Blankenship v. Dialist Intern. Corp.

• Decision Date: 07 March 1991
• Docket Number: No. 5-90-0022,5-90-0022
• Citation: 568 N.E.2d 503,209 Ill.App.3d 920,154 Ill.Dec. 503
• Parties: , 154 Ill.Dec. 503 Clyde E. BLANKENSHIP, Plaintiff-Appellee, v. DIALIST INTERNATIONAL CORP., Herman L. Smith and James Cronin, Defendants-Appellants.
• Court: United States Appellate Court of Illinois

Page 503

568 N.E.2d 503

209 Ill.App.3d 920, 154 Ill.Dec. 503

Clyde E. BLANKENSHIP, Plaintiff-Appellee, v. DIALIST INTERNATIONAL CORP., Herman L. Smith and James Cronin, Defendants-Appellants.

No. 5-90-0022.

Appellate Court of Illinois Fifth District.

March 7, 1991.

Andrew J. Gleeson, Kassly, Bone, Becker, Dix, Reagan & Young, P.C., Belleville, for defendants-appellants.

Kurowski & Courtney, P.C., Belleville (Edward E. Johnston, John J. Kurowski, of counsel), for plaintiff-appellee.

Justice HARRISON delivered the opinion of the court:

Defendants Dialist International Corporation, Herman L. Smith and James Cronin appeal from orders of the circuit court of St. Clair County entering summary judgment and awarding attorney fees in favor of plaintiff Clyde E. Blankenship in an action brought under the Franchise Disclosure Act (the Act) (Ill.Rev.Stat.1985, ch. 121 1/2, pars. 701 et seq.). Defendants contend that the trial court erred: (1) in granting summary judgment on the issue of damages where a genuine issue of material fact existed as to whether plaintiff acquired a franchise from defendants within the meaning of the Act; and (2) in awarding attorney fees in the amount of plaintiff's contingency fee contract rather than based on an hourly rate.

Plaintiff and defendant Cronin, vice-president and national sales manager of Dialist International Corporation, entered into a distributor's agreement which named plaintiff as the sales representative of Dialist International for a specified territory. In return, plaintiff paid Dialist International $15,000. Thereafter, plaintiff met with defendant Cronin and received a detailed explanation of the Dialist system and instruction on how to market the product, a list-finder device designed for attachment to telephones. Defendant Cronin also provided plaintiff with a blue binder entitled "Every Telephone Needs Dialist" which contained promotional materials, letters from purported customers and samples of Dialist advertising, cost sheets and purchase orders. Plaintiff was informed that additional instruction sessions would be held at a later date, but was never contacted further. Upon attempting to market the Dialist, plaintiff encountered difficulty regarding the credibility of the company. Defendant Smith, president of Dialist International, was contacted and provided plaintiff with a letter vouching for the credibility of Dialist International.

In March 1987, plaintiff sued defendants for rescission of the distributorship agreement and for damages under section 21 of the Act, asserting in substance that the agreement was for the sale of a franchise and because such sale was made in violation of Section 4 of the Act, he was entitled to the return, with interest, of the full amount paid by him for the franchise plus attorney fees and costs. (See Ill.Rev.Stat.1985, ch. 121 1/2, pars. 704, 721(1), (2)(a).) Thereafter, plaintiff moved for summary judgment as to all issues. Defendants' motion to dismiss, alleging exemption from the Act, was denied. On April 13, 1989, the trial court granted summary judgment for plaintiff and against defendants for the $15,000 plus interest at the rate of 9%.

On May 3, 1989, plaintiff filed his petition for attorney fees which requested "the sum pursuant to the contract for services signed in this matter which is a contingency fee of one-third of the amount recovered * * * or in the alternative the actual amount of services rendered at the reasonable hourly rate of counsel in this matter." On December 13, 1989, the trial court entered its order awarding plaintiff attorney fees of $5000 pursuant to the contingency fee contract.

We turn first to defendants' contention that by virtue of the application of the Act, a genuine factual question was created which precluded the entry of summary judgment. We disagree.

The sole function of the court reviewing the trial court's entry of summary judgment under section 2-1005 of the Code of Civil Procedure (Ill.Rev.Stat.1987, ch. 110, par. 2-1005) is to determine whether the lower court correctly ruled that no genuine issue of material fact had been raised and, if none was raised, whether judgment was correctly entered as a matter of law. (People ex rel. First National Bank v. North Chicago (1987), 158 Ill.App.3d 85, 104, 109 Ill.Dec. 709, 721, 510 N.E.2d 577, 589; Fuller v. Justice (1983), 117 Ill.App.3d 933, 938, 73 Ill.Dec. 144, 147, 453 N.E.2d 1133, 1136.) In ruling on a summary judgment motion, the trial court is required to construe the pleadings, affidavits, depositions and admissions on file strictly against the moving party and liberally in favor of the opponent. (Miller v. Smith (1985), 137 Ill.App.3d 192, 196, 91 Ill.Dec. 933, 937, 484 N.E.2d 492, 496.) If any facts upon which reasonable persons may disagree are identified, or inferences may be fairly drawn from those facts leading to different conclusions, the motion must be denied and the resolution of those facts and inferences be made at trial. LaSalle National Bank v. Illinois Housing Development Authority (1986), 148 Ill.App.3d 158, 161, 101 Ill.Dec. 373, 375, 498 N.E.2d 697, 699.

However, where a party moving for summary judgment files supporting affidavits containing well-pleaded facts and the party opposing the motion files no counteraffidavits, the material facts set forth in the movant's affidavits stand as admitted. (Wooding v. L & J Press Corp. (1981), 99 Ill.App.3d 382, 385, 54 Ill.Dec. 838, 841, 425 N.E.2d 1055, 1058.) If the opponent fails to controvert the proofs offered in support of the motion and the movant's showing of uncontradicted facts would entitle him to judgment as a matter of law, then summary judgment is proper. Kocjancich v. Bridges (1981), 93 Ill.App.3d 550, 552, 49 Ill.Dec. 4, 6-7, 417 N.E.2d 694, 696-97.

Defendants argue that the affidavit and supporting documents submitted by plaintiff failed to establish that a franchise agreement existed between the parties. The definition of franchise set forth in section 3 of the Act reads as follows:

"(1) 'Franchise' means a contract or agreement, either expressed or implied, whether oral or written, between two or more persons by which:

(a) a franchisee is granted the right to engage in the business of offering, selling, or distributing goods or services, under a marketing plan or system prescribed or suggested in substantial part by a franchisor; and

(b) the operation of the franchisee's business pursuant to such plan or system is substantially associated with the franchisor's trademark, service mark, trade name, logo-type, advertising, or other commercial symbol designating the franchisor or its affiliate; and

(c) the person granted the right to engage in such business is required to pay, directly or indirectly, a franchise fee of $100 or more; * * *." (Ill.Rev.Stat.1985, ch. 121 1/2. par. 703(1)(a), (1)(b), (1)(c).)

Thus, by statutory definition, a franchise exists where an agreement meets the three objective criteria. Salkeld v. V.R. Business Brokers (1989), 192 Ill.App.3d 663, 670, 139 Ill.Dec. 595, 599, 548 N.E.2d 1151, 1155.

Under the first statutory criterion, plaintiff must demonstrate that defendants granted him the right to sell or distribute goods pursuant to a suggested marketing plan or system. Defendants argue that the material provided to plaintiff cannot be considered a marketing plan where, under the agreement, plaintiff was allowed to "develop his territory and sales staff without interference * * *." However, the focus of this requirement is not the franchisee's mandatory use of the marketing plan, as the language "prescribed or suggested" reveals, but rather whether such a right was provided under the contract. Ill.Rev.Stat.1985, ch. 121 1/2, par. 703(1)(a).

Section 3 of the Act defines a marketing plan as: "[A] plan relating to some aspect of the conduct of a party to a contract in conducting business, including but not limited to (a) specification of price, or special pricing systems or discount plans, (b) use of particular sales or display equipment or merchandising devices, (c) use of specific sales techniques, (d) use of advertising or promotional materials or cooperation in advertising efforts * * *." (Ill.Rev.Stat.1985, ch. 121 1/2, par. 703(19).)

A review of the record indicates that the agreement at issue in the present case satisfies the statutory requirement of a marketing plan or system.

According to plaintiff's uncontradicted affidavit, he met with a representative of Dialist International, defendant Cronin, and received a detailed explanation of the Dialist system and instruction on how to market the product. Plaintiff was promised that additional instruction regarding the system would be held at a later date. He was further provided a manual or binder detailing product information and sales points and providing promotional material, sample advertisements and numerous letters from purported customers announcing their participation in the public relations program known as Dialist. As part of his sales strategy, plaintiff was advised to obtain similar letters for use in approaching new customers. When plaintiff encountered...