Genelco, Inc. v. Bowers

• Decision Date: 13 March 1989
• Docket Number: No. 88-0408,88-0408
• Citation: 536 N.E.2d 783,181 Ill.App.3d 1,129 Ill.Dec. 733
• Parties: , 129 Ill.Dec. 733 GENELCO, INC., Plaintiff-Appellant, v. Dan M. BOWERS, individually and d/b/a Bowers Engineering Company, Defendant-Appellee.
• Court: United States Appellate Court of Illinois

Page 783

536 N.E.2d 783

181 Ill.App.3d 1, 129 Ill.Dec. 733

GENELCO, INC., Plaintiff-Appellant, v. Dan M. BOWERS, individually and d/b/a Bowers Engineering Company, Defendant-Appellee.

No. 88-0408.

Appellate Court of Illinois First District, First Division.

March 13, 1989.

Rehearing Denied April 18, 1989.

Peterson, Ross, Schloerb & Seidel, Chicago (Peter M. Sfikas, Clay H. Phillips, Mary F. Andreoni, of counsel), for plaintiff-appellant.

Pope, Ballard, Shepard & Fowle, Chicago (Thomas J. Regan, of counsel), for defendant-appellee.

Justice QUINLAN delivered the opinion of the court:

Central States Joint Board (Central States), a labor union, contracted with the plaintiff, Genelco, Inc. (Genelco), for the development and installation of a computer system for Central States. Problems arose after the system was installed and Central States hired Bowers Engineering Co. to review and evaluate the problems with the system, as well as the system itself. In its review, unfavorable remarks were made about Genelco's performance and Genelco filed suit against the defendant Dan M. Bowers, individually and d/b/a Bowers Engineering Co. (Bowers), alleging that Bowers had maliciously schemed to take over Genelco's business with Central States. Genelco's third amended complaint sought damages from Bowers for: tortious interference with contractual relations; tortious interference with prospective economic advantage; commercial disparagement; and wilful and wanton conduct. Bowers moved to dismiss the third amended complaint under section 2-619(a)(9) of the Code of Civil Procedure, asserting that its reports were protected by a qualified privilege. (See Ill.Rev.Stat.1987, ch. 110, par. 2-619(a)(9).) The trial court granted Bowers' motion and dismissed Genelco's third amended complaint with prejudice. We affirm the trial court's dismissal with prejudice.

The specific facts of the case are as follows. On February 2, 1982, Genelco entered into a contract with Central States which provided that Genelco would develop and install a computer system for Central States called the "Claims Adjusting and Reporting System" (CARS). Genelco later contracted with Central States for another system, called the "Employee Reporting Verification System". Thereafter, Central States experienced problems with its data processing system, and in January 1984, hired Bowers to evaluate and review the problems with the system. Specifically, Bowers was to review the status of the CARS program, which was apparently the basis for the problems, and then make recommendations regarding completion of the program. At that time, Bowers was, of course, aware of the contracts between Genelco and Central States, because its evaluation was to include a review of the parties' responsibilities under the contracts.

On February 2, 1984, Bowers prepared a "Report on EDP Audit" for Central States. Generally, the report consisted of Bowers' conclusions and recommendations concerning Central States' data processing system and the Genelco program, including: (1) general observations on the Genelco-Central States contracts, Genelco's duties under the contracts, operations, system performance, future operations, and improvements; and (2) recommendations as to action that was required immediately, in the near future, and in the long term concerning the Genelco contracts, data processing operations and system performance.

Specifically, Bowers' report concluded that Genelco's responsibilities, as set forth in the Genelco-Central States contract, were vaguely defined, and suggested that Central States consult legal counsel concerning possible litigation with Genelco. The report also concluded that system performance could be improved substantially, but noted that Genelco's representations to the contrary were cause for concern. The report suggested that possible reasons for Genelco's contrary representations could be due to Genelco's insufficient knowledge or expertise in certain areas, financial pressures, or contract interpretation. The report further stated that while Bowers did not believe that Genelco was incompetent, Bowers, nevertheless, concluded that it did not believe Genelco's performance was acceptable. Moreover, the report noted that after conversations with Genelco, Bowers believed Genelco was either unable or unwilling to bring the system to a satisfactory level. Finally, the report suggested that Central States negotiate a contractual relationship for continued support with either Genelco, Bowers, or some other organization.

In addition to the report, Genelco based its claim against Bowers on two letters from Bowers to Genelco's vice president, Russell Korte. The first letter, dated March 23, 1984, informed Genelco that the Central States system was not successfully completed under the contract, and that Genelco's performance was not in accordance with generally accepted standards of professionalism in the computer applications industry. That letter also stated that Bowers intended to work with Genelco to resolve the problems as quickly as possible, and there was a "punch list" of software problems for Genelco to correct attached to the letter. In its second letter to Genelco, dated September 6, 1984, Bowers stated that although Genelco had adequately responded to certain of the punch list items, there were still other items which Genelco had not adequately remedied. Because Genelco failed to resolve certain of the problems, Bowers stated, it had been forced to step in and remedy the problems for Central States. Bowers further informed Genelco that Central States would not make a claim against Genelco for the costs of Bowers' review, but that Central States would deduct the cost of repairs which Bowers was forced to make from its payment to Genelco.

On June 20, 1985, Genelco filed an eight count complaint against Bowers for inducing breach of contract, interference with prospective business advantage, libel, commercial disparagement, and violations of the Consumer Fraud and Deceptive Trade Practices Act. (See Ill.Rev.Stat.1987, ch. 121 1/2, par. 261 et seq.) The trial court, on Bowers' motion, dismissed portions of that complaint, and Genelco filed an amended complaint. That complaint was also dismissed on Bowers' motion and Genelco filed a second amended complaint. Bowers again moved to dismiss the complaint, this time supporting its motion with the affidavit of Dan Bowers, which verified that he had prepared the February 2, 1984 report and the letters of March 23, 1984 and September 6, 1984. The affidavit expressly stated that distribution of the letters was limited to the individuals named on the documents, and that those named were all either employees of Central States, Genelco, Bowers or subcontractors hired by Bowers to assist in the evaluation. Distribution of the report, the affidavit explained, was limited to employees of Central States, Genelco, Bowers and Bowers' subcontractors on this job. The court again dismissed the complaint, without prejudice to Genelco's right to file a third amended complaint. Before filing its third amended complaint, however, Genelco deposed Dan Bowers. Genelco then filed its third amended complaint.

Genelco's third amended complaint, the basis for this appeal, set forth five counts against Bowers: (1) tortious interference with contractual relations; (2) tortious interference with prospective economic advantage; (3) commercial disparagement pursuant to Bowers' letter of March 23, 1984; (4) commercial disparagement pursuant to Bowers' report of February 2, 1984; and (5) wilful and wanton "disregard of Genelco's rights under the contract." Attached to and made part of Genelco's third amended complaint were: the Genelco-Central States agreement, Bowers' report of February 2, 1984, Bowers' letter of March 23, 1984, and Bowers' letter of September 6, 1984. The third amended complaint asserted that Bowers' unfavorable written comments about Genelco were made with actual malice because Bowers was trying to steal Central States' business away from Genelco.

Again Bowers moved to dismiss the complaint. Bowers asserted, as it had previously, that under section 2-619(a)(9) of the Code of Civil Procedure, Genelco's claim against it was barred by a qualified privilege. (See Ill.Rev.Stat.1987, ch. 110, par. 2-619(a)(9).) In addition, Bowers' motion expressly incorporated its previous motions to dismiss, one of which had included the affidavit of Dan Bowers.

After hearing argument by the parties, the transcript reveals that the trial court reviewed in detail the third amended complaint, its prior rulings on Genelco's previous complaints, as well as the applicable case law, and then concluded that consultants such as Bowers possessed a qualified privilege in presenting reports of their findings. The court reasoned that if such consultants were not protected by a qualified privilege, there would be an improper chilling effect upon those hired to render professional judgments. The court concluded that the allegations in the complaint were not sufficient to overcome the privilege, and, accordingly, dismissed the third amended complaint with prejudice.

Genelco now asks us to determine whether the trial court properly dismissed its third amended complaint with prejudice under section 2-619(a)(9) of the Code of Civil Procedure. See Ill.Rev.Stat.1987, ch. 110, par. 2-619(a)(9).

Genelco argues, in its appeal, that the trial court erred when it dismissed Genelco's third amended complaint with prejudice for two basic reasons: (1) Bowers' motion...