Chi. Teachers Union Local 1, Am. Fed'n of Teachers v. Bd. of Educ. of Chi.

• Decision Date: 30 March 2018
• Docket Number: Case No. 12 C 10338
• Parties: CHICAGO TEACHERS UNION LOCAL 1, AMERICAN FEDERATION OF TEACHERS, AFL-CIO, et al., Plaintiffs, v. BOARD OF EDUCATION OF THE CITY OF CHICAGO, a body politic and corporate, Defendants.
• Court: U.S. District Court — Northern District of Illinois

CHICAGO TEACHERS UNION LOCAL 1,AMERICAN FEDERATION OF TEACHERS, AFL-CIO, et al., Plaintiffs, v. BOARD OF EDUCATION OF THE CITY OF CHICAGO, a body politic and corporate, Defendants.

Case No. 12 C 10338

UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION

March 30, 2018

Judge Jorge L. Alonso

MEMORANDUM OPINION AND ORDER

This matter is before the Court on the motion of Plaintiff/Counter-Defendant Chicago Teachers Union ("CTU") to dismiss the counterclaim of Defendant/Counter-Plaintiff Board of Education of the City of Chicago ("Board"). CTU also moves to strike the Board's third affirmative defense. For the following reasons, the Court grants CTU's motion as to the counterclaim and denies the motion as to the third affirmative defense.

BACKGROUND

In 2012, CTU, a labor organization representing teachers employed by the Board, brought this class action under Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e et seq. CTU alleges the Board violated Title VII by engaging in a pattern and practice of racial discrimination through its layoff policy, which had a disparate impact on African American teachers and para-professionals.

After CTU filed its Second Amended Complaint, the Board filed its Answer, which included affirmative defenses and a counterclaim. (Pl.'s 2d Am. Compl., Dkt. # 167; see also Def.'s Answer, Dkt. # 178.) The Board's counterclaim alleges that CTU breached the implied duty of good faith and fair dealing arising out of the 2007-2012 collective bargaining agreement ("CBA") between CTU and the Board by filing this class action case, which allegedly interferes with the Board's right to receive the "fruits" of the CBA and violates CTU's own constitution and bylaws to the extent it advocates on behalf of some members to the detriment of others. (See Def.'s Answer, Dkt. # 178, pp. 35-39, ¶¶ 4-8, 17-25.)

In its answer, the Board pleaded three affirmative defenses, the third alleging that CTU lacks standing to be a class representative. The crux of the third affirmative defense, which overlaps with parts of the counterclaim, is that CTU violated its own constitution in bringing its lawsuit because CTU's House of Delegates did not authorize the lawsuit and because the lawsuit promotes the interest of some CTU members to the possible detriment of other members. (See Def.'s Answer, Dkt. # 178, pp. 33-34, ¶¶ 1-7.) CTU has moved to dismiss the Board's counterclaim pursuant to Fed. R. Civ. P. 12(b)(1) and (6) and to strike the Board's third affirmative defense pursuant to Fed. R. Civ. P. 12(f).

DISCUSSION

I. Motion to Dismiss

A Rule 12(b)(6) motion "tests whether the complaint states a claim on which relief may be granted." Richards v. Mitcheff, 696 F.3d 635, 637 (7th Cir. 2012). To survive a motion to dismiss for failure to state a claim, a plaintiff's complaint must contain "a short and plain statement of the claim[s] showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). The short and plain statement under Rule 8(a)(2) must "'give the defendant fair notice of what . . . the claim is and the grounds upon which it rests.'" Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)). Under federal notice-pleading standards, a complaint's "[f]actual allegations must be enough to raise a right to relief above thespeculative level," Twombly, 550 U.S. at 555, by including "sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 570). "In reviewing the sufficiency of a complaint under the plausibility standard, [courts must] accept the well-pleaded facts in the complaint as true, but [they] 'need[ ] not accept as true legal conclusions, or threadbare recitals of the elements of a cause of action, supported by mere conclusory statements.'" Alam v. Miller Brewing Co., 709 F.3d 662, 665-66 (7th Cir. 2013) (quoting Brooks v. Ross, 578 F.3d 574, 581 (7th Cir. 2009)).

Similarly, when considering a Rule 12(b)(1) motion to dismiss, a district court accepts as true all well-pleaded factual allegations and draws reasonable inferences from the allegations in favor of the pleading party. Kelley v. Med-1 Solutions, LLC, 548 F.3d 600, 604 (7th Cir. 2008) (citing Capitol Leasing Co. v. FDIC, 999 F.2d 188, 191 (7th Cir. 1993)).

A. Breach of Implied Covenant

In support of its motion to dismiss, CTU argues that the Board's allegations that CTU breached the implied duty of good faith and fair dealing in the CBA by filing this lawsuit fail to state a claim.

As CTU correctly explains, there is no stand-alone cause of action for breach of the implied covenant of good faith and fair dealing under Illinois law. Every contract contains an implied covenant of good faith and fair dealing, but the implied covenant is not an independent source of duties; rather, it guides the interpretation of the terms of the contract. Beraha v. Baxter Health Care Corp., 956 F.2d 1436, 1443 (7th Cir. 1992); see also Voyles v. Sania Mortg. Corp., 751 N.E.2d 1126, 1131 (Ill. 2001) (recognizing that the implied duty of good faith and fair dealing is generally not "'an independent source of duties giving rise to a cause of action in tort'") (quoting Cramer v. Ins. Exch. Agency, 675 N.E.3d 897, 903 (Ill. 1996)). Where a contractvests one of the parties with discretion in performing an obligation, and that party exercises that discretion in bad faith, unreasonably, or in a manner inconsistent with the reasonable expectations of the parties, the party breaches the implied covenant of good faith and fair dealing. Hickman v. Wells Fargo Bank N.A., 683 F. Supp. 2d 779, 792-93 (N.D. Ill. 2010). But "[t]he covenant . . . does not enable a [party] to read an obligation into a contract that does not exist." N. Tr. Co. v. VIII S. Michigan Assocs., 657 N.E.2d 1095, 1104 (Ill. App. Ct. 1995). "To properly allege breach of the covenant, a party must plead the existence of contractual discretion," Bank of Am., N.A. v. Shelbourne Dev. Grp., Inc., 732 F. Supp. 2d 809, 824 (N.D. Ill. 2010) (emphasis added), by identifying provisions of the contract that vest the opposing party with discretion. See Bank One, Springfield v. Roscetti, 723 N.E.2d 755, 764 (Ill. App. Ct. 1999). The party asserting the claim must identify "in the express contract of the parties a satisfactory basis which makes it necessary to imply certain duties and obligations in order to effect the purposes of the parties making the contract." Mid-West Energy Consultants, Inc. v. Covenant Home, Inc., 815 N.E.2d 911, 916 (Ill. App. Ct. 2004).

The Board does not identify any provisions of the CBA that vest CTU with discretion either that CTU exercised unfairly or that might have served as the basis for the action that the Board complains of in its counterclaim, i.e., filing this lawsuit. (See Def.'s Answer, Dkt. # 178, pp. 35-39.) This deficiency warrants dismissal. See, e.g., Bywater v. Wells Fargo Bank, N.A., 2014 WL 1256103, at *7 (N.D. Ill. 2014) (noting plaintiff's failure to plead contractual discretion meant "her breach of good faith allegation would not be sufficient standing alone to state a claim for breach of contract."). The Court agrees with CTU that the Board does not state a claim for breach of contract based on a theory of breach of the implied covenant of good faith and fair dealing in the CBA.

B. "Preemption" under IELRA

CTU argues that there is a still more fundamental reason why the Board's counterclaim must be dismissed: the claim is "preempted"¹ by the Illinois Educational Labor Relations Act ("IELRA"), the labor statute that governs the CBA.

Federal courts frequently hold that a claim for breach of the covenant of good faith and fair dealing arising out of a collective bargaining agreement governed by a labor statute such as, for example, the Labor Management Relations Act ("LMRA"), 29 U.S.C. §§ 141 et seq., is preempted by that statute, to the extent that the claim depends on interpretation of the collective bargaining agreement. See, e.g., Bader v. United Airlines, Inc., 113 F. Supp. 3d 981, 989-90 (N.D. Ill. 2015) (citing cases decided under the LMRA); see also Debock v. United Parcel Serv., Inc., No. 15cv447, 2015 WL 7428561, at *3 (D. Nev. Nov. 20, 2015) (breach of contract and breach of implied covenant claims are "classic examples of claims consistently preempted by § 301" of the LMRA); Kwasnik v. Nat'l R.R. Passenger Corp., No. 96 C 1933, 1997 WL 109977, at *4 (N.D. Ill. Mar. 7, 1997) (reaching a similar result under Railway Labor Act, 45 U.S.C. §§ 151 et seq.). CTU argues that a similar principle applies to this case under the IELRA: when aparty seeks to assert a claim for breach of a collective bargaining agreement that requires interpretation of the agreement, original jurisdiction over the matter resides exclusively with the Illinois Educational Labor Relations Board ("IELRB"). See 115 ILCS 5/15 ("A charge of unfair labor practice may be filed with the [IELRB] by an employer, an individual or a labor organization."); see also 115 ILCS 5/14(b) (defining unfair labor practices of a labor union, in pertinent part, as "(1) Restraining or coercing employees in the exercise of the rights guaranteed under this Act . . . [or] (3) Refusing to bargain collectively in good faith with an educational employer"); 115 ILCS 5/16 (providing for judicial review of IELRB decision only in "the Appellate Court of a judicial district in which the Board maintains an office").

The Illinois Supreme Court has never directly addressed whether the IELRA divests courts of jurisdiction to hear common-law claims for breach of a collective bargaining agreement, but it has held that "the legislature intended to divest the circuit courts of primary jurisdiction over educational labor arbitration awards" and "grant[] the [IELRB] exclusive primary jurisdiction over arbitration disputes." Bd. of Educ...