United States District Court, N.D. Illinois, Eastern Division
January 6, 2005.
AW ACQUISITION CORP., an Illinois Corporation, Plaintiff,
SOUTHWESTERN BELL MOBILE SYSTEMS, LLC, d/b/a CINGULAR WIRELESS, Defendant.
The opinion of the court was delivered by: WAYNE ANDERSEN, District Judge
MEMORANDUM OPINION AND ORDER
This case is before the Court on the Defendant Southwestern
Bell Mobile Systems, LLC, d/b/a Cingular Wireless' Motion to
Dismiss Counts II, III, and V of the Plaintiff's First Amended
Complaint pursuant to FED. R. CIV. P. 9(b) and 12(b)(6). The
jurisdiction of this Court is based upon 28 U.S.C. § 1332 because
the parties are citizens of different states and the amount in
controversy exceeds the statutory minimum of $75,000, exclusive
of interest and costs. For the following reasons, the Court
grants the Defendant's motion in part and denies it in part.
I. The Agreement
On or about October 1, 1997, Areawide Cellular, Inc. and the
Defendant's predecessor, Southwestern Bell Mobile Systems, Inc.
d/b/a Cellular One (hereinafter the named Defendant, Southwestern
Bell Mobile Systems, LLC d/b/a Cingular Wireless, and
Southwestern Bell Mobile Systems, Inc. d/b/a Cellular One are
collectively referred to as "Cingular"), entered into an "Authorized Sale and Service
Agreement" ("Agreement") whereby Areawide Cellular, Inc. became a
licensed sales and service dealer of Cingular wireless services.
The parties subsequently amended the Agreement on or around
October 20, 1997, which altered the original payment structure.
The parties operated under the Agreement until April 7, 2003,
when Areawide Cellular, Inc. filed for bankruptcy protection.
Thereafter, AW Acquisition Corp. purchased the assets of Areawide
Cellular, Inc. (hereinafter Areawide Cellular, Inc. and AW
Acquisition Corp. are collectively referred to as "Areawide").
Pursuant to the Agreement, Areawide became a nonexclusive,
authorized agent of Cingular to sell Cingular services. In
particular, Section 3 of the Agreement, which lays out the
parameters of the parties' relationship, states in relevant part:
[Cingular] hereby appoints [Areawide] as a
nonexclusive, authorized agent in the Area to solicit
and contract, on behalf of [Cingular], with
Subscribers for the Authorized Services, subject to
all of the terms and conditions hereof.
During the term of this Agreement or thereafter,
[Cingular] reserves the right without obligation or
liability to [Areawide] to market the Authorized
Services and CPE in the same geographical areas
served by [Areawide], whether through [Cingular's]
own representatives or through others, including, but
not limited to other authorized agents, retailers,
resellers and distributors.
Upon enrollment of a particular Subscriber, that
Subscriber shall become a customer of [Cingular] and
[Cingular] shall offer and furnish such customer
billing services as [Cingular] deems appropriate.
[Cingular] shall be responsible to collect any
charges for Authorized Services from Subscribers.
Furthermore, Section 1 of the Agreement sets forth the following
Authorized Services. Those Services provided by
[Cingular] that [Areawide] is authorized hereunder to
sell on behalf of [Cingular], including CRS and any
other Services set forth on Exhibit A hereto. Cellular Radio Services (CRS). Any and all service
(including resale of said service) authorized by the
Federal Communications Commissions . . .
CPE. The customer premise equipment, including
cellular terminal equipment, that a Subscriber needs
for using CRS and other Authorized Services.
Subscriber. A customer of an Authorized Service
provided by [Cingular]. The CRS telephone number or
other service access number assigned to a customer of
[Cingular's] Authorized Services is deemed to be a
separate Subscriber, regardless of how many CRS
telephone numbers or service access numbers may be
used by one customer.
Accordingly, Areawide agreed to act as Cingular's agent with
respect to the sale of Authorized Services to Subscribers (this
opinion hereinafter refers to the customers to whom Areawide sold
the Cingular Authorized Services as "Areawide-originated
In consideration of Areawide's sales efforts, Cingular agreed
to compensate Areawide under a series of tiered commissions. The
amendment to the Agreement explicitly sets forth the structure of
payment, but it shall suffice for the purposes of this opinion to
note that Areawide was to receive set commissions based upon each
activated Areawide-originated Subscriber and the type of
Authorized Services provided to that subscriber. Furthermore,
Areawide was to receive monthly residual commissions that were,
generally speaking, equal to five percent of the total recurring
base charges and local airtime charges billed by Cingular to
II. Allegations Regarding Cingular's Conduct
Areawide avers that on numerous occasions, Cingular directly
contacted Areawide-originated Subscribers and encouraged those
subscribers to end their relationship with Areawide. Furthermore,
Areawide alleges that Cingular offered to ship cellular telephones directly to Areawide-originated Subscribers
in an effort to induce them to leave Areawide. According to the
complaint, Cingular also attempted to establish a new
relationship with the Areawide-originated Subscribers through its
own internal channels of distribution.
In addition, the complaint claims that beginning in 1998, and
continuing throughout the duration of the Agreement, four
specific Cingular employees falsely represented that Cingular was
selling equipment to Areawide "at cost" and Areawide had access
to the same level of pricing and equipment discounts as
Cingular's internal channels of distribution. Moreover, Areawide
alleges these Cingular personnel falsely represented that
residual commissions paid to Areawide would not be affected when
Cingular sold a replacement phone directly to an
Areawide-originated customer. As set forth in the complaint, the
above-mentioned Cingular employees made these representations to
Areawide either in person or over the telephone.
Areawide further asserts that the Cingular employees knew at
the time that the representations were false and were intended to
prevent Areawide from purchasing cellular equipment from other
providers at a lower cost and to conceal the fact that Cingular
was withholding residual commissions due to Areawide. Based upon
the purportedly false representations, Areawide claims that it
continued to purchase equipment from Cingular and refrained from
purchasing equipment from other sources at lower rates. Moreover,
Areawide asserts that Cingular's allegedly false representations
induced it to refrain from pursuing potential claims for residual
commissions. This reliance was reasonable and justified,
according to Areawide, because Cingular was in a superior
position of knowledge with respect to its own pricing and
residual policies. III. The Counts
Cingular now asks this Court to dismiss Counts II, III, and V.
The disputed counts are summarized as follows: Count II alleges
that Cingular, by contacting Areawide-originated Subscribers,
breached the duty of good faith and fair dealing that is implied
in the parties' Agreement; Count III raises allegations of common
law fraud; and Count V alleges tortious interference with a
prospective economic advantage. At this point in the litigation,
Cingular does not seek the dismissal of Count I (breach of
contract for failure to pay commissions purportedly owed to
Areawide); Count IV (violation of the Illinois Franchise
Disclosure Act); or Count VI (defamation).
When deciding a motion to dismiss, this Court accepts as true
all "well-pleaded factual allegations and view[s] them, along
with the reasonable inferences to be drawn from them, in the
light most favorable to [the plaintiff]." Cornfield v.
Consolidated High School Dist. No. 230, 991 F.2d 1316, 1324 (7th
Cir. 1993). Moreover, under the federal notice pleading
standards, a complaint does not fail to state a claim simply
because it does not set forth a complete and convincing picture
of the purported wrongdoing. American Nurses' Association v.
State of Illinois, 783 F.2d 716, 727 (7th Cir. 1986). At the
same time, this Court is not bound by the legal characterizations
that the plaintiff assigns to the alleged facts. Republic Steel
Corp. v. Pennsylvania Engineering Corp., 785 F.2d 174, 183 (7th
Cir. 1986); Prudential Insurance Co. of America v. Sipula,
776 F.2d 157, 159 (7th Cir. 1985). Furthermore, this Court will grant
a defendant's motion to dismiss if 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 (1957).
I. Count II: Breach of Contract (Implied Covenant of Good
Faith and Fair Dealing)
In Count II, Areawide asserts that Cingular breached the
implied covenant of good faith and fair dealing when Cingular
directly contacted Areawide-originated Subscribers and encouraged
those Subscribers to forge a new relationship with Cingular
through its internal channels of distribution. Cingular responds
to this accusation by arguing that, while there is a duty of good
faith and fair dealing implied by law in every contract, that
duty does not create an independent cause of action. According to
Cingular, the implied duty of good faith and fair dealing is an
aid in the construction of contracts, and therefore any breach of
the implied duty must be appurtenant to some other explicit
It is true that Illinois law recognizes a covenant of good
faith and fair dealing implied by law in every contract. See
Martindell v. Lake Shore National Bank, 154 N.E.2d 683, 690
(Ill. 1958); see also Prudential Insurance Co. of America v. Van
Matre, 511 N.E.2d 740, 746 (Ill.App. 1987) ("a covenant of good
faith and fair dealing is implied in every contract as a matter
of law, absent an express disavowel"). Illinois law, however,
expressly rejects a broad independent cause of action in tort for
the breach of that implied contractual duty, and limits such a
claim to the very narrow circumstances present in cases when an
insurer has a "duty to settle" lawsuits brought against a
insurance policyholder. See Cramer v. Insurance Exchange
Agency, 675 N.E.2d 897, 898-904 (Ill. 1996) (the Illinois
Supreme Court recognized an independent cause of action in tort for breach of a contractual implied duty of good faith
and fair dealing when insurer assumes defense of policyholder who
has been sued); see also Voyles v. Sandia Mortgage Corp.,
751 N.E.2d 1126-30 (Ill. 2001) (the Illinois Supreme Court expressly
refused to extend the independent cause of action for the breach
of an implied duty of good faith and fair dealing beyond the
"duty to settle" line of cases recognized in Cramer).
In this case, Areawide characterizes Count II as a claim for
"breach of contract soliciting customers." Careful analysis,
however, reveals that the claim is simply an attempt to bring an
independent cause of action for the breach of a contractual
implied duty of good faith and fair dealing. Specifically,
Areawide alleges that "[b]y soliciting and encouraging Areawide's
customers to leave Areawide and, instead, continue its
relationship directly with Cingular, Cingular breached the
implied duty of good faith and fair dealing present in the
Agreement." Areawide does not point to any specific provision of
the Agreement that Cingular allegedly breached by failing to
adhere to the duty of good faith and fair dealing. In other
words, Areawide's claim simply alleges that Cingular violated an
independent duty of good faith and fair dealing, which Illinois
law does not recognize except in "duty to settle" cases.
Moreover, Areawide has sufficient recourse under the terms of the
Agreement. In fact, Areawide has brought a claim for breach of
contract in Count I, which avers that Cingular breached the
Agreement by failing to pay commissions allegedly owed to
For these reasons, Cingular's motion to dismiss Count II is
granted, and Count II is dismissed with prejudice. II. Count III: Common Law Fraud
In Count III, Areawide brings a cause of action for fraudulent
misrepresentation, which in Illinois requires the following
elements: "(1) a false statement of a material fact; (2) known or
believed to be false by the party making it; (3) intent to induce
the other party to act; (4) action by the other party in reliance
on the truth of the statement; and (5) damage to the other party
resulting from such reliance." People ex rel. Peters v.
Murphy-Knight, 618 N.E.2d 459, 463 (Ill.App. 1993) (citing
Soules v. General Motors Corp., 79 Ill.2d 282, 286 (1980)).
Furthermore, when a claim of fraud is brought before a federal
court, the Federal Rules of Civil Procedure require that the
plaintiff plead "the circumstances constituting the fraud . . .
with particularity." FED. R. CIV. P. 9(b). The Seventh Circuit
has interpreted this federal requirement to mean that the
plaintiff must allege the "who, what, where, and when" of the
purported fraud. See Ackerman v. Northwestern Mutual Life
Insurance Company, 172 F.3d 467, 469-70 (7th Cir. 1999); DiLeo
v. Ernst & Young, 901 F.2d 624, 627 (7th Cir. 1990). Under this
framework, the Court concludes that the complaint sufficiently
sets forth a claim for fraudulent misrepresentation.
Specifically, Areawide alleges that beginning in 1998, and
continuing throughout the entire relationship, four specific
Cingular employees represented to Areawide, either in person or
over the telephone, that Cingular was selling equipment to
Areawide "at cost" and that Areawide had access to the same level
of pricing and equipment discounts as Cingular's internal
channels of distribution. Furthermore, Areawide claims that the
same Cingular employees represented to Areawide that residual
commissions would not be affected when Cingular sold a
replacement phone to at least one Areawide-originated Subscriber. Areawide asserts that the named Cingular employees
knew that these representations were false, but nevertheless
persisted in making them in order to induce Areawide to not
purchase equipment from other vendors at an allegedly lower cost.
Furthermore, Areawide claims that it reasonably relied upon these
purportedly false statements by not purchasing equipment from
other vendors, and that their reliance was justified because
Cingular maintained a superior position of knowledge with respect
to its own costs and the prices it charges to its internal
channels of distribution.
Taking these allegations in a light most favorable to the
plaintiff, the Court concludes that Areawide has plead its claim
for fraudulent misrepresentation with sufficient particularity to
satisfy the heightened pleading standards set forth in FED. R.
CIV. P. 9(b). Furthermore, Areawide has sufficiently alleged the
elements for common law fraud. Accordingly, Cingular's motion to
dismiss Count III is denied.
III. Count V: Tortious Interference with Prospective Economic
In Count V, Areawide brings a cause of action for tortious
interference with a prospective economic advantage. In order to
bring a claim for tortious interference with a prospective
economic advantage, Areawide must allege: 1) that it had a
reasonable expectation of entering into a valid business
relationship; 2) Cingular had knowledge of the plaintiff's
expectancy; 3) purposeful or intentional interference on the part
of Cingular that prevented Areawide's legitimate expectancy from
ripening into a valid business relationship; and 4) damages to
Areawide resulting from the interference. See Cromeens,
Holloman, Sibert, Incorporated v. AB Volvo, 349 F.3d 376, 398
(7th Cir. 2003) (citing Soderlund Bros., Inc. v. Carrier Corp.,
663 N.E.2d 1, 7-8 (Ill.App. 1995)). However, in instances when
the relationship of the parties is defined by contract, if the contract shows "unambiguously on its face that the relief prayed
for is not merited, dismissal is both justified and appropriate."
Palada v. General Dynamics Corp., 47 F.3d 872, 874-76 (7th Cir.
In this case, Areawide's complaint states that at all relevant
times, "Areawide had a reasonable expectation of maintaining a
continuing business relationship with its customers for whom it
originated cellular telephone services, including deriving a
continued economic advantage." Furthermore, Areawide alleges that
when Cingular directly contacted the Areawide-originated
Subscribers, Cingular interfered with this prospective business
relationship. Pursuant to this interference, Areawide was harmed
because "it lost residual income that it would otherwise be paid
[by Cingular] in an amount to be determined." Even assuming these
facts to be true, as this Court must on a motion to dismiss,
Areawide fails to state a claim for tortious interference with a
prospective business or economic advantage for two reasons.
First, the Agreement explicitly states that Areawide-originated
Subscribers are customers of Cingular. In particular, the
Agreement states that Areawide is a "nonexclusive, authorized
agent" who was appointed to "solicit and contract, on behalf of
[Cingular]" subscribers for the cellular services provided by
Cingular. Furthermore, the Agreement says that upon enrollment of
an Areawide-originated Subscriber, "that Subscriber shall become
a customer of [Cingular]. . . ." Moreover, Cingular explicitly
reserved the right "without obligation or liability to [Areawide]
to market the Authorized Services and CPE in the same
geographical areas served by [Areawide], whether through
[Cingular's] own representatives or through others. . . ."
Importantly, the Agreement defines "CPE" as the "customer
premises equipment, including cellular terminal equipment, that a Subscriber needs for using CRS and other
Authorized Services." Given these express terms of the Agreement,
Cingular had the right to contact its own customers to market its
own services and cellular terminal equipment. Therefore, the
express terms of the Agreement unambiguously show that the relief
prayed for is not merited.
Second, Areawide's claim for tortious interference with a
prospective economic advantage fails because it is simply a claim
for breach of the Agreement wrapped in a shroud of tortious
interference. In Calderon v. Southwestern Bell Mobile Systems,
LLC, 2003 WL 22340175 (N.D.Ill.), Judge Grady addressed a
tortious interference claim almost factually identical to
Areawide's claim, and dismissed the claim because it was "simply
the same breach of contract claim for failure to pay commissions
that [was previously asserted in the complaint], dressed up as a
tortious interference claim." Calderon, 2003 WL 22340175 at *7.
In this case, Cingular makes the same argument that is,
Areawide's claim for tortious interference is nothing more than
an attempt to reassert that Cingular breached the Agreement. This
Court finds Judge Grady's reasoning persuasive.
Areawide alleges that when Cingular contacted
Areawide-originated Subscribers directly, they interfered with a
reasonable prospective economic advantage. This interference
purportedly resulted in harm to Areawide because it did not
receive the residual commissions that Cingular owed them pursuant
to the Agreement. In other words, Areawide's tortious
interference claim is nothing more than an attempt to reassert
that Cingular breached the Agreement by failing to pay
commissions a claim already brought in Count I. Accordingly, Cingular's motion to dismiss Count V is granted,
and Count V is dismissed with prejudice.
IV. Punitive Damages
Cingular separately moved to dismiss Areawide's request for
punitive damages with respect to Counts III and V based upon the
premise that the underlying counts are invalid. Because this
Court dismisses Count V, it follows that the plaintiff cannot
seek punitive damages with respect to that claim. This Court,
however, denies Cingular's motion to dismiss Count III;
accordingly, at this point the Court also denies Cingular's
motion to dismiss Areawide's request for punitive damages with
respect to Count III.
For the foregoing reasons, this Court denies Cingular's motion
to dismiss Count III and grants Cingular's motion to dismiss
Counts II and V. Accordingly, Counts II and V are dismissed with
IT IS SO ORDERED.
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