Direct Energy Business, LLC v. City of Harvey , 2021 IL App (1st) 200629 ( 2021 )

2021 IL App (1st) 200629No. 1-20-0629
Second Division
May 18, 2021
____________________________________________________________________________
IN THE
APPELLATE COURT OF ILLINOIS
FIRST DISTRICT
____________________________________________________________________________
DIRECT ENERGY BUSINESS, LLC, and ) Appeal from the
DIRECT ENERGY BUSINESS ) Circuit Court of
MARKETING, LLC, ) Cook County.
)
Plaintiffs-Appellees, )
) No. 18 L 8249
v. )
)
THE CITY OF HARVEY, ) Honorable
) Margaret Ann Brennan
Defendant-Appellant. ) Judge, presiding.
____________________________________________________________________________
JUSTICE COBBS delivered the judgment of the court, with opinion.
Presiding Justice Fitzgerald Smith and Justice Pucinski concurred in the
judgment and opinion.
OPINION
¶1 This appeal involves a dispute over payment for electricity provided to defendant, the City
of Harvey (City), by plaintiffs, Direct Energy Business, LLC, and Direct Energy Business
Marketing, LLC (collectively, Direct Energy). When the City refused to pay for some of the
electricity it was provided, Direct Energy filed a complaint alleging one count of breach of contract
and one count of quantum meruit. The circuit court granted summary judgment for Direct Energy
on the breach of contract claim and ordered the City to pay in excess of $1 million. The City now
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appeals, and for the following reasons, we reverse the grant of summary judgment and remand the
matter for further proceedings.
¶2 I. BACKGROUND
¶3 The following facts are taken from the parties’ pleadings, motions, and exhibits.
¶4 Direct Energy is a retail energy provider that supplies gas and power to customers
nationwide, including in Illinois. The City is an Illinois municipality of approximately 25,000
residents located south of Chicago. Prior to 2016, the City contracted with Commonwealth Edison
Company (ComEd) to provide its electricity. In June 2016, Direct Energy began delivering
electricity to the City.
¶5 On August 1, 2018, Direct Energy filed a two-count complaint seeking to recover under a
theory of breach of contract (count I) or alternatively, quantum meruit (count II). The complaint
alleged that the City’s switch from ComEd to Direct Energy occurred pursuant to a written contract
between the parties executed in November 2015. A copy of the purported contract, which was
attached to the complaint, reflects that the City agreed to purchase its electricity from Direct
Energy for a two-year period beginning in May 2016. The document bears the name and signature
of Rufus A. Fisher Jr., identified as the City’s “Director of Public Utilities.” The complaint also
alleged that Direct Energy sent the City monthly invoices for the electricity, which the City paid
without protest until December 2016. However, the City did not pay for electricity that Direct
Energy provided from December 2016 through April 2017.
¶6 The City filed an answer, denying all substantive allegations in Direct Energy’s complaint.
¶7 On November 1, 2019, Direct Energy filed a motion for summary judgment. Attached to
the motion were transcripts from the depositions of Fisher and Louis Williams, the City’s
comptroller.
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¶8 According to the transcripts, Fisher testified that in November 2015 he was employed as
the director of public works for the City, a position he had held since approximately 2011. For
some period prior to November 2015, Fisher had the authority to “sign off on contracts” for the
City, but lost that ability when Williams became comptroller around 2014. When Williams took
over, he informed Fisher that “all contracts for the [C]ity need to go through him.” Fisher further
testified that he had no discussions with Direct Energy or any conversations with City officials
about Direct Energy until the filing of the instant lawsuit. The only conversation Fisher had about
the City’s utility providers was in response to an inquiry from an energy broker he knew as “Mr.
Bob.” Fisher merely explained to “Mr. Bob” that he did not have the authority to enter into an
agreement and referred him to Williams. Fisher denied signing the written agreement attached to
the complaint and denied authorizing anyone to do so on his behalf. 1 He did not know who was
providing the City’s electricity or if the City had ever disputed any charges for electricity.
¶9 Williams testified that he was not a City employee but became an “independent contractor”
in 2014 when the City “outsourced its comptroller function” to his firm. As comptroller, he did
not have the authority to enter into utilities contracts on the City’s behalf. Instead, those contracts
“would have to be approved by the City Council.” Williams believed that the City had always
received its electricity from ComEd until his office started receiving monthly invoices from Direct
Energy in the middle of 2016. Upon receiving those invoices, Williams contacted Direct Energy
and requested a copy of their contract with the City, which was provided. Williams paid the Direct
Energy invoices for five or six months and did not notify Direct Energy that the City disputed any
1
Although Fisher testified that he did not sign the contract, the City did not raise a forgery
argument in the circuit court and conceded at oral arguments that Fisher signed the contract.
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of the charges. At some point, the City requested that Direct Energy close its account, as there was
no valid contract between the parties.
¶ 10 Also attached to Direct Energy’s motion was an affidavit from Holly Fuller, the head of
receivables management for Direct Energy. Fuller averred that the City owed Direct Energy a total
of $1,037,149.54, which represented the sum of (1) $285,383.17 in unpaid invoices for electricity
provided by Direct Energy, (2) $360,383.38 in City debt that Direct Energy purchased dollar-for-
dollar from ComEd, and (3) $391,027.99 in interest.
¶ 11 The City filed a response to Direct Energy’s motion, arguing that summary judgment was
inappropriate because Direct Energy had not shown the existence of a valid contract between the
parties. Specifically, the City contended that any agreement was void because it was not agreed to
by the city council as the municipal corporate authority or by someone who had been delegated
the power to act on behalf of the city council. The City also argued that Direct Energy was not
entitled to summary judgment on its quantum meruit claim because, as the City was unaware of
the change in electricity providers, it did not knowingly accept Direct Energy’s services.
Additionally, the City contended that there remained a question as to the measure of damages
because (1) Direct Energy charged the City for certain facilities that ComEd previously provided
for free and (2) Direct Energy charged the City for a parking lot owned by Metra rather than the
City.
¶ 12 On January 31, 2020, the circuit court entered an order granting Direct Energy’s motion
for summary judgment on the breach of contract claim and entered judgment against the City in
the amount of $1,037,146.54. This appeal followed.
¶ 13 II. ANALYSIS
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¶ 14 This court reviews an order granting summary judgment de novo, meaning that we perform
the same analysis as a trial judge would. Direct Auto Insurance Co. v. Beltran, 2013 IL App (1st)
121128, ¶ 43. Summary judgment is a “ ‘drastic means of disposing of litigation and, therefore,
should be granted only when the right of the moving party is clear and free from doubt.’ ” Id.(quoting Mashal v. City of Chicago, 2012 IL 112341, ¶ 49). Nevertheless, summary judgment is
appropriate where the pleadings, depositions, and affidavits on file establish that there is no
genuine issue of material fact and that the moving party is entitled to judgment as a matter of law.
Id. This court may affirm a trial court’s grant of summary judgment on any basis appearing in the
record, regardless of the trial court’s reasoning. Flores v. Westmont Engineering Co., 2021 IL App
(1st) 190379, ¶ 24.
¶ 15 Where the plaintiff is the party moving for summary judgment, it must show that the
materials relied upon establish the validity of its factual position on all the contested elements of
the cause of action. Direct Auto, 2013 IL App (1st) 121128, ¶ 43. Only if the plaintiff satisfies its
initial burden of production does the burden shift to the defendant to present evidence that there is
a genuine issue of material fact or that the moving party is not entitled to judgment as a matter of
law. Performance Food Group Co. v. ARBA Care Center of Bloomington, LLC, 2017 IL App (3d)
160348, ¶ 18. The burden of persuasion remains with the moving party at all times. Id.¶ 16 Here, Direct Energy’s claim was for breach of contract, the elements of which are that
(1) there was a valid and enforceable contract between the parties, (2) the plaintiff performed the
contract, (3) the defendant breached the contract, and (4) the plaintiff suffered damages as a result.
Id. ¶ 19. “In order to form a valid contract, there must be an offer and acceptance, consideration,
and valid and certain contractual terms.” Lindy Lu LLC v. Illinois Central R.R. Co., 2013 IL App
(3d) 120337, ¶ 21.
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¶ 17 The dispute in this case is focused on the first element: formation. To that end, we first
address Direct Energy’s contention that the City waived its ability to contest that a valid contract
was formed between the parties. Direct Energy argues that, although the City maintains that it
never agreed to purchase electricity from Direct Energy, the City’s “real argument” is that Fisher
lacked the capacity to bind the City to the written agreement, which Direct Energy asserts is an
affirmative defense that must be affirmatively plead. We find that the City did not waive its
challenge to the enforceability of the agreement. The record shows that the City maintained that
there was no valid contract throughout the proceedings below, both in its answer and in response
to Direct Energy’s motion for summary judgment. Nor can Direct Energy seriously claim it was
surprised by the City’s position, as both Fisher and Williams testified in their respective
depositions that Fisher was not authorized to sign contracts on behalf of the City.
¶ 18 In support of its argument that the City was required to affirmatively plead Fisher’s lack of
capacity, Direct Energy cites Oh Boy Grocers v. South East Food & Liquor, Inc., 79 Ill. App. 3d
252, 259-60 (1979), where this court stated that an employee’s alleged lack of authority to sign a
check on his company’s behalf was an affirmative defense that must be plead and proven.
However, Oh Boy is inapposite because the issue there was not whether a contract was formed
between the parties, but whether the defendant company was required to reimburse the plaintiff
where the defendant’s employee wrote a bad check for the delivery of certain goods. See id. at
253-55.
¶ 19 In short, the City’s position is not in the nature of an affirmative defense but rather that
Direct Energy did not produce facts establishing that a contract was formed. As the plaintiff and
moving party, Direct Energy was required to show that a valid and enforceable contract was
formed between the parties, i.e., that the City accepted its offer to provide electricity.
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¶ 20 We find that Direct Energy did not meet its burden. Direct Energy did not present any
evidence demonstrating that the city council, as the municipal corporate authority, was aware of,
much less agreed to, any contract with Direct Energy. Although Direct Energy’s evidence showed
that Fisher signed an agreement and Williams was aware of Direct Energy’s invoices, all of the
testimony in the record was that neither of these individuals had the authority to bind the City to a
contract. “Only the corporate authorities have the power to bind the city in a contract unless that
power is expressly delegated to another.” Chicago Food Management, Inc. v. City of Chicago, 163
Ill. App. 3d 638, 643 (1987). Moreover, the law presumes that those who deal with a municipal
corporation know the limitations on the power of city officials to enter into contracts, and
prospective contractors proceed at their own risk. Patrick Engineering, Inc. v. City of Naperville,
2012 IL 113148, ¶ 36; McMahon v. City of Chicago, 339 Ill. App. 3d 41, 46 (2003). Thus, the
general rule is that “when an employee of a municipal corporation purports to bind the corporation
by contract without prior approval, in violation of an applicable statute, such a contract is utterly
void.” City of Belleville v. Illinois Fraternal Order of Police Labor Council, 312 Ill. App. 3d 561,
563 (2000).
¶ 21 In this case, Direct Energy presented no evidence that the city council approved the written
agreement signed by Fisher, and Direct Energy has therefore failed to show the existence of an
enforceable contract. Although Direct Energy argues that Williams “ratified” the agreement, this
argument is unavailing because Williams did not have the authority to do so. Direct Energy relies
on section 2-16-030 of the Harvey Municipal Code, which provides that “[t]he comptroller shall
have charge of all contracts, judgment orders, notes, bonds and evidences of indebtedness
belonging to the city” and “shall have authority to execute in the name of the city all necessary
releases of claims, settlement of which has been legally authorized.” Harvey Municipal Code § 2-
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16-030(B) (eff. 2016). However, nothing in this provision gives the comptroller the power to form
a contract without the city council’s approval. It is one thing to have “charge” of the City’s rights
and obligations under existing contracts but another to sign those contracts in the first place. In
any event, it remains true that, in the municipal law context, a contract not approved by the
corporate authority is void, rather than merely voidable, and cannot be ratified by subsequent
municipal action. McMahon, 339 Ill. App. 3d at 48; D.C. Consulting Engineers, Inc. v. Batavia
Park District, 143 Ill. App. 3d 60, 63 (1986). Accordingly, Direct Energy is not entitled to
summary judgment on its breach of contract claim.
¶ 22 Alternatively, Direct Energy argues that this court may also award it summary judgment
on its quantum meruit claim pursuant to our authority under Illinois Supreme Court Rule 366 (eff.
Feb. 1, 1994). Quantum meruit, meaning “as much as he deserves,” is a cause of action seeking
recovery for the reasonable value of services that were rendered nongratuitously in the absence of
a contract dictating payment. (Internal quotation marks omitted.) Jameson Real Estate, LLC v.
Ahmed, 2018 IL App (1st) 171534, ¶ 61. The elements of a quantum meruit claim are that (1) the
plaintiff performed a service of measurable benefit to the defendant, (2) the service was not
performed gratuitously, (3) the defendant accepted the benefit of the service, and (4) there was no
written contract prescribing payment for the service. Id.¶ 23 In the municipal context, Illinois courts have traditionally drawn a distinction between
cases in which the municipal corporation was utterly without power to make the contract in
question and cases in which the corporation had the power but exercised it in an irregular way.
D.C. Consulting, 143 Ill. App. 3d at 63. In the former scenario, the contract is void, and the
municipality cannot be held liable. Id. In the latter scenario, however, the contract is merely
voidable, and the plaintiff may recover in quantum meruit. Id. Recently, in Restore Construction
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Co. v. Board of Education of Proviso Township High Schools District 209, 2020 IL 125133, ¶ 38,
our supreme court discussed when a governmental unit may be held liable in quantum meruit
where statutory procedures for awarding contracts were not strictly followed. There, the defendant
school board argued that the plaintiff construction company could not recover in quantum meruit
for services rendered because the board’s contract with the plaintiff did not comply with certain
competitive bidding and formal voting procedures. Id. ¶¶ 34-36. The court held that the plaintiff
could recover in quantum meruit, reasoning that (1) hiring contractors was “unquestionably among
the types of action Illinois school boards are authorized to undertake” and (2) the school board
could not invoke its own failure to comply with legal requirements to avoid paying for services
that were performed in good faith and accepted by the board. Id. ¶¶ 37-41.
¶ 24 This is in stark contrast to the present case, where the invalidity of the contract was not due
to any action or misconduct by the city council. Here, the city council evidently had no
involvement in procuring electricity from Direct Energy whatsoever. Whereas the school board in
Restore Construction was “regularly updated on the progress of the project and willingly accepted
the fruits of [the plaintiff’s] efforts,” there is no indication in the record that the city council was
aware that the City switched electricity providers on Fisher’s approval. Id. ¶ 39. While the council
was undoubtedly aware that somebody was providing municipal facilities with electricity, it would
have had no reason to know that its previous contract with ComEd, which was apparently approved
by the council, had been disturbed. Indeed, the Restore Construction court expressly noted that
that case was not like Patrick Engineering, which presented a situation involving the authority of
a municipal employee to bind a municipality to a contract. Id. ¶ 33. However, the present case is
like Patrick Engineering in that it involves the actions of an authorized municipal employee rather
than the corporate authority itself. In such cases, any contract entered into by the employee is void,
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and the plaintiff may not recover in quantum meruit. See Patrick Engineering, 2012 IL 113148,
¶¶ 38-39; D.C. Consulting, 143 Ill. App. 3d at 63-64. Direct Energy was therefore not entitled to
summary judgment on its quantum meruit claim.
¶ 25 III. CONCLUSION
¶ 26 In sum, Direct Energy was not entitled to summary judgment on its breach of contract
claim because it did not present evidence that it formed a valid and enforceable contract to provide
the City with electricity. Direct Energy is also not entitled to summary judgment on its claim of
quantum meruit because, as its agreement was signed only by a municipal employee without
authority to bind the City, the contract was void rather than merely voidable. Accordingly, we
reverse the judgment of the circuit court and remand for further proceedings.
¶ 27 Reversed and remanded.
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Cite as: Direct Energy Business, LLC v. City of Harvey, 2021 IL App
(1st) 200629Decision Under Review: Appeal from the Circuit Court of Cook County, No. 18-L-8249;
the Hon. Margaret A. Brennan, Judge, presiding.
Attorneys Emanuel C. Welch and ShawnTe Raines, of Ancel Glink, P.C., of
for Chicago, for appellant.
Appellant:
Attorneys Nicholas R. Lawson (pro hac vice) and Jason A. Richardson, of
for McDowell Hetherington LLP, of Houston, Texas, for appellees.
Appellee:
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