Fischer v. First Chicago Capital Mkt

• Decision Date: 20 September 1999
• Docket Number: No. 98-2656,98-2656
• Citation: 195 F.3d 279
• Parties: (7th Cir. 1999) Thomas P. Fischer, Plaintiff-Appellant, v. First Chicago Capital Markets, Inc., Defendant-Appellee
• Court: U.S. Court of Appeals — Seventh Circuit

Page 279

195 F.3d 279 (7th Cir. 1999)

Thomas P. Fischer, Plaintiff-Appellant, v. First Chicago Capital Markets, Inc., Defendant-Appellee.

No. 98-2656

United States Court of Appeals, Seventh Circuit

Argued December 9, 1998

Decided September 20, 1999

Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 98-C-79--Charles P. Kocoras, Judge. [Copyrighted Material Omitted] Before Flaum, Easterbrook, and Diane P. Wood, Circuit Judges.

Diane P. Wood, Circuit Judge.

First Chicago Capital Markets, Inc. (FCCM) hired Thomas P. Fischer to serve as a consultant on a new securitization program. When FCCM refused to pay compensation to which Fischer believed he was entitled, Fischer filed this diversity suit, alleging breach of contract and a variety of quasi-contract claims. The district court dismissed Fischer's complaint for failure to state a claim upon which relief may be granted. For the reasons discussed below, we reverse and remand.

I

Because the district court dismissed under Federal Rule of Civil Procedure 12(b)(6), we recite the facts as Fischer presented them in his complaint. In April 1995, Fischer approached Ken Vallrugo, then the Managing Director at FCCM, with a proposal to help FCCM develop a Healthcare Accounts Receivables Securitization Program (the "Program"). Vallrugo was enthusiastic about the proposition, and he and his supervisor, Senior Managing Director Thomas Campbell, entered into negotiations with Fischer. On May 25, 1995, while their discussions were ongoing, Campbell authorized Fischer to begin work on the Program, and Fischer did so. Shortly thereafter, on July 11, the parties signed a letter of understanding entitled "Consulting Agreement." That document reflected Fischer's agreement to market, originate, and implement the Program from May 25, 1995 to December 31, 1995, subject to early termination or extension by mutual agreement. In exchange, FCCM promised to pay Fischer $12,500 each month (representing 96 hours of work at $130 per hour) for the term of the contract. The Agreement concluded with the following paragraph, which is the crux of the current dispute:

Tom, as we have discussed, we will determine referral fees on a case by case basis. If the Program is successful, we hope to move from this arrangement to an ongoing consulting arrangement on a fee basis that will be paid by Program participants. The following administrative services will need to be performed going forward: (1) the initial calculation and the ongoing (annual) monitoring of the "average useful life" of assets financed in accordance with federal tax guidelines; (2) the monitoring and implementation of annual updated hospital board of directors' resolutions . . . ; (3) the coordination, accumulation and dissemination of information to First Chicago on a quarterly basis; (4) coordination with First Chicago to insure Program effectiveness; and (5) assistance to First Chicago with the marketing of new and/or expanded programs. We are thinking at this time of a sliding fee scale for such services from between 8 basis points per annum and 5 basis points based on the size of the Program, but this agreement will be worked out in the future when both of us know how the Program is working and the feasibility of continuing our work together.

Between May and December 1995, Fischer performed his obligations under the Agreement. The parties then agreed to extend the hourly fee arrangement to June 1996, and Fischer continued to work on behalf of the Program. During this period, Fischer completed the start-up process and initiated the Program with bond issues totaling $32 million: a $16 million, 20-year bond issue by the St. Francis Healthcare System and a $16 million, 27-year bond issue by ServantCor. At FCCM's request, Fischer continued to service and market the program from June 1996 through March 1997, despite the fact that his hourly fee arrangement had terminated upon completion of the start-up efforts. As a result of his post-June endeavors, Fischer obtained a lucrative new participant, the Daughters of Charity National Healthcare System, for the Program.

Despite the promising start, the relationship between Fischer and FCCM soured. Beginning in June 1997 (after both Vallrugo and Campbell had left the company), Fischer repeatedly invoiced FCCM for $25,600, his first year's compensation. Fischer, who believed he was entitled to an annual fee based on the size and dollar amount of the Program's bond issues, reached this figure by multiplying eight basis points by $32 million, the amount of outstanding bonds in the Program. FCCM eventually responded with a letter dated August 5, 1997, that announced that FCCM was terminating the contract and that it was willing to give Fischer a one-time payment of $16,000, or five basis points times $32 million, but no more. Maintaining that he was entitled to an annual fee for the duration of the bond issues, Fischer rejected the offer and filed suit.

II

Applying Illinois law, which both parties agree governs this case, the district court dismissed Fischer's suit. The court held that the contested paragraph was not sufficiently definite and certain to be an enforceable contract. Instead, "the final paragraph simply preserved the parties' positions for future negotiations." The court also rejected Fischer's alternative theory of recovery, the doctrine of promissory estoppel. The court found that Fischer was unable to show detrimental reliance separate from the performance that supplied the consideration for the written agreement, as required by Illinois law, and because recovery under a promissory estoppel theory was defeated by the Illinois statute of frauds. Because the district court resolved these issues on a motion to dismiss, our review is de novo. Hentosh v. Herman N. Finch Univ. of Health Sciences, 167 F.3d 1170, 1173 (7th Cir. 1999).

On appeal, Fischer concedes that FCCM did not breach the written agreement. He argues, however, that the parties entered into a subsequent oral agreement that entitles him to payment. According to Fischer, both before and after the July 11, 1995 letter, Vallrugo assured him that after the hourly fee arrangement concluded, Fischer was to continue to market and service the Program in exchange for basis points for the life of the St. Francis and ServantCor bonds.

FCCM does not challenge Vallrugo's authority to bind it. Instead, it argues that the parol evidence rule bars Fischer from introducing evidence of the alleged oral agreement. But the parol evidence rule applies only to agreements made prior to or contemporaneous with the signing of a written contract; it does not bar evidence tending to show later modifications of the contract. Williams v. Jader Fuel Co., 944 F.2d 1388, 1394-95 (7th Cir. 1991); see also Barille v. Sears Roebuck & Co., 289 Ill.App.3d 171, 224 Ill.Dec. 557, 682 N.E.2d 118, 123 (1997); Vuagniaux v. Korte, 273 Ill.App.3d 305, 210 Ill.Dec. 38, 652 N.E.2d 840, 844 (1995). That Vallrugo allegedly made the same promises to Fischer both before and after the execution of the written agreement does not render the subsequent assurances inadmissible. The facts as alleged by Fischer suggest merely that he and Vallrugo later resolved an issue left open by the Agreement.

Fischer has a significantly larger problem, however, in the form of the statute of frauds. Although the parol evidence rule does not prevent the parties from orally modifying their contract subsequent to its signing, the Illinois statute of frauds precludes enforcement of a services contract that cannot be performed within a year "unless the promise or agreement upon which such action shall be brought, or some memorandum or note thereof, shall be in writing, and signed by the party to be charged therewith." 740 ILCS 80/1; see also Monetti, S.P.A. v. Anchor Hocking Corp., 931 F.2d 1178, 1180-81 (7th Cir. 1991); Evans v. Fluor Distribution Companies, Inc., 799 F.2d 364, 365-66 (7th Cir. 1986). Fischer alleges that the parties orally modified their contract to conform to the last paragraph of the July 11, 1995 letter. After that oral modification, the agreement provided for an "ongoing consulting relationship" under which FCCM was to pay Fischer an annual fee for the duration of the St. Francis and ServantCor bonds in exchange for continuing administrative services. Because the bonds will last 20 and 27 years, respectively, Fischer obviously cannot service these bonds within one year. He seeks to avoid this difficulty by arguing that FCCM may compensate him for 27 years' work within the first year by paying him the present value of what he would have...