated Dough
Products, Inc., 212 F.3d 373, 381 (7th Cir. 2000).
The Court notes that the Illinois Second District Appellate
Court recently indicated that an independent action for breach of
good faith and fair dealing may exist in certain limited
situations. See Voyles v. Sandia Mortgage Corp., 311 Ill. App.3d 649,
656, 724 N.E.2d 1276, 1281, 244 Ill. Dec. 192, 197-98 (2nd
Dist. 2000). However, that court noted the concern that this
recognition "will swallow ordinary breach of contract cases."
Accordingly, the court limited its holding to the narrow
circumstances of the case before it. See Voyles, 311 Ill.App.3d
at 656, 724 N.E.2d 1276, 244 Ill.Dec. 192. Illinois courts have
been reluctant to allow a plaintiff to bootstrap a breach of duty
of good faith and fair dealing claim on the same factual basis as
a breach of contract claim. See Teachers Insurance & Annuity
Association of America v. LaSalle National Bank, 295 Ill. App.3d 61,
74, 691 N.E.2d 881, 891, 229 Ill.Dec. 408 (2d Dist. 1998).
A review of the complaint indicates that except for one
addition, Southwest Whey's breach of duty of good faith and fair
dealing claim (Count VIII) is identical to its breach of contract
claim (Count I). In Count VIII, Southwest Whey adds one
additional sentence alleging that the breach of contract action
also constitutes a bad faith claim. Because Illinois generally
does not recognize a separate cause of action for breach of duty
of good faith and fair dealing, Nutrition 101 contends that it is
entitled to summary judgment on Count VIII.
Southwest Whey has alleged no such egregious conduct here.
Moreover, their argument that Nutrition 101 had broad discretion
pursuant to the joint venture does not alone support an
independent cause of action. The key to the Voyles decision was
the nature of the case and the wrongfulness of defendant's
conduct. 311 Ill.App.3d at 656-57, 244 Ill.Dec. 192,
724 N.E.2d 1276. It was not the fact that a party had abused its broad
discretion pursuant to a contract.
The court in Voyles noted the concern that the recognition of
such a tort could "swallow ordinary breach of contract cases."
Because of the nature of the case, the risk there was low.
Voyles, 311 Ill. App.3d at 656, 244 Ill.Dec. 192,
724 N.E.2d 1276. Here, the risk is much greater. Southwest Whey has
basically restated its contract claim in Count VIII. They have
merely added a sentence to Count I. Therefore, it appears to the
Court as though they are merely trying to bootstrap Count VIII to
their breach of contract claim. Southwest Whey has failed to
articulate any of the criteria identified by the court in
Voyles that future bad faith ...