Dawson v. General Motors Corp.

Citation977 F.2d 369
Decision Date13 October 1992
Docket NumberNo. 91-2347,91-2347
PartiesHanley DAWSON, Jr., an individual, and Hanley Dawson Cadillac Company, an Illinois corporation, Plaintiffs-Appellants, v. GENERAL MOTORS CORPORATION, a Delaware and Michigan corporation, Defendant-Appellee.
CourtUnited States Courts of Appeals. United States Court of Appeals (7th Circuit)

Malcolm M. Gaynor, Robert D. Nachman, Franklin S. Schwerin, A. Daniel Feldman (argued), Schwartz, Cooper, Kolb & Gaynor, Chicago, Ill., for plaintiffs-appellants.

Richard C. Godfrey (argued), Martin T. Tully, Kirkland & Ellis, Chicago, Ill., for defendant-appellee.

Before CUDAHY, EASTERBROOK and KANNE, Circuit Judges.

CUDAHY, Circuit Judge.

Hanley Dawson, Jr. (Dawson) and Hanley Dawson Cadillac Company (HDCC) sued General Motors Corporation (GM) for breach of contract, alleging that GM had promised the dealership certain lease terms and then reneged a year later. The district court dismissed the plaintiffs' complaint for failure to state a claim. Because we conclude that the plaintiffs' allegation of a binding promise is sufficient to survive a motion to dismiss, we reverse.

I.

The facts, as alleged by the plaintiffs, are as follows. From 1971 to 1988, Dawson (through HDCC) operated a Cadillac franchise dealership at 630 North Rush Street in Chicago. Cadillac is a division of GM. GM, the lessee of the Rush Street facility, subleased the facility to HDCC under a sublease agreement due to expire on February 28, 1988--unless GM exercised the first of its four remaining five-year options under the lease.

Since 1980, HDCC had sold and serviced Nissan (non-GM) vehicles in addition to Cadillacs at the Rush Street facility. By 1986, Dawson had also become a franchised dealer for Toyota, Mitsubishi, Saab, Subaru, Chrysler and Plymouth vehicles; these non-GM vehicles, however, were sold and serviced at a separate building located at 640 North LaSalle Street.

By 1976, Dawson had come up with an idea for increasing revenue and cutting costs. He wanted to separate the sales and service functions of all his franchises, using the prime Rush Street location as a multi-line showroom and moving the service and parts functions to a lower-cost site. Under his plan, the Rush Street facility would be converted to a sales facility for Dawson's six other franchises in addition to Cadillac and Nissan. Dawson communicated his proposal to GM on several occasions from 1976 through 1986.

The time for Dawson to act came in 1986. He had acquired a site for a service-and-parts facility on North Avenue at the Chicago River. His option to extend his lease on the LaSalle Street property was exercisable only until October 1, 1986. And he would need to make a major investment of money to renovate the Rush Street facility under his plan. Dawson therefore told GM that he needed an answer--that he could not follow through with his plan unless he had GM's assurance that the Rush Street site would continue to be available to him until the year 2008 at substantially the same base rent as that provided under his existing lease, which was $0.76 per square foot.

GM responded with a letter dated September 15, 1986, which stated:

In response to your inquiry regarding the sublease ... the current five year sublease option will expire February 29, 1988 and four (4) five year options remain for renewal.... It is ... Cadillac Motor Car Division's plan to exercise the remaining five year options extending through 2011.

.... While Cadillac cannot guarantee the annual lease rate will not increase, it is anticipated the percent of increase will be a maximum of three percent for each five year option which is to be exercised. Since our plans indicate the continued need for dealer representation for Cadillac in the foreseeable future, Cadillac is not in a position to insure a stabilized rent factor, hence the possibility of an increase. We trust this information will assist in your final decision regarding the planned major rennovation [sic] of the 630 N. Rush Street facility.

On September 25, 1986, Dawson wrote to Cadillac:

We are very pleased to know that Cadillac intends to exercise all of the remaining five year options to extend its lease through 2011 on the property at 630 North Rush Street which it sublets to us.

As we have advised Cadillac, we are working on designs and layouts of major renovations to modernize these facilities which we could not do unless we had firm assurances from General Motors that it will continue to sublet the property to us throughout the entire remaining period of its available options on the base lease on substantially the same terms as our existing sublease.

In reliance upon the assurances of Cadillac that it will continue to sublease the property to us and that our annual lease payment of $185,800 will not increase more than 3% for each of the five year sublease terms, we have authorized our architects to complete their drawings and we have committed to the multimillion dollar expenditures required to implement our plans.

Dawson then let his option to renew the LaSalle Street lease expire, instructed a contractor to proceed on the Rush Street renovation and added to his commitment in the North Avenue facility.

A year later, on September 17, 1987, Cadillac sent Dawson another letter. This letter announced a "General Motors decision to offer [HDCC] a new five year sublease"--but on different terms. Noting that "GM cannot continue to provide you below market rental rates for the portion of the property you use for selling competitive products," the letter offered to lease space used for Cadillac operations at $2.08 per square foot, and space used for Nissan products at $20.00 per square foot. Further, it forbade Dawson to use any of the Rush Street property for non-GM franchises other than Nissan.

Dawson could not afford to remain at the Rush Street location under the new lease terms. He went back to the owner of the LaSalle Street property which he had given up, but only 60 percent of it was available. Nevertheless, Dawson rented the remaining LaSalle Street space (at $15.00 per square foot) and, by 1988, when his Rush Street lease expired, he had moved all his operations to the LaSalle Street and North Avenue locations. Due to the costs of the move, limited space and the inferior location, as well as expenses incurred through the renovation plans, Dawson and HDCC soon went out of business.

Dawson and HDCC brought a three-count complaint in Illinois state court. Count I sought damages for breach of contract. Count II alleged a violation of §§ 4(b) and 13 of the Illinois Motor Vehicle Franchise Act, Ill.Rev.Stat. ch. 121 1/2, §§ 754 & 763 (1987). And Count III alleged that GM's refusal to allow Dawson to move his non-GM franchises into the Rush Street facility was an intentional interference with an economic expectancy. GM removed the action to federal court on the basis of diversity of citizenship.

The district court granted GM's motion to dismiss under Federal Rule of Civil Procedure 12(b)(6). The court held that Cadillac's September 15, 1986, letter did not constitute an offer that could form the basis of a binding contract. Since Count II also rested on a breach of contract, it fell along with Count I. As for Count III, the district court reasoned that Dawson had no valid expectancy that GM would permit him to sell non-GM vehicles in the Rush Street facility, and that in any event GM's action was not unjustified.

II.

We review a dismissal under Rule 12(b)(6) de novo, accepting as true all well-pleaded factual allegations and drawing all reasonable inferences in favor of the plaintiff. Yeksigian v. Nappi, 900 F.2d 101, 102 (7th Cir.1990). The plaintiffs' claims must survive dismissal if "relief could be granted under any set of facts that could be proved consistent with the allegations." Hishon v. King & Spalding, 467 U.S. 69, 73, 104 S.Ct. 2229, 2232, 81 L.Ed.2d 59 (1984).

The parties agree that the substantive law of Illinois applies to the dispute. The principal issue we face is whether the plaintiffs have adequately alleged an enforceable contract with GM.

GM focuses exclusively on the letters exchanged in September 1986, arguing that Cadillac's 1986 letter is unambiguous and cannot be read as a binding offer of any sort. If an alleged written contract is unambiguous, the parties' intent is derived as a matter of law from the alleged contract itself. Quake Construction, Inc. v. American Airlines, Inc., 141 Ill.2d 281, 152 Ill.Dec. 308, 312, 565 N.E.2d 990, 994 (1990). GM's argument finds support in much of the language of the letter: "It is Cadillac Motor Car Division's plan ..."; "it is anticipated the percent of increase will be ..."; "We trust this information will assist in your final decision...." Such language suggests the mere provision of information without a binding promise.

The plaintiffs, on the other hand, place heavy emphasis on the parties' long-term course of dealing and discussions leading up to the 1986 letters. These additional communications help the plaintiffs' argument in two ways. First, assuming that the two 1986 letters constitute the entirety of the alleged contract, the external discussions can be used to demonstrate ambiguity, for Illinois cases continue to allow extrinsic evidence for that purpose. See Toys "R" Us, Inc. v. NBD Trust Co., 904 F.2d 1172, 1176 (7th Cir.1990); Federal Deposit Ins. Corp. v. W.R. Grace & Co., 877 F.2d 614, 620-21 (7th Cir.1989) (citing cases), cert. denied, 494 U.S. 1056, 110 S.Ct. 1524, 108 L.Ed.2d 764 (1990). Second, these discussions are urged by the plaintiffs to make up part of the agreement itself.

GM argues that the complaint does not allege any course of conduct or background discussions, and that the plaintiffs' brief is thus full of new facts not of record in violation of Federal Rule of Appellate Procedure 28(a)(4) and Circuit Rule 28(d)(2). But we have made clear on more...

To continue reading

Request your trial
165 cases
  • Seymour v. Hug
    • United States
    • U.S. District Court — Northern District of Illinois
    • November 8, 2005
    ...parties have agreed to. Academy Chicago Publishers v. Cheever, 144 Ill.2d 24, 29, 161 Ill.Dec. 335, 578 N.E.2d 981 (1991); see also Dawson, 977 F.2d at 373. There is no requirement that an agreement be "signed, sealed, and delivered" to be binding, Abbott, 164 F.3d at 389, and Illinois cour......
  • In re Midway Airlines, Inc., Bankruptcy No. 91 B 06449
    • United States
    • United States Bankruptcy Courts. Seventh Circuit. U.S. Bankruptcy Court — Northern District of Illinois
    • March 10, 1995
    ...at 256, 515 N.E.2d at 65 (quoting Morey v. Hoffman, 12 Ill.2d 125, 131, 145 N.E.2d 644, 648 (1957)); see also Dawson v. General Motors Corp., 977 F.2d 369, 373 (7th Cir.1992); Orr Constr., 560 F.2d at 27. The Court concludes that Midway and Northwest did not reach agreement, i.e., they did ......
  • U.S. ex rel. Durcholz v. Fkw Inc.
    • United States
    • U.S. District Court — Southern District of Indiana
    • February 25, 1998
    ...as true all well-pleaded factual allegations and draw all reasonable inferences in favor of the plaintiff. Dawson v. General Motors Corp., 977 F.2d 369, 372 (7th Cir.1992). B) PLAINTIFF'S COMPLAINT STATES FCA CLAIMS WITH PARTICULARITY Both FKW and Strange move to dismiss Plaintiff's FCA cla......
  • Gillespie v. City of Indianapolis
    • United States
    • U.S. District Court — Southern District of Indiana
    • June 5, 1998
    ...Narcotics Intelligence and Coordination Unit, 507 U.S. 163, 165, 113 S.Ct. 1160, 1161, 122 L.Ed.2d 517 (1993); Dawson v. General Motors Corp., 977 F.2d 369, 373 (7th Cir.1992). DISCUSSION Scope of the Government's The United States, which is not a party to this action, moved the Court to al......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT