Utility Audit, Inc. v. Horace Mann Service Corp.
| Decision Date | 13 September 2004 |
| Docket Number | No. 03-2453.,03-2453. |
| Parties | UTILITY AUDIT, INC., Plaintiff-Appellant, v. HORACE MANN SERVICE CORPORATION, Defendant-Appellee. |
| Court | U.S. Court of Appeals — Seventh Circuit |
Appeal from the United States District Court for the Central District of Illinois, Richard Mills, J David A. Rolf, Edward Z. Dianrdo (argued), Sorling, Northrup, Hanna, Cullen & Cochran, Springfield, IL, for Plaintiff-Appellant.
Roger K. Heidenreich (argued), Sonnenschein, Nath & Rosenthal, St. Louis, MO, for Defendant-Appellee.
Before FLAUM, Chief Judge, and RIPPLE and ROVNER, Circuit Judges.
Horace Mann Service Corporation wanted to save money on its telephone bills. To that end, it hired Utility Audit, Inc. in January 2000 to review past bills for possible overbilling and to recommend ways of saving money in the future. In exchange, Horace Mann agreed to pay to Utility Audit a percentage of any savings realized. But Horace Mann refused to pay Utility Audit any part of the $1.2 million it stood to save after switching long-distance carriers, a move Utility Audit takes credit for recommending. Utility Audit sued, but the district court granted summary judgment to Horace Mann, concluding that under the terms of the parties' contract, Utility Audit was not entitled to any of the savings that resulted from the switch in carriers. The court also denied Utility Audit's attempt to amend its complaint to add a claim of unjust enrichment. We affirm.
The parties' contract required Utility Audit to review the past five years of bills Horace Mann received from MCI for local and long distance telephone service. If Utility Audit's review resulted in a refund or credit, then Horace Mann was required to pay 43% of the refund or credit to Utility Audit. In addition, the contract required Utility Audit to "monitor" the bills Horace Mann would receive from MCI over the coming 12 months to identify any possible future savings. Specifically, the contract stated that:
[Horace Mann] retains Utility Audit Inc., to monitor all MCI Long Distance, Long Distance and Local Exchange Carrier(s) and/or all Phone related service bills for the period going forward for 12 months, beginning on the date [Horace Mann] implements audit savings. Utility Audit Inc. will ensure refunds/credits and/or savings are realized and/or obtained by [Horace Mann].
[Horace Mann] understands that Utility Audit Inc. will receive 40% of any future savings on a telecommunication bill for a period of One Year.
But under the terms of the contract, Horace Mann retained the right to "choose not to implement a Utility Audit Inc. recommendation," in which case "there is no charge for future savings."
Over the next few months Utility Audit submitted a number of reports to Horace Mann. In the first, Utility Audit advised Horace Mann that its current contract with MCI was "inferior," but that Utility Audit was "very confident" it could obtain a better proposal from MCI before the contract expired on November 30, 2000. The report also advised Horace Mann to obtain pricing proposals from the other "most capable carriers today," specifically Qwest, Claricom, AT & T, McLeod USA, and Sprint.
A couple of weeks later, Utility Audit submitted to Horace Mann a second report, this one entitled "Home Office Report." In it, Utility Audit again recommended that Horace Mann renew its contract with MCI before it expired in November, although Utility Audit had not yet obtained better rates from MCI. In a third report submitted in April — entitled "New Long Distance Pricing Home Office Report" — Utility Audit provided Horace Mann with rate proposals from Qwest, Claricom (aka Staples), MCI, and AT & T. Based upon the new proposals, Utility Audit estimated in a fourth report that Horace Mann stood to save the following amounts each year over its current contract with MCI:
Qwest $712,856.37
Staples $672,805.35
MCI $653,876.44
AT & T $418,198.91
Despite other carriers' cheaper rates, Utility Audit "strongly recommend[ed] that [Horace Mann] accept MCIWorldcom's current proposal," and "strongly advise[d] against switching to another carrier" because of the reliability of MCI's service. However, Utility Audit advised, if Horace Mann wanted to switch carriers, it should choose either Qwest or Staples. Finally, in July 2000, Utility Audit changed its recommendation and advised Horace Mann to "switch to another carrier other than MCI unless the terms and conditions of MCI are acceptable," after MCI refused to refund what Utility Audit believed to be overcharges as the result of rounding.1
In the meantime, on its own, Horace Mann obtained a pricing proposal from Global Crossing, a telecommunications provider never mentioned in any of Utility Audit's reports. Global Crossing's proposal was substantially cheaper than any of the proposals Utility Audit had obtained for Horace Mann, and would result in an annual savings of $1.2 million. Horace Mann accepted Global Crossing's proposal and contracted with it rather than with any of the providers Utility Audit had suggested.
Horace Mann paid a total of $25,000 to Utility Audit, $15,000 for savings realized due to Utility Audit's review of past bills, and $10,000 for unspecified recommendations for future savings. But Horace Mann paid Utility Audit nothing for the $1.2 million it stood to save each year by switching to Global Crossing. Utility Audit eventually billed Horace Mann for the 40% of savings it believed it was due under the terms of the contract; Horace Mann refused to pay.
Utility Audit then sued Horace Mann. Originally Utility Audit alleged a single claim of breach of contract. Later it attempted to add a claim of unjust enrichment, alleging in the alternative to its contract claim that its recommendation to solicit better cheaper telephone rates fell outside the parties' contract and it was therefore entitled to quantum meruit damages based upon the money Horace Mann saved with Global Crossing. The district court denied Utility Audit's request for leave to amend its complaint as futile, concluding that the recommendation to solicit better rates was within the subject matter of the parties' contract.
Both parties then filed motions for summary judgment. Utility Audit argued that it was entitled to summary judgment because it was undisputed that Horace Mann implemented its recommendation to solicit better prices, and therefore it was entitled to 40% of the $1.2 million Horace Mann saved during the first year of its contract with Global Crossing. Horace Mann argued, on the other hand, that it owed nothing and was entitled to summary judgment because it was undisputed that (1) Utility Audit never recommended the switch to Global Crossing, and (2) the suggestion Utility Audit made to solicit more favorable proposals was so general that it covered the entire universe of possibilities, and therefore could not be considered a "recommendation" under the ordinary definition of that word.
The district court granted summary judgment to Horace Mann. It concluded that Horace Mann never implemented most of Utility Audit's recommendations, such as the recommendation to renew its contract with MCI after obtaining from it more favorable rates, or to accept the proposals Utility Audit obtained from Qwest, Staples, and AT & T. As for Utility Audit's suggestion generally that Horace Mann solicit more favorable proposals, the district court agreed with Horace Mann that the suggestion was too general to be considered a "recommendation."
Utility Audit concedes that Global Crossing was not among the telecommunication providers that it recommended to Horace Mann. Nevertheless, it contends that the undisputed evidence establishes that by accepting Global Crossing's proposal, Horace Mann was following its general recommendation to contract with a cheaper telephone service provider. Accordingly, Utility Audit argues that the district court erred by not granting it summary judgment. Alternatively, Utility Audit argues that whether Horace Mann was following its recommendation when it accepted Global Crossing's proposal is a disputed question of fact which precluded the district court from granting summary judgment to Horace Mann.
We review de novo the district court's decision to grant Horace Mann's motion for summary judgment and to deny Utility Audit's. Rizzo v. Pierce & Assocs., 351 F.3d 791, 793 (7th Cir.2003). Summary judgment is appropriate when there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Id. The interpretation of an unambiguous contract is a question of law, and therefore a dispute over the terms of an unambiguous contract is suited to disposition on summary judgment. Id.; Kallman v. Radioshack Corp., 315 F.3d 731, 735 (7th Cir.2002).
Under Illinois law, which the parties agree governs, contract terms are interpreted according to their plain meaning unless otherwise defined. Trade Center v. Dominick's Finer Foods, 304 Ill.App.3d 931, 238 Ill.Dec. 230, 711 N.E.2d 333, 335 (1999). Although words should be given their ordinary and accepted...
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