Gordon v. Matthew Bender & Co., Inc.

• Decision Date: 29 April 1983
• Docket Number: No. 82 C 4570.,82 C 4570.
• Citation: 562 F. Supp. 1286
• Court: U.S. District Court — Northern District of Illinois
• Parties: Joel GORDON, Plaintiff, v. MATTHEW BENDER & COMPANY, INC., a New York corporation, Defendant.

562 F. Supp. 1286

Joel GORDON, Plaintiff, v. MATTHEW BENDER & COMPANY, INC., a New York corporation, Defendant.

No. 82 C 4570.

United States District Court, N.D. Illinois, E.D.

April 29, 1983.

Lionel G. Gross, Freda J. Levenson, Altheimer & Gray, Chicago, Ill., for plaintiff.

Lawrence A. Reich, Philip C. Lederer, Lederer, Reich, Sheldon & Connelly, Chicago, Ill., for defendant.

MEMORANDUM OPINION AND ORDER

WILLIAM T. HART, District Judge.

The plaintiff Joel Gordon ("Gordon"), a citizen of Illinois, has brought a twelve-count First Amended Complaint ("complaint") against Matthew Bender & Company, Inc. ("Matthew Bender"), a New York corporation with its principal place of business in New York. The Court has subject matter jurisdiction based on diversity of citizenship and the existence of a federal question. 28 U.S.C. §§ 1331 and 1332. Now before the Court is Matthew Bender's motion to dismiss eight of the twelve counts of the complaint. For the reasons given below, the motion is granted in part and denied in part.

Facts

The Court here will briefly review the facts common to all counts of the complaint, and will discuss the facts relevant to each particular contested count below.

Gordon began working for Matthew Bender on November 5, 1973, as one of its law book sales representatives in a territory which included parts of Chicago and the surrounding areas. The employment agreement between Gordon and Matthew Bender stated no definite period during which the parties remained obligated to each other. Gordon developed into a commendable employee who reached or exceeded the goals set for him by his employer.

On July 24, 1980, Gordon was informed by his superior at Matthew Bender that his territory would be reduced on September 1, 1980. On October 7, 1980, he was told that he would be terminated if he failed to achieve in his new territory the same sales goals which had been set for the territory he worked in prior to the September 1 change. Thus though Gordon's territory had been diminished, his sales goals remained the same. He did not meet the goals and was fired on January 8, 1981.

Counts IV and V of the complaint allege violations of the Age Discrimination in Employment Act, 29 U.S.C. §§ 621 et seq. Count VII alleges that Matthew Bender has failed to pay Gordon commissions due him. Count X alleges an action for an account stated. Matthew Bender has answered these four counts by denying the essential allegations, and has moved to dismiss the balance of the complaint.

Each of the eight counts Matthew Bender challenges here allege causes of action which arguably arise under state law. The parties have not expressly addressed the initial issue of which state's law applies. However, Gordon and Matthew Bender each have relied heavily on Illinois decisions. Further, Gordon is a citizen of Illinois who has worked for Matthew Bender in this state. The Court assumes that Illinois law governs the state law causes of action asserted here.

The standard applied by a federal court in ruling on a motion to dismiss a complaint for failure to state a claim upon which relief may be granted, brought under Fed. R.Civ.P. 12(b)(6), is stated in Conley v. Gibson, 344 U.S. 41, 45-46, 78 S.Ct. 99, 101-02, 2 L.Ed.2d 80 (1957): "A complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." In ruling on Matthew Bender's motion to dismiss, the Court applies this firm principle.

Count I

In addition to the general allegations described above, Gordon states that "Matthew Bender maliciously manipulated circumstances to make Mr. Gordon's job impossible and that this bad faith conduct of Matthew Bender is actionable ..." (Plaintiff's Response, at 6). In Count I, Gordon claims to sue under both tort and contract theories for the breach by Matthew Bender of its duty and covenant, implied in law, to deal with Gordon in good faith. He says that in Illinois, "every contract includes a duty of good faith and fair dealing. `Even though the express words are absent, performance in good faith will be implied by the court.' (Dasenbrock v. Interstate Restaurant Corp. (1972), 7 Ill.App.3d 295, 300, 287 N.E.2d 151, 154, leave to appeal denied, 55 Ill.2d 601.)." Pierce v. MacNeal Memorial Hospital Association, 46 Ill.App.3d 42, 51, 4 Ill.Dec. 615, 622, 360 N.E.2d 551, 558 (1st Dist.1977).

In this case, Gordon and Matthew Bender had an employment contract terminable at will by either party at any time (see discussion and rulings on motions to dismiss Counts II and VI, infra). The essence of Gordon's legal argument is that Matthew Bender's alleged breach of the obligation (implied in law) to deal in good faith creates an independent cause of action. No decision of which this Court is aware has held this to be true. Instead, the principle of performance in good faith comes into play in defining and modifying duties which grow out of specific contract terms and obligations. It is a derivative principle.

The four cases which Gordon cites (none of which deals with the "good faith" obligation in the context of an at will employment) point to this conclusion. See Pierce, supra, 4 Ill.Dec. at 622, 360 N.E.2d at 558 (defendants required by settlement agreement to obtain legal opinion; "good faith and fair dealing" principle is an aid in interpreting a specific contractual obligation); Stevenson v. ITT Harper, Inc., 51 Ill.App.3d 568, 9 Ill.Dec. 304, 310, 366 N.E.2d 561, 567 (1st Dist.1977) (plaintiff fired prior to vesting date for receiving pension benefits; Pierce principle "does not aid plaintiff because the record does not suggest that plaintiff's termination was a bad faith effort by ITT Harper to avoid its conditional duty under the contract to pay pension benefits."); Ledingham v. Blue Cross Plan for Hospital Care, Inc., 29 Ill.App.3d 339, 330 N.E.2d 540, 548 (5th Dist.1975), rev'd on other grounds, 64 Ill.2d 338, 1 Ill.Dec. 75, 356 N.E.2d 75 (1976) (in a "life and health insurer-insured relationship there is a duty upon both parties to act in good faith and deal fairly with the other party to the contract.");¹ Hardin v. Eska Company, 127 N.W.2d 595 (Iowa 1964) (the defendant granted plaintiff the exclusive right to market items in a specific territory and then began to compete in that same territory, thereby destroying the basis of plaintiff's bargain; "good faith" obligation prevents defendant from interfering with plaintiff's firm contract right).

Thus none of the cases upon which Gordon relies hold that in the context of an employment at will, the obligation to deal in good faith which is implied in law is an independent basis for an action. A very recent decision of the New York Court of Appeals squarely holds that no such cause of action will lie.

In Murphy v. American Home Products Corp., No. 35 (N.Y. March 29, 1983), the plaintiff, whose employment was for no definite duration, was fired. Murphy brought suit alleging several theories for recovery, including a tort action for wrongful discharge and a breach of contract action for the employer's breach of the obligation, implied in law, to deal with an employee in good faith. The court first found that no action for wrongful discharge of an employee at will could be stated under New York law. It then went on to address the plaintiff's assertion

that in all employment contracts the law implies an obligation on the part of the employer to deal with his employees fairly and in good faith and that a discharge in violation of that implied obligation exposes the employer to liability for breach of contract.

Slip op. at 10. While holding that New York law recognizes that an obligation of good faith and fair dealing may be implied in a contract, the court stated:

In such instances the implied obligation is in aid and furtherance of other terms of the agreement of the parties. No obligation can be implied, however, which would be inconsistent with other terms of the contractual relationship. Thus, in the case now before us, plaintiff's employment was at will, a relationship in which the law accords the employer an unfettered right to terminate the employment at any time. In the context of such an employment it would be incongruous to say that an inference may be drawn that the employer impliedly agreed to a provision which would be destructive of his right of termination. The parties may by express agreement limit or restrict the employer's right of discharge, but to imply such a limitation from the existence of an unrestricted right would be internally inconsistent.

Slip op. at 11 (emphasis added).

The decision in Murphy strongly suggests that this Court has correctly interpreted the nature of the obligation to deal in good faith, implied in all Illinois contracts. Such an obligation "is in aid and furtherance of other terms of the agreement of the parties." Id. It does not create an independent cause of action. See also Martin v. Federal Life Ins. Co., 109 Ill.App.3d 596, 65 Ill.Dec. 143, 150, 440 N.E.2d 998, 1005 (1st Dist.1982) (the good faith and fair dealing principle "is essentially used as a construction aid in determining the parties' intent"; court dismisses tort action based on alleged bad faith termination of employment at will).

Illinois, like New York, does not allow for an action based on a discharge from an employment at will (except in certain circumstances, discussed infra with regard to Count VI, which are not applicable here). If the implied obligation to deal in good faith created such a cause of action, it would eviscerate the at will doctrine altogether. Murphy v. American Home Products, supra. The Court believes that Murphy reflects the decision an Illinois court would reach on these facts.

Since Gordon was an at will employee, the duty to deal in good faith was appended to nothing which had independent life. Therefore no cause...