HL Miller Mach. Tools, Inc. v. Acroloc Inc., 87-1113.

• Decision Date: 25 February 1988
• Docket Number: No. 87-1113.,87-1113.
• Citation: HL Miller Mach. Tools, Inc. v. Acroloc Inc., 679 F. Supp. 823 (C.D. Ill. 1988)
• Parties: H.L. MILLER MACHINE TOOLS, INC., Plaintiff, v. ACROLOC INCORPORATED and Bayer Industries, Incorporated, Defendants.
• Court: U.S. District Court — Central District of Illinois

679 F. Supp. 823

H.L. MILLER MACHINE TOOLS, INC., Plaintiff, v.ACROLOC INCORPORATED and Bayer Industries, Incorporated, Defendants.

No. 87-1113.

United States District Court, C.D. Illinois, Peoria Division.

February 25, 1988.

Richard Steagall, Nicoara & Steagall, Peoria, Ill., for plaintiff.

John C. Mulgrew, Jr., Davis & Morgan, Peoria, Ill., for defendants.

ORDER

MIHM, District Judge.

Presently before this Court is the Defendants', Acroloc, Inc.(hereafter Acroloc) and Bayer Industries, Inc.'s (hereafter Bayer)Motion to Dismiss and Strike.Acroloc's and Bayer's Motion to Dismiss is fundamentally based upon the allegation that the contract which is the subject of the Plaintiff, H.L. Miller Machine Tool, Inc.'s (hereafter Miller) Complaint was a contract terminable at will, and therefore, Counts I and II of Miller's Complaint cannot be sustained.

Count I of Miller's Complaint is a diversity action for breach of contract against Bayer, a manufacturer of machine tools, and Acroloc, the distributor of Bayer's machines and tools.Count II of the Complaint seeks compensatory and punitive damages for Bayer's and Acroloc's attempt to interfere with Miller's right to receive a commission on a completed sale of machine tools and its' wrongful withholding of payment of an outstanding commission due Miller.There is no dispute between the parties that Illinois law governs this diversity action.

The contract entered into by Miller and Acroloc, which was acting as the agent of Bayer, is critical to the resolution of this pending Motion to Dismiss.Miller alleges that the contract provided that Miller was to act as the "exclusive distributor" for Acroloc products within the entire State of Illinois, the central and eastern portions of the State of Wisconsin, and the northeastern portion of the State of Indiana.

In its Complaint, Miller alleges that the agreement provided that Miller was to undertake his or its best effort to contract with potential customers, promote Acroloc products, and complete sales to ultimate users of the product.Further, Acroloc was obligated to compensate Miller for its efforts with a 15% commission on the sale of each Acroloc machine during the inception period of the contract.In return, Acroloc would provide both training and customer assistance to Miller's employees and potential customers.Additionally, the contract provided a commission increase to 23% per machine at such time when the training and customer services to potential customers were completed, and Miller was completing sales of Acroloc machines at an average of two per month.

Miller alleges that this contract was confirmed in writing on June 19, 1986, by a letter from Patrick Sullivan, an employee of Acroloc, acting in the scope of actual and apparent authority for Acroloc and within the scope of Acroloc's actual and implied authority for Bayer.

Miller alleges that pursuant to the contract, it undertook substantial effort from June of 1986 through November of 1986 to promote Acroloc machines and product line.Miller asserts that these efforts included: (1) preparation of mass mailings to potential customers; (2) preparation of a number of quotations of price to potential users; (3) incurrence of travel expenses in the amount of $1,249.88, for a former Acroloc employee promoting the Acroloc product line; and (4) the payment of salary for a former Acroloc employee, in the amount of $19,261.94.Miller alleges that it fully performed all conditions and obligations pursuant to the contract.Further, Miller asserts that there was an implied obligation upon each party to act in good faith.

In November of 1986, without notice to Miller and allegedly without cause, Acroloc, acting within its scope of actual or apparent agency, terminated the contract.This termination was confirmed on November 24, 1986.

At the hearing held on October 16, 1987, Miller orally requested the Court to consider Sullivan's June 12, 1986 letter, which discussed the compensation agreement between Miller and the Defendants.The Court granted this Motion and has considered it in reaching its decision in this case.

Acroloc's and Bayer's Motion to Dismiss and Strike presents four contentions: (1) the contract entered into between the parties was terminable at will, and therefore, no claim for breach of contract can be sustained; (2) punitive damages are not recoverable in a breach of contract action; therefore, if this Court determines that Count II of Miller's Complaint is requesting punitive damages for breach of contract, it must be dismissed for failure to state a claim upon which relief can be granted; (3) no fiduciary relationship existed between Miller and either Defendant; therefore, to the extent that Count II is requesting compensatory and punitive damages for breach of fiduciary relationship, it must also be dismissed for failure to state a claim upon which relief can be granted; and (4) to the extent that Count II contains references to an offer of compromise, it must be stricken as irrelevant, immaterial, and prejudicial.

None of the parties dispute the fact that the agreement into which they entered is silent as to the specific duration of the agreement.However, this fact gives rise to the point of contention.

Bayer and Acroloc assert that absent an express time of duration for this contract, the contract must be deemed terminable at will.In contrast, Miller asserts that the objective intent of the parties was that the agreement would be of "long standing duration," and that this intent was confirmed by the Sullivan letter.Miller asserts that at the very least, the intention of the parties was that the contract would be enforced for a three year period.

The first and critical issue before this Court is whether the agreement entered into between the parties, which is admittedly silent as to duration, is a contract terminable at will.As a general proposition of law, under Illinois law, contracting parties may terminate at will if their contract contains no specific term of duration.First Commodity Traders v. Heinold Commodities,766 F.2d 1007, 1012(7th Cir.1985).A duration term need not specify a date or period of time; it can identify some event which will signal termination, even if it is not clear, ex ante, when that event will take place.First Commodity Traders v. Heinold Commodities,591 F.Supp. 812, 815-16(1984).

In First Commodity Traders v. Heinold Commodities(hereafter FCT), the defendant contended that the contract between the parties did not contain a duration term.However, the plaintiff contended that the agreement did contain a term, and that the term was set forth in language of the contract which stated: "The parties agreed that the relationship would continue so long as it remained profitable ... and otherwise could be terminated only for cause;""Heinold shall pay compensation to FCT dependent upon profitable operation of the branch office and the total cash and open trade equity of the branch."Id. at 816.

Judge Getzendanner, the district court judge, held that this language in the contract, directed at defining FTC's compensation, did not establish that profitability shall determine the duration of the agreement.Id.Although the court agreed that this language did indicate that the partiesdid not intend to contract terminable at will, the court concluded that in the absence of a cognizable duration term, a contract will be terminable at will by operation of law, whether or not that was the parties' specific intent.Id.

In a slightly different setting, employment contracts, the Illinois courts have addressed to what extent agreements between an employer and employee regarding bonus and annual salary constitute a term of duration.Mann v. Ben Tire Distributors, Limited,89 Ill.App.3d 695, 44 Ill.Dec. 869, 411 N.E.2d 1235(4th Dist.1980).In Mann,the plaintiff, an employee of the defendant, was given a document by his employer which set forth his bonus, which provided for and required calculation on an annual basis.It was determined that the bonus calculation could not be ascertained on a period less than one year.Mann v. Ben Tire Distributors, Limited,44 Ill.Dec. at 870, 411 N.E.2d at 1236.The plaintiff argued that the time span for financial reckoning should be equated with a term for duration of employment.Id.44 Ill.Dec. at 871, 411 N.E.2d at 1237.Further, the plaintiff argued that the employer's promise of annual review indicated the intent of the parties to enter into a one year contract.Id.

The court noted that it is a long standing principle in Illinois that hiring at a monthly, or even an annual salary (if no period of duration is specified), is an employment contract terminable at will.Id.44 Ill.Dec. at 870, 411 N.E.2d at 1236.However, the court recognized that in certain circumstances guarantees made by an employer sufficiently established a term of duration.Id.

Citing to Grauer v. Valve and Primer Corporation,47 Ill.App.3d 152, 5 Ill.Dec. 540, 361 N.E.2d 863(1977), the court stated that a statement by the employer guaranteeing the plaintiff a minimum of $22,500 a year, in addition to statements concerning annual review, constituted a one year contract.Mann v. Ben Tire Distributors, Limited,44 Ill.Dec. at 870, 411 N.E.2d at 1236.The court noted that no such language was present in the Mann agreement.Id.Thus, the court held that whether the document was evaluated within the four corners or with the aid of surrounding circumstances, it was an employment arrangement terminable at will by either party.Id.

In the present case, Miller appears to make an argument similar to the one made in FCT.Miller asserts that the language in the contract, which defines Miller's compensation under the contract, constitutes a term of duration.

It is the Court's opinion that pursuant to the position of the district court in FCT, Miller's contention fails.Recognizing that it may have been...