Linker v. Allstate Ins. Co.

• Decision Date: 22 July 2003
• Docket Number: No. 1-01-2125.,1-01-2125.
• Citation: 794 N.E.2d 945,276 Ill.Dec. 695
• Parties: Chris LINKER, Richard Hughes, James W. Carson, John Chaney, Jay Flanagan, and Donald Jones, individually and on behalf of all others similarly situated, Plaintiffs-Appellants, v. ALLSTATE INSURANCE COMPANY, an Illinois Corporation, and The Agent Transition Severance Plan, Defendants-Appellees.
• Court: United States Appellate Court of Illinois

794 N.E.2d 945

276 Ill.Dec. 695

Chris LINKER, Richard Hughes, James W. Carson, John Chaney, Jay Flanagan, and Donald Jones, individually and on behalf of all others similarly situated, Plaintiffs-Appellants, v. ALLSTATE INSURANCE COMPANY, an Illinois Corporation, and The Agent Transition Severance Plan, Defendants-Appellees.

No. 1-01-2125.

Appellate Court of Illinois, First District, Second Division.

July 22, 2003.

Rehearing Denied June 13, 2003.

Lawrence Walner & Associates, Ltd. (Lawrence Walner, James T. Nyeste, of counsel), Chicago; Law Offices of Randall J. Wolfe (Randall J. Wolfe, of counsel), Lake Oswego, OR; Gatti, Gatti, Maier, Krueger, Sayer & Associates (Daniel J. Gatti, of counsel), Portland, OR, for Appellants (other than Chris Linker and Richard Hughes).

Sonnenschein, Nath & Rosenthal (Jeffrey P. Lennard, David L. Schiavone, Deborah A. Devaney, Thomas E. Deer, of counsel), Chicago, for Appellees.

Justice BURKE delivered the opinion of the court:

Plaintiffs Chris Linker, Richard Hughes, and the law firms representing them (the Attorneys) filed this appeal from orders of the circuit court denying their request for attorney fees under the common fund doctrine, denying their request for a preliminary injunction to escrow certain funds for fees, denying their motion to reconsider denial of their request for fees and request for escrow, and denying their motion to compel discovery.¹

Plaintiffs James Carson, John Chaney, Jay Flanagan, and Donald Jones (plaintiffs) appeal from an order of the circuit court granting defendants Allstate Insurance Company's and The Agent Transition Severance Plan's² motion to dismiss plaintiffs' putative class action complaint that alleged causes of action for breach of contract and common law fraud.

For the reasons set forth below, we affirm in part, reverse in part, and remand for further proceedings.

STATEMENT OF FACTS

Plaintiffs were employed by defendant, as employees, rather than independent contractors, under various forms of employment contracts, including R830, R1500, and a "General Agent" contract, as agents who sold insurance policies.³ Plaintiffs retired, some early, or terminated their employment with defendant prior to November 1, 1999. Plaintiffs filed the instant class action against defendant seeking damages for breach of contract (count I) and common law fraud (count II), contending that defendant coerced them and others similarly situated to retire from, terminate their employment, or convert to independent contractor status, at a time when defendant knew, but failed to disclose to them that, within a short period of time, it would offer lucrative severance benefits and conversion incentives to individuals who remained employed with defendant.⁴

According to plaintiffs' complaint, defendant conceived a new business plan, as early as December 1998, whereby defendant's customers would purchase policies of insurance through independent contractors, call centers, or the Internet. As part of this plan, defendant would eliminate all of its employee-agents, such as plaintiffs. Plaintiffs alleged that to effectuate this plan, defendant pressured or intimidated as many employees as possible to retire, terminate their employment contracts, or convert to independent contractor status so as to prevent them from being eligible for the benefits of the program it would soon announce. According to plaintiffs' complaint, defendant held meetings with its agency managers as early as July 1999, and advised them of the incentives that were going to be offered to employees later that year. Plaintiffs further alleged that many of the employees, prior to retiring, terminating their employment, or converting to independent contractor status, inquired of the agency managers or human resource representatives as to whether they could sell their books of business or whether any other changes were under consideration. Most plaintiffs were told that no changes were being considered or known of, including being allowed to sell their books of business.

On November 10, 1999, after many employees had terminated their employment with defendant, defendant officially announced its new business plan and offered a severance plan and conversion incentives under its "Agent Transition Severance Plan" (Plan) to those employee-agents remaining with the company. Pursuant to the Plan, all employee employment contracts would terminate no later than June 30, 2000. For those employees who terminated their contracts, retired, or converted to independent contractor status between December 1, 1999, and June 30, 2000, the following options were offered. First, an employee could convert to independent contractor status under defendant's R3100S contract with certain other bonuses being given. Second, an employee could retire or terminate his or her relationship with defendant and either sell his or her books of business or select a severance program. Two severance plans were offered. The first was the base plan in which employees would receive 1 week of pay for each full year of service with defendant, up to 13 weeks, to be paid in 6 monthly installments. The second was the enhanced severance plan in which employees would receive 1 year's pay, to be paid in 24 monthly installments.

On January 11 and 14, 2000, plaintiffs' attorneys sent a demand letter to defendant, seeking the same benefits offered under the Plan for plaintiffs since the severance plan and conversion incentives were under consideration at the time plaintiffs had retired or left defendant's employ. Having received no response from defendant, plaintiffs filed their original class action complaint on April 20. The proposed class included all employee-agents who terminated their employment with defendant, in whatever manner, after December 1, 1998, and who were not offered benefits under the Plan. On May 15, defendant amended its Plan to include employees who had retired or terminated their employment subsequent to June 1, 1999. On May 18, defendant sent a letter to Linker, among others presumably, informing him of the amendment. Linker was advised that if he desired to receive the benefits, he was required to return a signed release to defendant by July 31.

On May 31, plaintiffs filed an emergency motion to compel defendant to provide the names of putative class members with whom defendant had been communicating in connection with the class action and with whom it had made settlement offers, and to permit plaintiffs' attorneys to initiate discovery so that they could properly advise their retained clients and other putative class members. In their motion, plaintiffs alleged that after the class action had been filed, but before the class was certified, defendant made attempts to settle with putative class members, including Linker and Hughes, without communicating with counsel. The trial court denied the motion on June 1. Thereafter, defendant filed a motion to dismiss the class action complaint. In the latter part of July, Linker and Hughes accepted defendant's settlement offer and both signed releases.

On August 1, plaintiffs filed an amended complaint. Carson, Chaney, Flanagan, and Jones were added as representative plaintiffs. The causes of action remained the same. However, The Agent Transition Severance Plan⁵ was added as a party defendant and a cause of action based on a violation of ERISA (count III) was alleged against it and defendant.⁶ On August 8, Linker, Hughes and their attorneys filed a motion for attorney fees pursuant to, inter alia, the common fund doctrine, and a motion for a preliminary injunction to escrow certain funds for fees. Defendants filed a memorandum in opposition to this motion. In addition, on September 15, defendants filed a motion to dismiss counts I and II of plaintiffs' amended class action complaint pursuant to section 2-615 of the Code of Civil Procedure (Code) (735 ILCS 5/2-615 (West 1998)) and a motion to dismiss count III pursuant to section 2-619 of the Code (735 ILCS 5/2-619 (West 1998)). With respect to count I, defendants contended that plaintiffs failed to allege any specific contract provision that was breached and that Illinois does not recognize an independent cause of action for breach of the implied covenant of good faith in at-will employment contracts. With respect to count II, defendants contended that plaintiffs failed to plead with specificity and also failed to plead that defendant owed a special duty to plaintiffs to disclose its proposed Plan to its employees. Plaintiffs thereafter responded to defendants' motion and defendants replied.

On November 1, a hearing was held on plaintiffs' motion for fees. At the hearing, plaintiffs argued that there was a "pot of approximately $10 million" to be paid to 119 former employees. According to counsel, they believed that their demand letter to defendant and the filing of the class action lawsuit prompted defendant to amend its severance plan and to offer benefits to the additional 119 employees. Following the hearing, the trial court denied plaintiffs' motion for attorney fees and for a preliminary injunction.

On November 6, following arguments by counsel, the trial court granted defendants' motion to dismiss. First, the trial court concluded that all employees, including those employed under the R830 contracts, were at-will employees. The court further concluded that there was no independent cause of action for breach of the implied covenant of good faith. The court dismissed count I with prejudice because, given the facts of the case, it did not believe that plaintiffs could cure the defects. With respect to count II, the court dismissed this count without prejudice, finding that plaintiffs failed to plead with specificity and with particularity and also that they failed to plead any special duty on the part of defendant. Plaintiffs were given leave to file a second amended complaint.

On January 16, 2001, plaintiffs filed...