United States District Court, N.D. Illinois
March 29, 2004.
FRANK C. FARARO, & MARKIEWICZ COOK ASSOCIATES, INC., Plaintiffs,
SINK LLC f/k/a ARTIST COLONY, LLC, and ARTIST COLONY LIMITED f/k/a ROUSSEAU ACQUISITIONS, INC., Defendants
The opinion of the court was delivered by: DAVID COAR, District Judge
MEMORANDUM OPINION AND ORDER
These cases come before the Court on Motions for Summary Judgment on
Plaintiffs' unjust enrichment claims filed by Defendant Artist Colony
Limited and Defendant Sink, LLC. As with the previous motions for summary
judgment, see Farraro v. Sink., LLC, No. 01 C 6956, 2002 WL
31687671 (N.D. Ill. Nov. 27, 2002), the issues presented in both
Farraro v. Sink. LLC, No. 01 C 6956, and Markiewicz v.
Sink, LLC. No. 01 C 6957, are essentially identical. For efficiency
purposes, the Court will once again dispose of the motions from both
cases in a single opinion. For the reasons set forth in this opinion,
Artist Colony Limited's Motions for Summary Judgment are granted in part
and denied in part and Sink, LLC's Motions for Summary Judgment are
granted in part and denied in part.
I. FACTUAL AND PROCEDURAL BACKGROUND
The Court will only briefly discuss the facts relevant to the issues in
Defendant Artist Colony Limited, formerly known as Rousseau
Acquisitions, purchased Artist Colony, LLC (now known as Sink, LLC) in
February 2001. Artist Colony Limited manufactures novelty furniture
items, primarily bean bag chairs. Both Plaintiffs, Markiewicz-Cook,
Associates, Inc. ("Markiewicz") and Frank C. Fararo ("Fararo") had oral
agreements with Defendant Artist Colony, LLC whereby Plaintiffs were to
place Defendant's products in catalogs, including J.C. Penney, Spiegel,
Sears, and others.
When Artist Colony, LLC sold its assets to Rousseau Acquisitions (which
became Defendant Artist Colony Limited), neither the seller corporation
nor the buyer corporation promptly notified Plaintiffs of the sale. Once
Plaintiffs learned of the sale, they inquired whether the new entity,
Artist Colony Limited, would continue to employ them to find catalog
space for the products. Artist Colony Limited elected not to employ
When Rousseau Acquisitions acquired the assets of Artist Colony, LLC in
February 2001, Plaintiffs had already secured the catalog space for
Artist Colony, LLC's products in the lucrative Christmas and Fall sale
issues of the catalogs. Defendant Artist Colony Limited received and
filled orders from the catalog placements that Plaintiffs secured for
Artist Colony, LLC. Plaintiffs brought lawsuits in Illinois state court
to recover commissions from the sales their catalog placements generated.
Defendant Artist Colony Limited removed the cases to federal court where
jurisdiction is based upon diversity of citizenship.
Plaintiffs had several corporate law theories of recovery against
Defendant Artist Colony Limited: successor liability, de facto merger,
and implicit acceptance of obligation. On November 25, 2002, this Court
granted Defendant Artist Colony Limited summary judgment on
those theories of relief. The only theory of recovery remaining
against Defendant Artist Colony Limited after the summary judgment stage
was unjust enrichment. Artist Colony Limited now seeks summary judgment
on Plaintiffs unjust enrichment claim.
Plaintiff's complaint details two theories of recovery against
Defendant Sink, LLC, both arising under Illinois state law: the
"procuring cause" rule and exemplary damages under the Illinois Sales
Representative Act. Sink, LLC did not seek summary judgment on those
The parties were unable to agree on the scope of issues for trial prior
to the pretrial conference on January 17, 2003. Additionally, the
pretrial order that Plaintiffs submitted in advance of the pretrial
conference was substantially out of compliance with the local rules. At
the pretrial conference, the Court ordered Defendant Sink, LLC, to set
forth its objections to Plaintiffs' pretrial order in writing. Sink, LLC
presented three objections to the pretrial order. First, Sink, LLC
contended that Plaintiffs were not entitled to proceed or recover against
it on an unjust enrichment theory. Second, Sink, LLC objected to
Plaintiffs' claims for commissions based on catalog sales that were not
disclosed during discovery. Third, Sink, LLC objected to Plaintiffs'
attempted recovery of pre-judgment interest under the Illinois Interest
Act. The Court sustained the second objection, denied the third
objection, and treated the first objection as a motion for summary
judgment on Plaintiffs' unjust enrichment claim.
Presently before the Court are Sink, LLC's Motions for Summary Judgment
against Plaintiffs Fararo and Markiewicz on the unjust enrichment theory
and Artist Colony Limited's Motions for Summary Judgment on the unjust
enrichment theory against the same Plaintiffs. The Defendants are
situated very differently with respect to Plaintiffs' unjust enrichment
claims, so the Court will proceed with a separate analysis as to each
II. SUMMARY JUDGMENT STANDARD
According to the Federal Rules of Civil Procedure, summary judgment is
proper "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 a judgment as a matter of law." Fed.R.Civ.P. 56(c);
Kamler v. H/N Telecommunication Services. Inc., 305 F.3d 672,
677 (7th Cir. 2002). A genuine issue of material fact exists for trial
when a reasonable jury could return a verdict for the party opposing
summary judgment. Anderson v. Liberty Lobby. Inc.,
477 U.S. 242, 248 (1986); Hedberg v. Indiana Bell Tel. Co., 47 F.3d 928,
931 (7th Cir. 1995). When determining whether a genuine issue of material
fact exists, the Court considers the evidence and all proper inferences
therefrom in the light most favorable to the non-moving party. See
Neuma, Inc. v. AMP. Inc. 259 F.3d 864, 871 (7th Cir. 2001).
Because the purpose of summary judgment is to isolate and dispose of
factually unsupported claims, the non-movant must set forth specific
facts showing that there is a genuine issue for trial in its response.
See Fed, R. Civ. P. 56(e); Michael v. St. Joseph County,
et al., 259 F.3d 842, 845 (7th Cir. 2001); Albiero v. City of
Kankakee, 246 F.3d 927, 932 (7th Cir. 2001). To successfully oppose
the motion for summary judgment, the non-movant must do more than raise a
"metaphysical doubt" as to the material facts, see Wolf v. Northwest
Ind. Symphony Soc'y, 250 F.3d 1136, 1141 (7th Cir. 2001) (citation
and quotation omitted), and instead must present definite, competent
evidence to rebut the motion. See Albiero, 246 F.3d at 932.
Rule 56(c) mandates the entry of summary judgment against a party "who
fails to make a showing sufficient to establish the existence of an
element essential to that party's case, and in which that
party will bear the burden of proof at trial." Celotex Corp.
v. Catrett, 477 U.S. 317, 322 (1986); see also Civil Liberties
for Urban Believers v. City of Chicago, 342 F.3d 752, 759 (7th Cir.
2003). A scintilla of evidence in support of the non-movant's position is
not sufficient to oppose successfully a summary judgment motion; "there
must be evidence on which the jury could reasonably find for the
[non-movant]." Anderson, 477 U.S. at 250.
III. PLAINTIFFS' UNJUST ENRICHMENT CLAIMS
A. Choice of Law
Both Plaintiffs seek to pursue unjust enrichment claims against each
Defendant. Before addressing the merits of the claims, the Court must
make a choice of law determination. Neither party addressed the choice of
law question in its briefs, but both cited only to Illinois law in their
briefs. This decision reflects a tacit assumption that Illinois law
should apply. The parties made a similar assumption in briefing the
earlier summary judgment motion by Artist Colony Limited, an assumption
that was erroneous. See Farraro v. Sink. LLC. No. 01 C 6956,
2002 WL 31687671, at *3 (N.D. Ill. Nov. 27, 2002).
As to the unjust enrichment issue, however, it is clear that Illinois
law should apply. As with the corporate law theories in the previous
summary judgment motion, the elements of unjust enrichment are
essentially identical in both Illinois and North Carolina. Compare M
& O Insulation Co. v. Harris Bank Naperville, 783 N.E.2d 635,
639 (III. App. Ct. 2002) (describing elements of unjust enrichment under
Illinois law) with Watson Electrical Construction Co. v. Summit
Companies. LLC. 587 S.E.2d 87, 92 (N.C. App. Ct. 2003) (describing
the unjust enrichment cause of action under North Carolina law). "In the
absence of a conflict, Illinois law applies as the law of the forum."
Dearborn Ins. Co. v. International Surplus Lines Ins. Co.,
719 N.E.2d 1092, 1096 (Ill.App. Ct. 1999). In addition, "protecting
sales representatives is fundamental public policy in Illinois."
Maher & Assoc., Inc. v. Quality Cabinets, 640 N.E.2d 1000,
1005 (Ill.App. Ct. 1994). Due to the absence of a conflict and the
strong public policy of Illinois to protect sales representatives, like
Plaintiffs Markiewicz-Cook and Fararao, Illinois law will govern the
Plaintiffs unjust enrichment claims.
B. Unjust Enrichment Standards
To establish an unjust enrichment claim in Illinois, "a plaintiff must
present evidence that the defendant unjustly retained a benefit to the
plaintiffs detriment and that the defendant's retention of that benefit
violated fundamental principles of justice, equity, and good conscience."
M & Q Insulation Co. v. Harris Bank Naperville,
783 N.E.2d 635, 639 (Ill.App. Ct. 2002). Quantum meruit is a subset of
unjust enrichment that adheres when the plaintiff alleges performance of
valuable services without compensation. The unjust enrichment allegations
in this case fit under the quantum meruit rubric. "To be
successful on a quantum meruit theory under Illinois law, [Plaintiffs]
must prove (1) performance of services, (2) the reasonable value of the
services, and (3) the receipt by the defendant from the plaintiff of a
benefit which it would be unjust to retain without paying compensation."
Fischer v. First Chicago Capita Markets. Inc., 195 F.3d 279,
284-85 (7th Cir. 1999) (citing Illinois cases). Neither unjust enrichment
nor its narrower subset quantum meruit obtain where there is a
specific contract between the parties. See People ex rel. Hartigan
v. E & E Hauling. Inc., 607 N.E.2d 165, 177 (Ill. 1992) (holding
that unjust enrichment does not apply when there is a specific contract);
Installco. Inc. v. Whiting Corp., 784 N.E.2d 312, 318 (Ill.
App. Ct. 2002) (holding that quantum meruit does not apply
when there is a specific contract). The Court will now proceed to
assess the summary judgment
motions of each defendant separately.
1. Unjust Enrichment against Defendant Artist Colony
Artist Colony Limited, in its summary judgment presentation, asserts
that it is entitled to summary judgment for two reasons. First, it
asserts that summary judgment is required because "it paid full and fair
consideration for the assets of Artist Colony, LLC, and did so in
connection with an asset sale that did not transfer liabilities." (Artist
Colony Ltd. Motion Summ. J., at 2). Second, it asserts that Illions law
prohibits imposition of quasi-contractual liability on a benefitting
a. Does the asset sale foreclose Plaintiff's unjust
As to the first position, Plaintiff correctly responds that Artist
Colony Limited misunderstands the nature of this cause of action. The
allegations are that Plaintiff placed products in catalogs which
generated sales for Artist Colony Limited. Plaintiffs expected to be
compensated for doing so and they were not. Because Plaintiffs never had
a contract with Defendant Artist Colony Limited, their only avenue of
recovery against it (now that Plaintiffs corporate successor liability
theories have been rejected as a matter of law) is under the equitable
doctrine of quantum meruit.
Both Plaintiffs have marshalled sufficient proof to proceed to a jury
trial on this theory. The Plaintiffs performed a service for the seller
of these goods when they placed the goods in the catalogs. Their oral
contracts with Defendant Sink, LLC establish a fair assessment of the
reasonable value of their services.*fn2 Plaintiffs have also provided
competent evidence that
Defendant Artist Colony Limited's catalog sales from Plaintiff's
placements would not have been received without Plaintiff's services.
Under these circumstances, a reasonable jury could determine that
Defendant Artist Colony Limited's retention of the full benefits of
Plaintiffs' work is unjust.
This is an equitable theory of recovery that is not based on the asset
sale contract between Sink, LLC and Defendant Artist Colony Limited.
Defendant Artist Colony Limited will be free to argue that the asset sale
agreement between it and Defendant Sink, LLC, included an accounting of
future benefits owed to Plaintiffs in the price, but the contract itself
does not make that sufficiently clear to require summary judgment for
Defendant Artist Colony Limited,
b. Does Illinois law prohibit quasi-contractual liability in
If Artist Colony Limited's assertion about Illinois law's prohibition
of quasi-contractual liability on benefitting third parties is correct,
Defendant Artist Colony Limited would be entitled to summary judgment.
Artist Colony Limited cites to three cases in support of its position:
Midcoast Aviation. Inc. v. General Elec. Credit Corp.,
907 F.2d 732, 737 (7th Cir. 1990) (applying Illinois law); Goldstick v. ICM
Realty, 788 F.2d 456, 467 (7th Cir. 1986) (applying Illinois law);
and Decatur Production Credit Ass'n v. Murphy, 456 N.E.2d 267,
275 (1983). Those cases either do not support Defendant Artist Colony
Limited's position or they are distinguishable from the case presently
before the Court.
The first case, Midcoast Aviation, supports a denial of
Defendant Artist Colony Limited's summary judgment motion. In
Midcoast Aviation, the plaintiff, Midcoast Aviation, renovated
the interior of an airplane pursuant to a contract with American
Aviations Industries, Inc. ("AAI"), but the airplane was owned by a
third-party General Electric Credit Corporation.
See Midcoast Aviation, 907 F.2d at 735. Although the
renovation was successful, Midcoast Aviation was unable to obtain payment
for its services, so it sued AAI for breach of contract and GECC for
unjust enrichment under a quantum meruit theory. The Seventh
Circuit affirmed a jury verdict in favor of Midcoast on the quantum
meruit charge. See Midcoast Aviation, 907 F.2d at 738 ("a
reasonable jury pondering the law of quasi-contract could find the facts
indicative of what the words `unjust' and `inequitable' stand for"). As
in Midcoast, the Plaintiffs here have provided sufficient facts
from which a reasonable jury could find that Defendant Artist Colony
Limited was unjustly enriched by their work.
The second case that Artist Colony Limited relies upon,
Goldstick, also supports the Plaintiffs position. In
Goldstick, the Plaintiff, Goldstick, was retained by one
Kusiersky, who was managing the property for a third-party, ICM Realty,
to reduce back property taxes that were due on a failing real-estate
development. Goldstick managed to reduce the taxes due by some S870,000,
and sought a reasonable fee. When the negotiations for the fee broke
down, Goldstick sought to recover directly from ICM Realty on what the
Seventh Circuit described as a "restitution, or quasi-contract" theory.
Goldstick, 788 F.2d at 467. The Seventh Circuit reversed the
district court's grant of summary judgment, holding that based on
Goldstick's services, the tax amount was diminished, and "a reasonable
jury could find" that "a claim for restitution, or `quasi-contract,'"
was present on these facts. See Goldstick, 788 F.2d at 467
(citing Industrial Lift Truck Service Corp. v. Mitsubishi Int'l
Corp., 432 N.E.2d 999, 1002 (Ill. 1982)). As with
Goldstick, the Plaintiffs here have provided a service that
resulted in a conferred benefit upon Defendant Artist Colony Limited, and
a reasonable jury could return a verdict in their favor.
The third case, Decatur Production Credit Association, is
distinguishable from the instant
case. In Decatur Production Credit Association v. Murphy,
one Carr sought to prove an unjust enrichment claim against the secured
creditors of Murphy. Murphy, an insolvent farmer, and Carr agreed to a
contract by which Carr would provide personal services, labor, and
materials for farming, in exchange for a 50 percent share of Murphy's
profits from the harvest. See Decatur Production Credit Ass'n.
456 N.E.2d at 287-88. When Carr learned that the profits were subject to
a lien on the crops that Murphy had given to his creditors, he sought to
recover from the creditors on an unjust enrichment theory. See
id. at 288. Carr could have learned of the encumbrance through a
record search prior to entering into the contract; having failed to do
so, he could not recover on a quasi-contractual theory simply because the
contract did not work to his advantage. See id. Unlike Carr,
the Plaintiffs in this case could not have learned of the sale of Artist
Colony, LLC (now Defendant Sink, LLC) to Rousseau Acquisitions (now
Defendant Artist Colony Limited) prior to their contract with Artist
Colony, LLC. In fact, the services for which they are seeking
compensation were largely (if not entirely) performed before Rousseau
Acquisitions acquired the assets of Artist Colony, LLC.
Although neither party cites to it, there is a more recent Illinois
case that further supports Plaintiffs opposition to summary judgment in
this case. In a 1998 case, the Illinois Court of Appeals held that a
Plaintiff real estate broker could not state a claim for quantum
meruit because he never expected to receive a commission if he
failed to execute a sale of the property. See Owen Wagener & Co.
v. U.S. Bank, 697 N.E.2d 902 (Ill. Ct. App. 1998). In that case, the
broker found a willing buyer, but the subject property was undergoing
foreclosure proceedings that gave the mortgagor the right to reject the
sale. See id. at 904-05. After the bank successfully
foreclosed on the property and obtained title, it sold the property to
the same buyers that the
broker had found. See id at 905. The court rejected the broker's
quantum meruit theory in that case as a matter of law because
the broker never expected to receive a commission from the bank. See id.
In that case, and those to which it cites, a real estate broker
attempts to recover a commission where it failed to execute a sale
between a willing buyer and seller, and then a third party, with whom the
broker did not have a contract, sells the property to the same willing
buyer. The difference between those cases and the case presently before
the Court is that the subject property would have been sold to someone
with or without the services of the broker; in this case, if the
Plaintiffs had not placed the products into the catalogs, those sales
would not have been accomplished. Under Illinois law, then, Plaintiffs
are entitled to proceed to a jury on their quantum meruit claim
against Defendant Artist Colony Limited.
2. Unjust Enrichment against Defendant Sink, LLC
Unlike Defendant Artist Colony Limited, Defendant Sink, LLC had an
express contract with the Plaintiffs to place its products into catalogs.
Under Illinois law, claims for unjust enrichment cannot be sustained in
the face of an express contract between parties; the party can recover on
the contract or not at all. See. e.g., Adams v, American Intern.
Group, Inc., 791 N.E.2d 26, 31 (Ill.App. Ct. 2003) ("an action for
unjust enrichment that seeks imposition of an implied contract . . .
cannot be maintained where an express contract governs the parties");
B & B Land Acquisition. Inc. v. Mandell, 714 N.E.2d 58, 63
(Ill.App. Ct. 1999) ("Because the theory [of unjust enrichment] is based
on an implied contract, it has no application when an express contract
governs the relationship between the parties.").
Plaintiff seeks to apply an exception to this doctrine that has arisen
through contingent fee
arrangements in attorney-client contracts. While it is true that
Illinois courts have recognized a narrow exception that permits unjust
enrichment claims between terminated attorneys and their former clients,
see Wegner v. Arnold, 713 N.E.2d 247 (1999), Plaintiffs are
mistaken that the exception obtains in this case. Plaintiff's contracts
with Sink, LLC were terminated when Rousseau Acquisitions acquired the
assets of the corporation, but the similarities to the terminated
attorney exception ends there. If Sink, LLC continued to receive any
benefits from Plaintiffs' services after their contracts were terminated,
Plaintiffs can pursue recovery under the procuring cause rule, which
specifically protects terminated sales representatives. In the terminated
attorney cases, the terminating party (the client) earned substantial
benefits post-termination and the terminated attorney had no legal
Any recovery from Sink, LLC would be based on the Plaintiffs contracts
with Sink, LLC, not on an equitable unjust enrichment theory. Defendant
Sink, LLC's motion for summary judgment on Plaintiffs unjust enrichment
theory is granted.
IV. ISSUES REMAINING FOR TRIAL
At trial, Plaintiffs can attempt to prove any and all of the following
three theories of recovery: (1) that Defendant Sink, LLC owes Plaintiffs
commissions under the procuring cause rule, whereby commissions are due
even after termination of sales representatives if the sales
representatives were the procuring cause of the sale that their services
resulted in unjust enrichment to Defendant Artist Colony Limited; (2)
that Defendant Sink, LLC, owes Plaintiffs exemplary damages up to three
times the amount of the commissions as provided by the Illinois Sales
Representative Act, 820 Ill. Comp. Stat. 120/1-3; and (3) that Plaintiffs
services resulted in unjust enrichment to Defendant Artist Colony
For the reasons set forth in this opinion, Defendant Artist Colony
Limited's Motion for Summary Judgment is denied and Defendant Sink, LLC's
Motion for Summary Judgment is granted.