Stoll v. United Way of Champaign County, Illinois, Inc. ( 2008 )

Filed 1/23/08 NO. 4-07-0262
IN THE APPELLATE COURT
OF ILLINOIS
FOURTH DISTRICT
JUDITH STOLL, ) Appeal from
Plaintiff-Appellant, ) Circuit Court of
v. ) Champaign County
THE UNITED WAY OF CHAMPAIGN COUNTY, ) No. 06L223
ILLINOIS, INC., an Illinois Not-for- )
Profit Corporation, ) Honorable
Defendant-Appellee. ) Jeffrey B. Ford,
) Judge Presiding.
______________________________________________________________
JUSTICE TURNER delivered the opinion of the court:
In October 2006, plaintiff, Judith Stoll, filed a
breach-of-contract complaint against defendant, the United Way of
Champaign County, Illinois, Inc. (United Way), an Illinois not-
for-profit corporation and plaintiff's former employer. The next
month, the United Way filed a motion to dismiss the complaint
under section 2-619(a)(9) of the Code of Civil Procedure (Proce-
dure Code) (735 ILCS 5/2-619(a)(9) (West 2006)). After a March
2007 hearing, the trial court granted the United Way's motion and
dismissed plaintiff's complaint with prejudice.
Plaintiff appeals, contending the trial court erred by
granting the United Way's motion to dismiss because she (1) had
directly enforceable contractual rights or (2) was a third-party
beneficiary of a contract between the United Way and the labor
union to which she belonged, the American Federation of Labor and
Congress of Industrial Organizations of Champaign County (AFL-
CIO). We affirm.
I. BACKGROUND
In her complaint, plaintiff alleged that in April 2000,
the United Way hired her as an AFL-CIO community-services liaison
(Liaison). On June 24, 2003, she began negotiating with United
Way representatives on a memorandum of understanding, which was
to govern, inter alia, the terms and conditions of her employment
by the United Way as the Liaison. Additional negotiations
occurred on four other dates. As a result of the negotiations, a
memorandum of understanding between the United Way and the AFL-
CIO (Memorandum) was created. After becoming aware of the
Memorandum's contents, plaintiff elected to continue her employ-
ment with the United Way under the Memorandum's terms and condi-
tions.
The Memorandum began by stating it recognized the
desires of the United Way and the AFL-CIO to cooperate in provid-
ing human-care services regardless of demographics or need. The
Memorandum then declared its purpose was "to clearly identify the
intent of all concerned, to assure coordination, and to provide
maximum cooperation and utilization of all resources and efforts
of both organizations." It also outlined the responsibilities,
procedures, and objectives of a full-time Liaison. The Memoran-
dum was effective from July 1, 2003, to June 30, 2007.
The Memorandum did address discipline of the Liaison,
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and provided, in pertinent part, the following:
"[T]he United Way will follow the tenets of
progressive and corrective discipline. Pro-
gressive discipline is intended to correct
employee deficiencies and shall consist of
any or all of the following:
a.) Oral warning
b.) Written reprimand and
remediation plan, as needed
c.) Suspension
d.) Discharge
It is understood by all parties that
severe infractions of United Way policy
and procedures, [c]ode of [e]thics[,] or
violation of law or regulations may lead
to immediate discharge.
* * *
When [the] United Way is contemplating
discipline[,] a pre[]disciplinary meeting
will be held. [The] United Way shall notify
the Liaison and the [AFL-CIO] of the meeting
and the reason(s) for the contemplated disci-
pline. The Liaison shall be informed of
her/his rights to representation by the [AFL-
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CIO] and shall be entitled to representation
at all times during this disciplinary pro-
cess. The Liaison and the [AFL-CIO] shall be
given the opportunity to rebut the reasons
for such contemplated discipline.
In the event disciplinary action is
taken against the Liaison, the United Way
shall promptly furnish the [AFL-CIO] and the
Liaison with written notice of such disci-
plinary action and the reasons therefor."
Additionally, the Memorandum set forth a grievance-
resolution procedure for when a dispute arose regarding the
enforcement of the Memorandum's provisions that affected the
Liaison. The Memorandum also recognized the following:
"The [AFL-CIO] as the exclusive bargain-
ing representative of the Liaison reserves
the right to process disputes on behalf of
the Liaison. The [AFL-CIO] reserves the
right to advance the dispute, withdraw from
representation of the dispute, or consider
the dispute settled at the appropriate step
of the process based on the facts of the
dispute. If the Liaison has a desire to
advance the dispute, including moving the
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issue to mediation between the levels sup-
ported by the [AFL-CIO] s/he may do so at the
Liaison's own expense."
The Memorandum is signed by Mary McGrath, the chair of
the United Way's board of directors; Tamara Lemke, president and
chief executive officer of the United Way; Kevin Sandefur, AFL-
CIO president; and cochairs of the AFL-CIO community services
committee, Dorinda Miller and Mike Spillers.
In March 2005, Lemke placed plaintiff on administrative
leave from her position as Liaison. Prior to placing her on
administrative leave, the United Way had not taken any disciplin-
ary action against plaintiff. In April 2005, Lemke terminated
plaintiff's employment with the United Way. During her entire
employment with the United Way, plaintiff was a member of the
AFL-CIO.
In October 2006, plaintiff filed the instant breach-of-
contract complaint in the trial court, asserting the Memorandum
created a contractual right, enforceable by her, to the disci-
plinary procedures contained in the Memorandum and bound the
United Way to follow those procedures; and thus the United Way
breached the contract by failing to do so. Plaintiff denied
committing any act or infraction sufficient to justify her
termination by the United Way.
The United Way filed a section 2-619 motion to dismiss,
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asserting plaintiff lacked standing to bring the complaint
because plaintiff was not a party to the Memorandum and the
Memorandum contained no provision providing third-party benefi-
ciary status to plaintiff. The United Way filed a memorandum in
support of its motion to dismiss. In January 2007, plaintiff
filed a memorandum of law in opposition to dismiss. Thereafter,
the United Way filed a response to plaintiff's memorandum of law.
In March 2007, the trial court held a hearing on the
United Way's section 2-619 motion to dismiss. After hearing the
parties' arguments and considering their memoranda of law, the
court granted the United Way's motion, finding plaintiff lacked
standing to bring her suit because she was not a party to the
agreement and not a third-party beneficiary. This appeal fol-
lowed.
II. ANALYSIS
In this case, plaintiff challenges the trial court's
dismissal with prejudice of her complaint pursuant to section 2-
619 of the Procedure Code (735 ILCS 5/2-619 (West 2006)). With a
section 2-619 motion to dismiss, the movant "admits the legal
sufficiency of the plaintiff's complaint but asserts an affirma-
tive defense or other matter that avoids or defeats the plain-
tiff's claim." DeLuna v. Burciaga, 223 Ill. 2d 49, 59, 857
N.E.2d 229, 236 (2006). "In ruling on such a motion, the court
must interpret all pleadings and supporting documents in the
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light most favorable to the nonmoving party." Melena v.
Anheuser-Busch, Inc., 219 Ill. 2d 135, 141, 847 N.E.2d 99, 103
(2006). A section 2-619 motion presents a question of law, and
thus our review of the trial court's ruling on the motion is de
novo. DeLuna, 223 Ill. 2d at 59, 857 N.E.2d at 236. Addition-
ally, this court may affirm the trial court's judgment on any
basis that is supported by the record. Krilich v. American
National Bank & Trust Co. of Chicago, 334 Ill. App. 3d 563, 573,
778 N.E.2d 1153, 1163 (2002).
Plaintiff's complaint alleges the United Way, her
former employer, breached the Memorandum when it terminated her
from the Liaison position. Illinois law has established the
presumption that employment contracts are at will and thus
terminable by either party. However, the presumption may be
overcome by showing the parties agreed otherwise. McInerney v.
Charter Golf, Inc., 176 Ill. 2d 482, 485, 680 N.E.2d 1347, 1349
(1997).
A. Policy Statement
Plaintiff asserts that, based on Duldulao v. Saint Mary
of Nazareth Hospital Center, 115 Ill. 2d 482, 505 N.E.2d 314
(1987), the Memorandum created enforceable contractual rights,
and plaintiff was entitled to the disciplinary proceedings set
forth in it. In Duldulao, 115 Ill. 2d at 490, 505 N.E.2d at 318,
our supreme court held an employee handbook or other policy
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statement creates enforceable contractual rights when the tradi-
tional requirements for contract formation are present. The
Duldulao court explained contract formation occurs in such cases
if the following conditions are present:
"First, the language of the policy statement
must contain a promise clear enough that an
employee would reasonably believe that an
offer has been made. Second, the statement
must be disseminated to the employee in such
a manner that the employee is aware of its
contents and reasonably believes it to be an
offer. Third, the employee must accept the
offer by commencing or continuing to work
after learning of the policy statement."
Duldulao, 115 Ill. 2d at 490, 505 N.E.2d at
318.
The court further explained that, under those conditions, the
employee's continued work is the consideration for the promises
contained in the policy statement. Duldulao, 115 Ill. 2d at 490,
505 N.E.2d at 318.
Here, plaintiff fails to allege how the Memorandum was
an offer to her as an United Way employee or that she even
believed it was such an offer. The Memorandum's contents indi-
cate it is an agreement between the United Way and the AFL-CIO to
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provide human-care services through the Liaison. It is signed by
executives of both organizations but not by plaintiff. The
Memorandum set forth the responsibilities, procedures, and
objectives regarding the Liaison position, which was responsible
to both organizations and had to work cooperatively with both of
them. The Memorandum memorialized the United Way and the AFL-
CIO's agreement on how to discipline the Liaison. The Memorandum
in no way indicated it was a policy statement to the Liaison.
Moreover, plaintiff simply alleges she was aware of the
Memorandum's terms at the time of its execution and participated
in the negotiations with the United Way on its terms. She has
not alleged the United Way disseminated the memorandum to her, as
the Liaison, after it was executed. Plaintiff has also failed to
allege any other manner in which the United Way indicated the
Memorandum was an offer to her, as its employee.
We further point out Duldulao involved an employee
handbook created by the employer, which was "'designed to clarify
your rights and duties as employees.'" (Emphasis omitted.)
Duldulao, 115 Ill. 2d at 491, 505 N.E.2d at 319. In Wood v.
Wabash County, 309 Ill. App. 3d 725, 726, 722 N.E.2d 1176, 1177
(1999), the Fifth District also dealt with an employer's person-
nel policy handbook. Such handbooks are written by the employer
for its employees, which is vastly different from this case where
the Memorandum was drafted to memorialize the employer's agree-
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ment with a labor union.
Additionally, we note that, even if Duldulao applies to
employers' contracts with outside parties, we disagree the United
Way disseminated an offer of the employment terms in the Memoran-
dum to plaintiff simply by negotiating the terms of the Memoran-
dum with her as a representative of the outside party. If that
was the case, any employee who assists an employer in drafting an
employee handbook or policy statement could bind the employer to
the terms of the handbook or the statement regardless of whether
the employer ever came up with a final version of the statement
or handbook and/or distributed that final version to the employ-
ees. Such a result is inconsistent with the presumption of
employment at will and Duldulao.
Accordingly, we find the trial court properly concluded
the Memorandum did not vest plaintiff with contractual rights
under Duldulao. Additionally, we note that, even if plaintiff
has contractual rights pursuant to Duldulao, for the reasons
discussed in the next section, the court properly dismissed her
breach-of-contract claim because she failed to exhaust her con-
tractual remedies.
B. Third-Party Beneficiary
Plaintiff also contends she has contractual rights as a
third-party beneficiary of the Memorandum.
We begin by noting the unusual nature of the Memoran-
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dum. In part, the Memorandum defines the working relationship
between the United Way and the AFL-CIO. It also creates the
Liaison position and sets forth the job description, hiring
process, the payment of benefits and union dues, annual salary
increases, the development of a work plan, discipline procedures,
and one job responsibility for that position. Further, the
Memorandum establishes a grievance procedure for resolving dis-
putes regarding application and enforcement of the Memorandum
that affect the Liaison and expressly states the AFL-CIO is the
exclusive bargaining representative of the Liaison. Thus, the
Memorandum is also akin to a collective-bargaining agreement.
Additionally, the Memorandum is not a typical employment con-
tract, as it is an agreement between the employer and the union,
not the employer and employee. Thus, the Memorandum does not fit
neatly into one definitive type of contract.
Assuming arguendo plaintiff is a third-party benefi-
ciary of the Memorandum, the Memorandum contains the aforemen-
tioned grievance procedures. When a collective-bargaining agree-
ment establishes grievance and/or arbitration procedures for
disputes arising out of the agreement, an employee alleging a
violation of the agreement must attempt to exhaust his or her
contractual remedies before seeking judicial relief. See Gelb v.
Air Con Refrigeration & Heating, Inc., 356 Ill. App. 3d 686, 695,
826 N.E.2d 391, 400 (2005). Moreover, in a pre-Duldulao handbook
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case, the Fifth District concluded that, if a college handbook
was a binding contract between the college and a nontenured
teacher, the entire handbook was binding upon the parties, and
thus the teacher had to first pursue the grievance procedures
contained in the handbook. Jackson v. Board of Trustees of
Junior College District No. 530, 22 Ill. App. 3d 898, 901-02,
317 N.E.2d 318, 320-21 (1974). Accordingly, in the area of
employment law, courts have required the parties to exhaust
dispute-resolution procedures in the contract before filing suit.
Moreover, dispute-resolution provisions in other types
of contracts have been found to be a condition precedent to
filing suit. See Ford Motor Co. v. Motor Vehicle Review Board,
338 Ill. App. 3d 880, 885-86, 788 N.E.2d 187, 192 (2003), citing
Mayfair Construction Co. v. Waveland Associates Phase I Ltd.
Partnership, 249 Ill. App. 3d 188, 619 N.E.2d 144 (1993); DeValk
Lincoln Mercury, Inc. v. Ford Motor Co., 811 F.2d 326 (7th Cir.
1987). In Mayfair Construction Co., 249 Ill. App. 3d at 201, 619
N.E.2d at 153, the First District affirmed the conclusion that an
owner materially breached a construction contract by failing to
first submit the dispute between it and the contractor to the
architect as provided for in the contract. In DeValk, 811 F.2d
at 336, the Seventh Circuit found the mediation clause contained
in the contract between the automobile dealership and the manu-
facturer had to be strictly complied with before a party filed
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suit.
Here, section III, paragraph nine of the Memorandum
states that, "[i]f a dispute arises regarding the application or
enforcement of this agreement that affects the Liaison
(employee), the grievance resolution procedure is as follows."
The Memorandum then provides for informal discussions and a
formal, written grievance. The Memorandum defines "grievance" as
"any dispute or disagreement between the parties with respect to
the application, administration[,] or interpretation of the
provisions of this agreement or arising out of matters controlled
by [the] United Way which directly affect wages, hours[,] and
terms and condition of employment." The aforementioned language
makes the grievance procedures mandatory for disputes it covers.
Plaintiff does not argue her claims fall outside the Memorandum's
grievance procedures.
"[T]hird-party beneficiaries generally have no greater
rights in a contract than does the promisee." United
Steelworkers of America v. Rawson, 495 U.S. 362, 375, 109 L. Ed.
2d 362, 377, 110 S. Ct. 1904, 1913 (1990). Thus, since the AFL-
CIO was required to resolve disputes through the grievance pro-
cess, so was plaintiff. Moreover, the Memorandum expressly
grants her the right to engage in the informal grievance proce-
dure and to submit a formal grievance. However, plaintiff con-
tends the following provision gives her the right to advance a
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dispute against the United Way in any manner she chooses: "If
the Liaison has a desire to advance the dispute, including moving
the issue to mediation between the levels supported by the [AFL-
CIO] s/he may do so at the Liaison's own expense." We disagree.
That provision does not, in any way, exempt her from
following the grievance procedures, which is the Memorandum's
dispute-resolution process. Further, the employee-advancement
provision limits the employee's advancement to "levels supported
by the [AFL-CIO]." The Memorandum indicates those levels include
the grievance procedures and mediation. Since plaintiff is not
exempt from the Memorandum's grievance procedures, she was re-
quired to have her dispute addressed by the grievance procedures.
Additionally, plaintiff did not allege any facts estab-
lishing an exception to the exhaustion of contractual remedies,
such as (1) the United Way's repudiation of the contractual
dispute-resolution procedures (see Patterson v. Carbondale Commu-
nity High School District No. 165, 144 Ill. App. 3d 254, 261, 494
N.E.2d 240, 245 (1986)), (2) the futility of proceeding formally
with contractual remedies (see Zelenka v. City of Chicago, 152
Ill. App. 3d 706, 714, 504 N.E.2d 843, 848 (1987)), or (3) the
AFL-CIO's breach of its duty of fair representation (see Gelb,
356 Ill. App. 3d at 695, 826 N.E.2d at 400). We note plaintiff's
statements in her complaint allege United Way repudiated the
Memorandum's disciplinary procedures, not the dispute-resolution
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procedures. Her allegations are similar to those made by the
plaintiffs in Patterson, 144 Ill. App. 3d 254, 494 N.E.2d 240.
In that case, the plaintiffs raised breach-of-contract
claims against their former employer and contended they were not
required to exhaust their contractual remedies because of the
futility of doing so and the former employer's repudiation of the
agreement. The Patterson court concluded the plaintiffs had
alleged their former employer's repudiation of the contract but
not conduct by the former employer amounting to a repudiation of
the contractual procedure set forth for the resolution of dis-
putes. Patterson, 144 Ill. App. 3d at 260-61, 494 N.E.2d at 245.
The court explained the former employer's discharge of the plain-
tiffs did not point to the former employer's unwillingness to
resolve the ensuing dispute by administrative rather than judi-
cial means. Patterson, 144 Ill. App. 3d at 261, 494 N.E.2d at
245. Whether the former employer would have engaged in conduct
amounting to a repudiation of the contractual dispute-resolution
procedure could not be known absent the plaintiffs' attempt to
use it. Patterson, 144 Ill. App. 3d at 261, 494 N.E.2d at 245.
Since the plaintiffs did not allege facts indicative of (1) the
absolute futility of following the grievance procedure in the
agreement under which they sought relief, (2) the defendant's
repudiation of the grievance procedure, or (3) their own attempt
to follow the grievance procedure, the Patterson court concluded
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the plaintiffs were barred from seeking judicial relief and thus
the trial court properly dismissed the breach-of-contract claims.
Patterson, 144 Ill. App. 3d at 260-61, 494 N.E.2d at 244-45.
Like Patterson, plaintiff has alleged the United Way's
repudiation of certain disciplinary procedures in the Memorandum
but failed to allege any conduct by the United Way amounting to a
repudiation of the Memorandum's procedure set forth for dispute
resolution. In her complaint, plaintiff raised no allegations
the United Way refused to comply with the grievance procedure.
Moreover, the complaint is devoid of any indication plaintiff
even made an attempt to resolve this issue under the grievance
procedure. Thus, absent plaintiff's attempt to even use the
grievance procedure, she cannot establish the United Way repudi-
ated the Memorandum's grievance procedure and thus cannot pursue
her claim by judicial means. See Patterson, 144 Ill. App. 3d at
261, 494 N.E.2d at 245.
Accordingly, even if plaintiff has contractual rights
as a third-party beneficiary (or under Duldulao), she cannot
bring a breach-of-contract suit because she did not comply with
the grievance procedures contained in the Memorandum. Thus, the
trial court also properly dismissed her complaint on this con-
tractual theory.
III. CONCLUSION
For the reasons stated, we affirm the trial court's
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dismissal of plaintiff's suit with prejudice.
Affirmed.
STEIGMANN, J., concurs.
MYERSCOUGH, J., specially concurs.
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JUSTICE MYERSCOUGH, specially concurring:
I concur with the majority's result but write sepa-
rately to address the issue of preemption. Despite asking the
parties to discuss preemption at oral argument, and despite the
fact that the majority of the discussion at oral argument con-
cerned preemption, the majority does not address that issue.
Preemption can, as discussed below, have subject-matter
jurisdiction implications. Although United Way did not raise
preemption before the trial court or on appeal, this court has a
duty to sua sponte consider whether jurisdiction exists. See In
re Marriage of Mardjetko, 369 Ill. App. 3d 934, 935, 861 N.E.2d
354, 355 (2007).
Section 301 of the Labor Management Relations Act, 1947
(29 U.S.C. §185 (2000)) preempts state-law claims when the claims
require the interpretation of a collective-bargaining agreement.
See Lingle v. Norge Division of Magic Chef, Inc., 486 U.S. 399,
413, 100 L. Ed. 2d 410, 423, 108 S. Ct. 1877, 1885 (1988).
Moreover, section 301 reaches beyond collective-bargaining agree-
ments and applies to "agreement[s] between employers and labor
organizations significant to the maintenance of labor peace
between them." Retail Clerks International Ass'n, Local Unions
Nos. 128 & 633 v. Lion Dry Goods, Inc., 369 U.S. 17, 28, 7 L. Ed.
2d 503, 510, 82 S. Ct. 541, 548 (1962). The Memorandum between
United Way and the AFL-CIO meets that definition here.
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Whether a preemption defense can be forfeited depends
on the nature of the alleged preemption. The majority of federal
courts addressing the issue have concluded that if preemption
only alters the applicable substantive law, a party can forfeit
the preemption defense by failing to raise it. Wolf v. Reliance
Standard Life Insurance Co., 71 F.3d 444, 449 (1st Cir. 1995);
Dueringer v. General American Life Insurance Co., 842 F.2d 127,
130 (5th Cir. 1988); Johnson v. Armored Transport of California,
Inc., 813 F.2d 1041, 1044 (9th Cir. 1987); Gilchrist v. Jim
Slemons Imports, Inc., 803 F.2d 1488, 1497 (9th Cir. 1986). If,
however, preemption alters the forum applying the law, the de-
fense cannot be forfeited because it is essentially an issue of
subject-matter jurisdiction. See International Longshoremen's
Ass'n v. Davis, 476 U.S. 380, 393-94 n.11, 90 L. Ed. 2d 389, 402-
03 n.11, 106 S. Ct. 1904, 1913-14 n.11 (1986) (holding that
preemption can be raised at any time where Congress has vested
jurisdiction exclusively in the federal courts because the state
court had no power to act).
Therefore, the issue here is whether section 301 pre-
emption affects the choice of forum or the choice of law; that
is, whether section 301 gives federal courts the exclusive juris-
diction over suits for violations of contracts between employers
and labor organizations representing their employees or merely
provides that federal law will apply regardless of the location
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of the suit.
The United States Supreme Court has expressly stated
that federal and state courts have concurrent jurisdiction over
section 301 claims. See Charles Dowd Box Co. v. Courtney, 368
U.S. 502, 506-07, 7 L. Ed. 2d 483, 486-87, 82 S. Ct. 519, 522
(1962). Both state and federal courts, however, must apply
federal law in deciding the claims. See Local 174 v. Lucas Flour
Co., 369 U.S. 95, 102, 7 L. Ed. 2d 593, 598, 82 S. Ct. 571, 576
(1962). Because section 301 provides for the application of
federal law and not exclusive federal jurisdiction, the defense
of preemption under section 301 can be forfeited. See National
Metalcrafters, a Division of Keystone Consolidated Industries v.
McNeil, 784 F.2d 817, 825-26 (7th Cir. 1986) (holding that a
defendant may raise a section 301 preemption argument for the
first time on appeal only in special circumstances); Sweeney v.
Westvaco Co., 926 F.2d 29, 40, (1st Cir. 1991) (section 301
preemption can be forfeited); but see Flanagan v. Comau Pico, 274
Mich. App. 418, 426-27, 733 N.W.2d 430, 435 (2007) (holding that
federal law preempts state law in a dispute governed by section
301 and a party may not forfeit its application). As a result,
United Way forfeited that argument here.
However, in Gelb, a case cited by the majority, the
First District stated that "[s]ection 301 grants exclusive juris-
diction to federal district courts over suits for violations of
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contracts between employers and labor organizations representing
their employees." Gelb, 356 Ill. App. 3d at 692, 826 N.E.2d 398.
At oral argument, both parties asserted that this statement, to
the extent it held that federal courts have exclusive jurisdic-
tion over violations of collective-bargaining agreements, was
wrong. Although Gelb contains the statement that the jurisdic-
tion is "exclusive," the Gelb court did not actually find that
federal courts had exclusive jurisdiction, as the court proceeded
to address the section 301 issue under federal law. Had the Gelb
court meant that jurisdiction was exclusive in the federal court,
the court would have dismissed the cause of action for lack of
subject-matter jurisdiction.
For these reasons, I write to specially concur.
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