Cromeens, Holloman, Sibert, Inc. v. AB Volvo

In the
United States Court of Appeals
For the Seventh Circuit
____________
No. 01-3770
CROMEENS, HOLLOMAN, SIBERT, INCORPORATED,
a Texas corporation, doing business as CISCO FORD
EQUIPMENT; HAMMER EQUIPMENT SALES, a Canadian
corporation; KEIL EQUIPMENT COMPANY, a New York
corporation; et al.,
Plaintiffs-Appellants,
v.
AB VOLVO, a Swedish corporation; VOLVO EXCAVATORS
AB, a Swedish corporation; VOLVO CONSTRUCTION EQUIP-
MENT NV, a foreign corporation; et al.,
Defendants-Appellees.
____________
Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 00 C 8143—Charles P. Kocoras, Chief Judge.
____________
ARGUED SEPTEMBER 10, 2002—DECIDED NOVEMBER 7, 2003
____________
Before COFFEY, ROVNER and WILLIAMS, Circuit Judges.
ROVNER, Circuit Judge. The plaintiffs sued Volvo for
breach of dealership agreements that each of the plaintiffs
had entered into with Samsung, Volvo’s predecessor. The
district court entered summary judgment in favor of the
defendants because the dealership agreements contained
2 No. 01-3770
clauses permitting termination without cause. The plain-
tiffs appeal and we affirm the judgment except for one
statutory claim brought by one plaintiff. For that claim, we
vacate the judgment and remand.
I.
Between 1992 and 1997, each of the plaintiffs entered into
“Dealer Agreements” with Samsung corporate entities
(either Samsung America, Inc. or Samsung Construction
Equipment America Corporation or Samsung Construction
Equipment Company, all of which we will refer to as
“Samsung”) to become authorized dealers of certain
Samsung products in designated territories. Following the
lead of the parties, we will refer to the plaintiffs as the
Samsung Dealers. The Samsung products covered by the
contracts are listed sometimes specifically as excavators,
wheel loaders, crawler dozers, rubber tired loaders and hy-
draulic excavators, and sometimes generally as “Samsung
Construction Equipment for sale in North America” or
“Samsung Heavy Equipment” or even “all products.” In one
instance, the contract fails to mention the products covered.
In general, though, the contracts make clear that the
Samsung Dealers were authorized to sell Samsung con-
struction equipment.
In 1998, an affiliate of Volvo Construction Equipment
North America, Inc. (“Volvo”) acquired Samsung’s world-
wide construction equipment business. As a result, Volvo
assumed Samsung’s contractual rights and responsibilities,
including the Dealer Agreements. Volvo had an existing
dealership network for similar Volvo-manufactured con-
struction equipment and eventually decided to terminate
some of Samsung’s dealership agreements. In mid-1999,
Volvo began contacting the Samsung Dealers to negotiate
terminations of the Dealer Agreements. Volvo sent the
Samsung Dealers notices that they were terminated or were
No. 01-3770 3
going to be terminated within sixty days pursuant to the
“Termination Without Cause Provision” that is included in
each of the Dealer Agreements. By June 15, 1999, all but
two of the Dealer Agreements at issue here had been
terminated. The remaining two were terminated on Novem-
ber 15, 1999 and December 31, 1999.
The Samsung Dealers took exception to the terminations,
claiming that they had been promised they would not be
terminated so long as they were performing adequately.
They sued Volvo1 in Arkansas state court claiming: (1)
breach of contract; (2) breach of the covenant of good faith
and fair dealing; (3) violations of the Illinois Franchise
Disclosure Act (all of the Dealer Agreements contained an
Illinois choice-of-law provision); (4) violations of the Arkan-
sas Franchise Practices Act; (5) violation of the Texas Farm,
Industrial and Outdoor Power Equipment Dealer Act; (6)
violation of the Texas Deceptive Trade Prac-
tices—Consumer Protection Act; (7) violations of the Maine
Franchise Law for Power Equipment Machinery and
Appliances; (8) violations of a Montana statute that prohib-
its grantors from terminating dealership agreements
without good cause; (9) tortious interference with contrac-
tual relations and prospective economic advantage; (10)
misappropriation; (11) unjust enrichment; (12) estoppel;
and, for good measure, (13) recoupment. Volvo settled with
the only non-diverse plaintiff and then removed the case to
the United States District Court for the Eastern District of
1
They sued a number of Volvo corporate entities, including AB
Volvo, a Swedish corporation; Volvo Excavators AB, a Swedish
corporation; Volvo Construction Equipment NV, a foreign corpor-
ation, Volvo Construction Equipment North America, Inc.; and
Samsung Heavy Industries Company, Inc. The district court dis-
missed all of the defendants except Volvo Construction Equipment
North America, Inc., and the appeal is directed at that one
remaining defendant, whom we will refer to as “Volvo.”
4 No. 01-3770
Arkansas. The district court then granted Volvo’s motion to
transfer the case to the United States District Court for the
Northern District of Illinois. Volvo subsequently moved for
summary judgment.
The district court granted the motion in its entirety. The
court first noted that its jurisdiction rested solely on diver-
sity. Although a court sitting in diversity normally applies
the choice-of-law rules of the state in which it sits, when a
case has been transferred from another district, the court
instead applies the choice-of-law rules that the court in
the transferring state would apply. See Van Dusen v.
Barrack, 376 U.S. 612, 639 (1964). In this case, the district
court noted, an Arkansas choice-of-law provision governed.
Arkansas law provides that the parties to a multistate
transaction may choose their own law so long as it bears
a reasonable relation to the transaction. Arkansas Appli-
ance Distrib. Co. v. Tandy Electronics, Inc., 292 Ark. 482,
485, 730 S.W.2d 899, 900 (1987); Ark. Stat. Ann. § 85-1-
105(1). The parties here chose to apply the law of Illinois.
At the time the parties signed the contract, Samsung Con-
struction Equipment America Corporation was an Illinois
company with its principal place of business in Illinois.
Samsung Construction Equipment Company was a division
of Samsung America, Inc., which was a New Jersey cor-
poration with its principal place of business in Illinois. The
plaintiffs in this diversity suit, of course, are all citizens of
other states and foreign jurisdictions. Although the con-
tracts were later assigned to Volvo, a Delaware corporation
with its principal place of business in North Carolina, the
contracts bore a sufficient connection to Illinois at the time
they were executed to uphold the choice of Illinois law.
There is no evidence, for example, that Samsung sought to
apply the law of Illinois in order to avoid some less favor-
able law in a state more connected to the transactions. See
Tandy, 292 Ark. at 485-86; 730 S.W.2d at 900. The district
court remarked that much of the training and support
No. 01-3770 5
provided to the Samsung Dealers took place in Illinois,
providing an additional connection to the State. Therefore,
as the district court did, we will apply the law of Illinois to
the contracts.
At the time Volvo sought to terminate the Dealer Agree-
ments, five of the seven contracts had already expired
under their own terms. The district court found that for the
five expired contracts, the parties either continued to
operate under the terms of the original agreements or the
relationships became terminable at will. In either case, the
court held, Volvo had a right to terminate the relationships
without cause. The court rejected the Samsung Dealers’
attempt to apply the Illinois Franchise Disclosure Act (the
“IFDA”) to the contracts. The IFDA provides that franchises
may not be terminated without cause, and that parties may
not waive this protection in their contracts. See 815 ILCS §§
705/19, 41. The court found that the IFDA did not apply
because by its own terms it was limited in application to
franchises located within the State of Illinois, and none of
the franchises here were in Illinois. The court also declined
to apply the IFDA because to do so would allow a general
choice-of-law provision to trump a specific contradictory
term of a bargained-for contract between sophisticated
parties. Similarly, the anti-waiver provision of the IFDA did
not help the Samsung dealers, according to the court,
because it applied only to dealerships located within the
State.
The district court rejected the Samsung Dealers’ claim
that Volvo breached the covenant of good faith and fair
dealing by terminating the dealerships without cause be-
cause the contracts provided that the agreements could be
so terminated. To hold otherwise, the court stated, would
allow an implied covenant to replace an express contractual
term. No quasi-contractual relief was available for the
Samsung Dealers because that relief is available only when
there is no express contract between the parties. The claim
6 No. 01-3770
that Volvo tortiously interfered with its own relationship
with the Samsung Dealers failed, according to the district
court, because a party cannot tortiously interfere with its
own contracts. To the extent the Samsung Dealers were
claiming Volvo tortiously interfered with the Dealers’
relationships with their customers, the district court held
that the claim could not survive summary judgment. One of
the elements of tortious interference is that the defendant
must act without justification to induce a breach of contract.
The court found that Volvo merely passed on truthful
information to the Samsung Dealers’ customers, and that
supplying truthful information did not qualify as an
unjustified act. The court did not specifically rule on the
claims related to franchise laws in the states where particu-
lar plaintiffs resided, but granted summary judgment as to
all claims. The Samsung Dealers appeal.
II.
On appeal, the Samsung Dealers maintain that the IFDA
applies to them even though they are located outside of
Illinois. They argue that the IFDA invalidates the “ter-
mination without cause” provisions in each of their con-
tracts, and that the terminations violated the IFDA. They
also contend that the choice-of-law provisions do not void
the additional protections available in the states where
some of the franchises are located. In particular, they ask
us to apply the law of Texas, Maine and Montana, which
each prohibit in-state dealers from waiving statutory pro-
tections. The Samsung Dealers urge us to find that the
terms of the contracts consisted not only of the writings
submitted here but also include oral promises, implied
covenants of good faith and fair dealing, and the course of
dealing among the parties over the course of the relation-
ships. The Samsung Dealers defend their claims for unjust
enrichment and recoupment as allowable pleadings in the
No. 01-3770 7
alternative. Finally, they maintain that their claims for
tortious interference were improperly dismissed.
A.
We begin by addressing whether the protections of the
IFDA are available to the Samsung Dealers. The Dealers
are anxious to apply this statute because it prohibits ter-
minations of franchises without cause. See 815 ILCS
§ 705/19. The Dealers point out that each contract con-
tained a choice-of-law clause specifying that the contracts
would be construed and interpreted in accordance with the
law of the State of Illinois. The IFDA is a provision of
Illinois law but, by its own terms, the IFDA applies only to
franchises located within the State of Illinois. The Dealers
are located in Texas, Maine, Montana, New York, Alberta
and Saskatchewan. Relying on the Restatement (Second) of
Conflict of Laws (“R2d”), the Samsung Dealers argue that
the choice-of-law provision requires the application of the
substantive portions of the IFDA to the agreements but not
the limitations related to territorial scope:
In the absence of a contrary indication of intention, the
reference is to the local law of the state of the chosen
law.
R2d, § 187(3). The commentary of that section further
clarifies:
The reference, in the absence of a contrary indication of
intention, is to the “local law” of the chosen state and
not to the that state’s “law,” which means the totality of
its law including its choice-of-law rules. When they
choose the state which is to furnish the law governing
the validity of their contract, the parties almost cer-
tainly have the “local law” rather than the “law” of that
state in mind.
8 No. 01-3770
R2d, § 187(3), Commentary. Because the parties expressed
no contrary intention, the Samsung Dealers maintain that
they meant to invoke the substantive protections of the
IFDA but not its territorial limitation, which they charac-
terize as procedural and falling outside the bounds of “local
law.”
We agree with Volvo that the commentary to section
187(3) does not exclude territorial limitations from its defi-
nition of local law; rather, the commentary excludes only
choice-of-law rules from local law. A number of courts have
held that a state’s territorial limitations apply even when
that state’s law is selected for application by a choice-of-law
provision. For example, the Sixth Circuit considered the
applicability of the IFDA to a contract between an Illinois
franchisor and an Ohio franchisee. Highway Equip. Co. v.
Caterpillar Inc., 908 F.2d 60 (6th Cir. 1990). The agreement
in that case designated Illinois law as the parties’ law of
choice. The court noted that the Illinois Supreme Court had
stated it would not give extraterritorial effect to Illinois
statutes unless the legislature expressly directed it to do so.
Graham v. General U.S. Grant Post No. 2665, V.F.W., 43
Ill.2d 1, 6-8, 248 N.E.2d 657, 660-61 (1969). When the
Illinois legislature re-enacted the IFDA in 1988, it added a
provision limiting application of the law to franchises
located within Illinois. The Sixth Circuit understood that
amendment as confirmation that the legislature intended
to protect Illinois residents only and therefore declined to
apply the IFDA extraterritorially even to an agreement
requiring the application of Illinois law. Caterpillar, 908
F.2d at 63-64.
Similarly, the Fourth Circuit refused to apply New York
regulatory law to a distributor agreement that contained a
New York choice-of-law provision. Peugeot Motors of
America, Inc. v. Eastern Auto Distributors, Inc., 892 F.2d
355 (4th Cir. 1989), cert. denied, 497 U.S. 1005 (1990). The
No. 01-3770 9
regulatory law was limited by its own terms to distributors
who “sell[ ] or distribute[ ] in this state.” 892 F.2d at 358.
The distributor had never done business in New York. The
court concluded that the regulations could not be applied to
the distributor contract even though the agreement spe-
cified that New York law would apply. Instead the court
turned to New York common law to interpret the contract
at issue. 892 F.2d at 358.
We faced a similar issue regarding the application of
Wisconsin’s Fair Dealership Law (“WFDL”) to a contract
that prohibited product sales in Wisconsin. Generac Corp.
v. Caterpillar Inc., 172 F.3d 971, 973 (7th Cir. 1999). The
contract contained a choice-of-law clause providing that it
“shall be governed by and construed in accordance with the
internal laws of the State of Illinois.” 172 F.3d at 973. The
company producing the products was based in Wisconsin
and had made substantial investments in Wisconsin to
allow it to manufacture products for sale and distribution
elsewhere. Although the company had invested in infra-
structure in Wisconsin, a quirk in the contract prohibited
sales in Wisconsin. The company nonetheless sought to
bring a case under the WFDL. In deciding that case, we
remarked:
We know of nothing that would prevent the Wisconsin
legislature from announcing a particular choice of law
rule for dealership cases in duly enacted legislation.
That, in fact, is what the legislature has done. The
WFDL specifies who can take advantage of its pro-
tections through its definitions of the terms “dealer”
and “dealership,” and thus obviates the need to resort
to general choice of law principles.
Caterpillar, 172 F.3d at 976. We therefore looked to the law
itself rather than to general choice of law rules to determine
if the legislature meant for it to apply. Because the statute
defined “dealer” to mean “a person who is a grantee of a
10 No. 01-3770
dealership situated in this state,” we held that the
protections of the WFDL were available only to dealerships
that do business within the geographic confines of the
states of Wisconsin. This holding was bolstered by the fact
that we had previously concluded that the Wisconsin
Supreme Court would not construe the WFDL to apply
extraterritorially and that therefore a dealer seeking relief
under that statute could not recover damages for lost sales
arising out of the termination of out-of-state dealerships.
172 F.3d at 976.
We are inclined to agree with this line of reasoning. The
plain language of the Illinois law that the Samsung Dealers
seek to apply excludes those same dealers from its coverage
because they are located outside of Illinois. Nothing in the
Restatement suggests a contrary result. The Restatement
excludes from “local law” only the choice-of-law rules of the
state, not any territorial limitations contained in the
statute. The Samsung Dealers paradoxically argue that the
application of the IFDA is required, not by the law of
Illinois, but rather by the intention of the parties. This is a
circle from which the Samsung Dealers cannot successfully
emerge. If they insist (as they must, because the contract
chooses Illinois law) that Illinois law applies, then we must
look to the law of Illinois to determine the scope of applica-
tion. The IFDA limits its scope to franchises located within
the state, and the Samsung Dealers may not claim its
protections.
B.
Certain of the Samsung Dealers claim additional pro-
tections from the franchise laws of the states in which they
are located. Texas, Maine and Montana prohibit in-state
dealers from waiving those states’ statutory protections
against termination without cause. Citing section 187 of the
Restatement (Second) of Conflict of Laws, the Samsung
No. 01-3770 11
Dealers argue that a party’s choice of a certain state’s law
does not preclude the application of statutory protections
within that party’s own state if enforcement of the chosen
state’s law would be contrary to the express public policy of
the state’s law that would otherwise apply. We considered
a similar claim in Wright-Moore Corp. v. Ricoh Corp., 908
F.2d 128, 132 (7th Cir. 1990). Wright-Moore was an Indiana
company that entered into a franchise agreement with a
franchisor incorporated in New York with its principal place
of business in New Jersey. The contract specified that New
York law would govern the agreement. When Ricoh refused
to renew the agreement after it expired by its own terms,
Wright-Moore brought a claim under the Indiana franchise
laws. Indiana law, like Illinois law, prohibits terminations
without good cause, and also prohibits waiver of its
protections. Indeed, the Indiana statute prohibits “limiting
litigation brought for breach of the [franchise] agreement in
any manner whatsoever.” 908 F.2d at 132. Ricoh claimed
economic self-interest as the “good cause” required by the
statute, and also argued that New York rather than Indiana
law should apply under the contractual choice-of-law
provision.
We deferred to the district court’s finding that Indiana
had a strong public policy against allowing contractual
choice-of-law provisions to control the applicability of its
laws to Indiana franchises. But Indiana law, following the
Restatement, permits state public policy to override con-
tractual choice-of-law only if the state has a materially
greater interest in the litigation than the contractually
chosen state. 908 F.2d at 132-33. “Thus, for the Indiana
public policy to control the choice of law, Indiana must have
a materially greater interest in the litigation than does New
York.” 908 F.2d at 133. We concluded that Indiana in fact
had a materially greater interest in the litigation than New
York because the franchisee was incorporated and located
in Indiana, the witnesses and documents relevant to the
12 No. 01-3770
claims were located in Indiana, the contract negotiations
occurred in Indiana, and the contract was, in part, per-
formed in Indiana. Id. New York’s only connection to the
litigation was that the defendant was incorporated there.
We concluded that, because Indiana had a materially
greater interest than New York, and because the applica-
tion of New York law would be contrary to a fundamental
Indiana policy, Indiana franchise law should govern.
Before the district court, Volvo argued that the Texas and
Montana statutes did not apply because the type of equip-
ment covered by the contracts does not come under those
statutes’ protections. Volvo did not argue in the court below
that the Maine statute did not apply to the equipment at
issue. Instead, Volvo contended before the district court
that, even if those statutes applied to the contracts in
question, it had “good cause” to terminate the dealerships
as that term is defined by the Texas, Maine and Montana
statutes. On appeal, Volvo argues for all three states that
the statutes do not apply to the equipment covered by the
contracts, and that even if they did apply, Volvo had good
cause for the terminations. For reasons that are unclear
from the record, the district court did not address whether
Texas, Maine and Montana law would override the choice-
of-law provision in the contracts with franchisees located in
those states.
There are three distinct questions here that must be
answered. First, we must determine whether the Texas,
Maine and Montana franchise statutes apply to the equip-
ment at issue here. Second, using the analysis we set out in
the Ricoh case, we must determine whether the states of
Texas, Maine and Montana evinced a public policy against
allowing choice-of-law provisions to control the applicability
of those states’ franchise laws to the contracts at issue. If
they did demonstrate that public policy, we must determine
whether those states have a materially greater interest in
the litigation than the contractually chosen state of Illinois.
No. 01-3770 13
Third, we must determine whether there is a genuine issue
of material fact regarding Volvo’s asserted good cause for
the terminations. If the statutes do not cover the equipment
detailed in the contracts, there is no need to proceed to the
second and third questions, and so we will begin there.
The Texas statute in question is titled “Farm, Industrial,
and Outdoor Power Equipment Dealer Agreements.” Texas
Bus. & Com. Code Ann. § 19.01 (Vernon 1996). The law
specifies in relevant part:
“Equipment” means farm tractors, farm implements,
utility tractors, industrial tractors, and outdoor power
equipment and the attachments to or the repair parts
for those items.
....
“Outdoor power equipment” means any machinery
operated by an engine or electric power and used in
landscaping or cultivation of land for non-agricultural
purposes, and includes law and garden implements.
Texas Bus. & Com. Code Ann. §§ 19.01(8) & (10) (Vernon
1996). Three of the Samsung Dealers are Texas corpora-
tions with their principal places of business in Texas. They
are Cromeens, Holloman, Sibert, Inc. d/b/a Cisco Ford
Equipment (“Cisco”); Con-Equip, Inc. (“Con-Equip”); and
Con-Equipment, Inc. (“Con-Equipment”). Cisco’s Dealer
Agreement with Samsung specifies the products covered by
the agreement as “Cr. Excavators,” “Wheel Loaders,” and
“Crawler Dozers.” Both Con-Equip’s and Con-Equipment’s
Dealer Agreements cover “Samsung Construction Equip-
ment for sale in North America.” When we compare the
products listed in the contracts with the equipment covered
by the statute, we must conclude that the Texas statute was
not intended to apply to the types of dealerships held by the
Samsung Dealers in Texas. The contracted-for products are
clearly construction equipment and not the farm equipment
contemplated by the Texas statute. We conclude that the
Texas Samsung dealers were not entitled to the protections
14 No. 01-3770
of the Texas law. For that reason, we need not engage in
the conflict-of-law analysis set forth in Ricoh for the Texas
dealers.
We turn next to Montana. The statute there is titled
“Termination, Cancellation, Nonrenewal, or Substantial
Alteration of Farm Implements Dealership Agreements.”
Mont. Code Ann. § 30-11-801 (2001). On reviewing the title,
it should be no surprise that the statute covers dealership
agreements for farm implements:
Farm implement means any vehicle, machine or at-
tachment designed or adapted and used exclusively for
agricultural operations and only incidentally operated
or used on the highways.
Mont. Code Ann. § 30-11-801(7). Only one of the Samsung
Dealers is a Montana corporation, Performance Machinery
Company (“PMC”). PMC’s Dealer Agreement specifies that
the products covered by the agreement are “Samsung Heavy
Equipment.” The Samsung Dealers maintain that some of
the products that PMC purchased from Samsung were sold
to farmers and/or other agricultural operators for the
exclusive use of digging irrigation ditches in farming fields,
and for use in platting land for agricultural use. They
maintain that these sales bring the equipment within the
definition of “farm implement” in the Montana statute. We
agree with Volvo that the use by some farmers of some of
the equipment cannot convert construction equipment into
farm implements. The statute specifies that the equipment
must be designed and used exclusively for agricultural
operations. At best, the Samsung Dealers claim only that
some of the construction equipment was used incidentally
for farming purposes. Because the Montana statute does not
apply to PMC’s Dealer Agreement, we once again forego the
Ricoh conflict of law analysis.
No. 01-3770 15
That leaves Maine. FMS, Inc. (“FMS”) is a Samsung
Dealer incorporated in Maine and with its principal place
of business in Maine. The Maine statute is much broader
than those of Texas or Montana, and it may be for this rea-
son that Volvo did not argue before the district court that
the Maine statute did not apply to the equipment at issue.
Instead, Volvo argued that even if the Maine law applied,
Volvo had good cause to terminate the dealership. The
Maine statute is titled “Franchise Laws for Power Equip-
ment, Machinery and Appliances.” 10 M.R.S.A. §1361. The
products covered by the Maine statute are:
residential, recreational, agricultural, farm, commercial
or business equipment, machinery or appliances that
use electricity, gas, wood, a petroleum product or a
derivative of a petroleum product for operation.
10 M.R.S.A. §1361(8). Samsung’s contract with FMS covers
“All Samsung Construction Equipment for sale in North
America.”
Recall that Volvo failed to raise its claim that the Maine
statute did not apply to the equipment at issue in the court
below until its reply brief on summary judgment. Instead,
Volvo argued that, even if the Maine law applied, it had
good cause to terminate the agreement. The Samsung
Dealers contend that Volvo has waived the issue on appeal,
citing Schoenfeld v. Apfel, 237 F.3d 788, 793 (7th Cir. 2001).
There we held that issues not raised before the district
court are waived on appeal. But Volvo did not completely
fail to raise the issue; it merely raised it late. Because Volvo
raised the applicability of the Maine statute in its reply
brief, the district court was entitled to find that Volvo
waived the issue. As we noted previously, for reasons not
apparent from the record, the district court never ruled on
the applicability of the Texas, Montana and Maine statutes.
On appeal, the Samsung Dealers raised the applicability of
16 No. 01-3770
the Maine law in their opening brief. Although the district
court was entitled to deem the issue waived below, the
Samsung Dealers have waived waiver by raising the issue
here and addressing it substantively. Riemer v. Illinois
Dept. of Transp., 148 F.3d 800, 805 (7th Cir. 1998). Volvo is
therefore entitled to respond at this stage of the proceed-
ings.
The very materials upon which Volvo relies support
the Samsung Dealers’ position. Both the legislative history
of the Maine statute and the single case cited by Volvo
acknowledge that, although the law was initially written to
protect snowmobile dealers, the legislature greatly ex-
panded the statute to protect franchisees selling any
electric or gas-powered equipment, machinery or appliance
(with an exception not relevant here). See Rolec, Inc. v.
Finlay Hydrascreen USA, Inc., 917 F. Supp. 67, 68 (D. Me.
1996); 116th Maine Legislature, 1st Reg. Session, L.S. 364,
Comm. Amend. A, at 7. The Maine statute is broad enough
to encompass Samsung construction equipment for sale in
North America. Therefore, we must address the conflict of
law question and determine whether Maine has articulated
a strong public policy against allowing choice-of-law
provisions to prevail over state statutes, and whether
Maine’s public policy interest is substantially greater than
Illinois’ interest in the outcome of the case. If we answer
both of those question in the affirmative, we must consider
whether there is a genuine issue of material fact regarding
Volvo’s argument that it terminated the FMS dealership for
good cause.
Maine’s public policy can best be determined “not by the
varying opinions of laymen, lawyers, or judges as to the
demands of the interest of the public, but rather, by its
constitution and statutes, and, when cases arise concerning
a matter upon which they are silent, by its judicial decisions
and the constant practice of the government officials. The
No. 01-3770 17
policy must be well defined and dominant and may not be
gleaned from general consideration of supposed public
interests.” American Home Assurance Co. v. Stone, 61 F.3d
1321, 1324 (7th Cir. 1995) (citations and internal quote
marks omitted). The State of Maine has rendered this task
exceedingly easy for us. One section of the Maine franchise
law is titled “Public Policy.”
A contract or part of a contract or activity undertaken
pursuant to a contract in violation of this chapter is
deemed against public policy and is void and unenforce-
able.
10 M.R.S.A. § 1368. Under the section titled “Prohibited
Conduct,” we learn that it is unlawful for a manufacturer
(such as Volvo or Samsung):
B. To cancel, terminate, fail to renew or refuse to con-
tinue a franchise relationship with a distributor or
dealer, notwithstanding the terms, provisions or condi-
tions of an agreement or franchise or the terms or pro-
visions of a waiver, unless a manufacturer:
(1) Has satisfied the notice requirement of section
1366;
(2) Has acted in good faith as defined in this chap-
ter; and
(3) Has good cause for the cancellation, termination,
nonrenewal or noncontinuance; or
C. To terminate, fail to renew or refuse to continue any
franchise relationship with a distributor or dealer, not-
withstanding the terms, provisions or conditions of
an agreement or franchise or the terms or provisions of
a waiver, without good cause. The manufacturer has
good cause for a termination, cancellation, nonrenewal
or noncontinuance as follows.
18 No. 01-3770
(1) Failure by the distributor or dealer to comply
with a provision of the franchise agreement that
is reasonable and of material significance to the
franchise relationship when the manufacturer first
acquired actual or constructive knowledge of the
failure not more than 180 days before the date on
which written notification is given pursuant to
section 1366 is good cause.
(2) If the failure by the distributor or dealer, as
set forth in subparagraph (1), relates to the perfor-
mance by the distributor or dealer in sales or ser-
vice, then good cause is the failure of the distributor
or dealer to carry out effectively the performance
provisions of the franchise when:
(a) The distributor or dealer was notified by the
manufacturer in writing of that failure, the
notification stated that notice was provided of
failure of performance pursuant to this section
and the distributor or dealer was given a rea-
sonable opportunity for a period of not less than
6 months to make good-faith efforts to carry out
the performance provisions;
(b) The failure continued within the period that
began not more than 180 days before the date
on which notification of termination, cancella-
tion or nonrenewal was given pursuant to
section 1366; and
(c) The distributor or dealer has not substan-
tially complied with reasonable performance
criteria established by the manufacturer and
communicated to the distributor or dealer.
(3) There is good cause when the manufacturer and
the dealer or distributor agree not to renew the
franchise.
No. 01-3770 19
(4) There is good cause when the manufacturer dis-
continues production or distribution of the franchise
goods.
10 M.R.S.A. § 1363.2
The Maine statute thus evidences a strong public policy
against contracts that violate the franchise law generally.
When we review the franchise law, we find that manu-
facturers may not terminate or fail to renew without good
cause “notwithstanding the terms, provisions or conditions
of an agreement or franchise or the terms or provisions of
a waiver.” 10 M.R.S.A. §§ 1363(B) & (C). We read this
to mean that Maine law applies even when contracts pur-
port to waive its protections. Maine has thus expressed a
strong public policy against allowing choice-of-law provi-
sions to prevail over state statutes, and we must determine
whether Maine’s public policy interest is substantially
greater than Illinois’ interest in the outcome of the case.
Again, this is not a difficult assessment. Samsung, an
original party to the contracts, was located in Illinois.
Samsung transferred all of its interests to Volvo. None of
the plaintiffs or defendants are citizens of Illinois and none
of the franchises are located here. Maine’s public policy
therefore exceeds Illinois’ interest in the outcome of the
case.
2
Section 1366 provides:
All notices of termination or nonrenewal required by this
chapter must:
1. Delivery. Be sent by registered, certified or other
receipted mail, delivered by telegram or personally de-
livered to the distributor or dealer; and
2. Statement of intent. Contain a statement of intent to
terminate or not renew the franchise together with the
reasons for termination or nonrenewal and the effective
date of the termination, nonrenewal or expiration.
20 No. 01-3770
This means that FMS is entitled to the protections of the
Maine franchise law. Volvo maintains that it had good
cause to terminate or fail to renew the agreements. Volvo
contends that its legitimate business objective of consolidat-
ing its distribution network satisfies the good cause stan-
dard. Volvo also contends that it made a good faith business
decision to withdraw Samsung-brand excavators and
introduce remodeled Volvo-brand excavators, another good
cause reason to terminate under the Maine law. The Maine
statute provides that “[t]here is good cause when the
manufacturer discontinues production or distribution of the
franchise goods.” The Samsung Dealers dispute Volvo’s
characterization of the withdrawal of Samsung products
from the market. According to the Dealers, Volvo made
modest improvements to some of the excavators and
rebranded them but that the excavators essentially con-
tinued to be sold in a form covered by the Dealer Agree-
ments. The Samsung Dealers characterize this as a unilat-
eral decision to rebrand the product rather than a discon-
tinuation of production or distribution of the franchised
goods. At this stage of the proceedings, we believe there is
a genuine factual dispute over whether Volvo had good
cause to terminate FMS, and therefore we vacate and
remand as to FMS only for trial as to the good cause issue
under Maine law.
C.
We have now determined that the Illinois, Texas and
Montana statutes do not provide any additional protections
for the Samsung Dealers. The Maine statute may provide
some additional protection to FMS, the only franchise
plaintiff located in Maine, and we are remanding on FMS’
claims as we described above. All that remains, then, are
the Samsung Dealers’ arguments under the Illinois common
law of contracts. The Samsung Dealers urge us to find that
there is a material issue of fact regarding the terms of the
No. 01-3770 21
Dealer Agreements based on Samsung’s representations to
the Dealers before, during and after execution of the
contracts. In particular, the Samsung Dealers maintain
that the written agreements cannot be read in a vacuum
but must be supplemented with Samsung’s oral representa-
tions and with the course of dealing of the parties over the
course of the relationships. The Samsung Dealers also
contend that the contracts were modified by acquiescence in
the modification through a course of conduct consistent with
acceptance of the changed terms. The Dealers point out that
Volvo continued its relationships with the Dealers even
after the written documents had expired, including some
cases where the agreements expired multiple times. The
Samsung Dealers also continued investing in their dealer-
ships in reliance on promises by Volvo that they would be
given opportunities to continue as exclusive dealers of Volvo
equipment if they performed beyond the terms of the
written agreements. The Samsung Dealers charge Volvo
with breaching the implied covenant of good faith and fair
dealing by terminating the agreements without cause. The
Dealers argue that even without a “for cause” term, the
expectations of the parties temper Volvo’s discretion in
terminating the contracts. They also dispute the district
court’s judgment on their alternative theories of liability
grounded in unjust enrichment and recoupment. Finally,
they argue that their claims for tortious interference should
survive summary judgement because they have provided
sufficient evidence that Volvo was recruiting the Dealers’
customers prior to the contract terminations. Some of these
arguments are variations on a theme and will be addressed
together. We will address the remainder seriatim.
1.
We begin by examining the language of the various Deal-
er Agreements, which are identical in all relevant respects:
22 No. 01-3770
This Agreement may be terminated at any time by
either party without cause by giving at least sixty (60)
days written notice to the other party of such decision
to terminate this Agreement.
R. 32, Ex. 1, ¶ 22.3. The Samsung Dealers do not argue that
this paragraph is ambiguous. Rather, they insist that it
must be read in conjunction with Samsung’s oral assur-
ances that the company would not use this clause unless a
dealer was failing to perform adequately. This is a curious
position for the Samsung Dealers to adopt because the next
paragraph gives Samsung the option to terminate immedi-
ately, without notice, if the Dealers fail to pay Samsung in
a timely fashion, or if there are changes in control at the
dealerships, or if the Dealers breach their obligations to
maintain insurance, among other things. The paragraph
after that allows the company to unilaterally terminate the
agreement on thirty days’ notice if the Dealers fail to meet
sales objectives, fail to maintain inventory and services up
to Samsung’s expectations, or fail to perform their obliga-
tions and duties to customers. R. 32, Ex. 1, ¶¶ 22.4 & 22.5.
These paragraphs thus address the right of Samsung to
terminate if the Dealers are failing to perform adequately.
The termination without cause provision would thus be
meaningless under the Dealers’ reading.
Before we analyze the Dealers’ claims under Illinois com-
mon law, we will quote other relevant contract language.
First, the contract expressly contemplated the expiration of
the Agreement by its own terms:
Nothing contained herein shall be deemed to create any
express or implied obligation on either party to renew
or extend this Agreement or, if the Dealer is continued
as the Company’s dealer, to create any right to continue
such relationship on the same terms and conditions
contained herein. Each party, in its discretion, may
No. 01-3770 23
determine, for any reason whatsoever, not to renew or
extend this Agreement or to continue such relationship
on the terms and conditions contained herein.
R.32, Ex.1, ¶ 22.6. Next, the contract addressed what
meaning to assign any additional transactions that occurred
after the Agreement had formally terminated:
The consummation of any transaction of a type covered
by this Agreement by mutual consent after the expir-
ation or termination thereof shall, unless otherwise
agreed in writing, be governed by the applicable pro-
vision of this Agreement but shall not be construed as
reviving this Agreement or as in any way modifying the
effectiveness of such expiration or prior termination.
R.32, Ex.1, ¶ 23.7. The contract also explicitly rejected oral
modifications and confined the contract to the terms of the
written document:
This Agreement sets forth the entire understanding of
the parties relating to the subject matter hereof and
supersedes all prior agreements and understandings,
whether oral or written. Except for changes by the
Company permitted under this Agreement, no amend-
ment or modification of this Agreement or any portion
thereof shall be valid unless executed in writing by both
parties.
R.32, Ex.1, ¶ 30. Finally, the Agreement specified that de-
lays or failures in exercising rights were not to be construed
as waivers:
Neither the failure nor any delay on the part of any
party hereto in exercising any right, power or remedy
hereunder shall operate as a waiver thereof, or of any
other right, power or remedy, nor shall any single or
partial exercise of any right, power or remedy, preclude
any further or other exercise thereof, or the exercise of
any other right, power or remedy.
R. 32, Ex.1, ¶ 33.
24 No. 01-3770
The Samsung Dealers’ first line of argument encourages
us to use various forms of parol evidence to inform our
reading of the Dealer Agreements. According to the Dealers,
they asked Samsung about the meaning of the “termination
without cause” provision and Samsung assured them, before
signing and again after signing the contracts, that it had no
intention of exercising that option unless the Dealers were
not performing adequately. “Do the job, keep the line” was
the fundamental tenet of the relationship, according to the
Samsung Dealers, and all of the Dealers protest that they
would not have invested hundreds of thousands of dollars
to support the sale of the Samsung line but for their
reasonable expectation that they would be able to continue
their dealerships so long as they adequately performed. In
addition to these oral promises, the Samsung Dealers claim
that the contracts also consisted of terms that arose
through the course of dealing and custom and usage in the
industry. Before Volvo terminated these dealerships, no
Dealer had been terminated except for cause, demonstrat-
ing that terminations could only be for cause, according to
the Dealers. The Dealers also maintain that the contracts
were modified by Samsung’s acquiescence to certain
changes in the relationships. In particular, the Dealers
claim that Samsung’s sale of products to the Dealers even
after the contracts expired by their own terms demon-
strated that the Dealers would be allowed to keep the line
so long as they adequately performed. In sum, the Samsung
Dealers urge us to find that the contracts were supple-
mented by oral statements (made both before and after the
contracts were signed) and the conduct of the parties after
the contracts were signed.
The interpretation or legal effect of a contract is a ques-
tion of law to be determined by the court. Bowers Mfg. Co.,
Inc. v. Chicago Mach. Tool Co., 453 N.E.2d 61, 66 (Ill. App.
2d Dist. 1983). In interpreting a contract, we may not con-
No. 01-3770 25
sider evidence of a prior agreement or contemporary oral
agreement that would contradict the written agreement.
Bowers Mfg., 453 N.E.2d at 64-65.
An agreement, when reduced to writing, must be pre-
sumed to speak the intention of the parties who signed
it. It speaks for itself, and the intention with which it
was executed must be determined from the language
used. It is not to be changed by extrinsic evidence.
Western Illinois Oil Co. v. Thompson, 186 N.E.2d 287, 291
(Ill. 1962). The only exception to this rule is for ambiguous
contracts. Pioneer Trust & Sav. Bank v. Lucky Stores, Inc.,
414 N.E.2d 1152, 1154 (Ill. App. 1st Dist. 1980). Extrinsic
evidence is admissible to show the true meaning of an
ambiguous contract. Id. Determining whether a contract
is ambiguous in the first place is a question of law. “A
contract is ambiguous only if the language employed is sus-
ceptible of different constructions when read in its plain
and ordinary meaning.” Althoff Indust., Inc. v. Elgin Med.
Ctr., Inc., 420 N.E.2d 800, 803 (Ill. App. 2d Dist. 1981).
Thus, before we may consider the Samsung Dealers’
extrinsic evidence, we must determine whether the con-
tracts are ambiguous.
On the issue of termination without cause, the Dealer
Agreements are not ambiguous. The contracts each state
that the agreement may be terminated at any time by ei-
ther party without cause by giving at least sixty days
written notice to the other party. The language could not be
more plain, and the Samsung Dealers have not suggested
any viable alternate meaning. The Dealers urge us to find
that this provision really means that Samsung could
terminate only if the dealers were not performing ade-
quately. Another provision, however, gives Samsung the
unilateral power to terminate for nonperformance on thirty
days’ notice. Samsung’s right to terminate without cause on
26 No. 01-3770
sixty days’ notice (a right which extended to the Dealers as
well, incidentally) must mean what it says or the provision
is rendered superfluous. Moreover, the contracts themselves
provide that they may not be modified orally, and that the
written agreement supercedes all prior oral statements. A
party is not justified in relying on representations outside
of or contrary to the written terms of a contract he or she
signs when the signer is aware of the nature of the contract
and had a full opportunity to read it. Northern Trust Co. v.
VIII South Michigan Assoc., 657 N.E.2d 1095, 1103 (Ill.
App. 1st Dist. 1995) (“A party cannot close his eyes to the
contents of a document and then claim that the other party
committed fraud merely because it followed this contract.”).
Post-signing conduct does not move the Dealers any closer
to rewriting the Dealer Agreements. Again, the contract
itself contains a waiver clause providing that a failure or
delay in exercising a right will not operate as a waiver.
That Samsung had never terminated a Dealer without
cause did not preclude Volvo from using that provision
later. Nor does the sale of products to the Dealers after
some of the Dealer Agreements had expired by their own
terms indicate that the Dealers would never be terminated
except for cause. Again, the contracts provided for the
possibility of transactions occurring after expiration, and
specified that post-termination transactions would
be governed by the applicable provisions of the Dealer
Agreement but would not be construed as reviving the
Agreement or modifying the effectiveness of the termina-
tion. The Samsung Dealers’ citation to Maher & Assoc. v.
Quality Cabinets, 640 N.E.2d 1000 (Ill. App. 2d Dist. 1994),
is unavailing. That case holds that a contract may be
validly modified if the party that did not propose the
changes is shown to acquiesce in the modification through
a course of conduct consistent with acceptance. 640 N.E.2d
at 1007. Here the alleged “change” to the agreements was
No. 01-3770 27
that they could not be terminated without cause. The
change was allegedly brought about by Samsung’s failure to
ever terminate a Dealer without cause and by Samsung’s
continued transactions with Dealers after the expiration of
some of the Agreements. But both of these occurrences were
contemplated by the contract and Samsung never had a
chance to acquiesce to different terms. The change was
never proposed by the Samsung Dealers, and the change
contradicted the written contracts. Termination without
cause was an event that could happen only once for each
Dealer and thus there could be no course of conduct.
Samsung was also following the terms of the written
agreements when it engaged in post-termination transac-
tions with the Dealers. On some occasions, Samsung signed
new agreements with certain Dealers when it intended to
reinstate a fixed-term relationship. Samsung’s conduct
could not reasonably be interpreted as acquiescence under
these circumstances. In sum, we reject the Samsung Deal-
ers’ invitation to rewrite the contracts with extrinsic
evidence because the contracts are unambiguous.
2.
We address next the Samsung Dealers’ claim that Volvo
breached the implied covenant of good faith and fair dealing
by terminating the contracts without good cause. Every
contract contains an implied promise of good faith and fair
dealing between the contracting parties. Northern Trust,
657 N.E.2d at 1104. See also Dayan v. McDonald’s Corp.,
466 N.E.2d 958, 989-90 (Ill. App. 1st Dist. 1984) (a covenant
of good faith and fair dealing is implied into every contract
unless expressly disavowed). Generally, problems involving
the covenant of good faith and fair dealing arise when one
party to a contract is given broad discretion in performance.
Northern Trust, 657 N.E.2d at 1104; Dayan, 466 N.E.2d at28 No. 01-3770
990. The covenant requires a party vested with broad
discretion to act reasonably and not arbitrarily or in a
manner inconsistent with the reasonable expectations of the
parties. Northern Trust, 657 N.E.2d at 1104. Illinois courts
use the covenant to determine the intent of the parties
where a contract is susceptible to two conflicting construc-
tions. Id. This is not such a case.
As we discussed above, the contracts very clearly give the
right to terminate without cause on sixty days’ notice to
both parties. There is no ambiguity and the provision does
not vest a single party with discretion but rather grants
both parties the unfettered right to terminate. Illinois law
holds that parties to a contract are entitled to enforce the
terms to the letter and an implied covenant of good faith
cannot overrule or modify the express terms of a contract.
Northern Trust, 657 N.E.2d at 1104; Jespersen v. Minnesota
Mining & Mfg. Co., 681 N.E.2d 67, 71 (Ill. App. 1st Dist.
1997). “[T]he duty of good faith and fair dealing does not
override the clear right to terminate at will, since no
obligation can be implied which would be inconsistent with
and destructive of the unfettered right to terminate at will.”
Jespersen, 681 N.E.2d at 71.
The Samsung Dealers rely on Dayan for an additional
obligation in the case of franchise agreements. The court in
Dayan was addressing for the first time the Illinois common
law as it related to termination without cause of franchisees
by franchisors. The court noted that a number of other
courts had refused to enforce termination without cause
provisions in franchise agreements, especially where the
franchisor held broad, unilateral powers of termination at
will. 466 N.E.2d at 973. This practice was the result of
judicial concern over longstanding abuses in franchise rela-
tionships, apparently, and the court found that the then-
recently passed (but not retroactively applicable) Franchise
Disclosure Act expressed the same public policy that many
No. 01-3770 29
of these courts had recognized. That is, a franchisor may
not terminate a franchisee without good cause. Id. The
court accepted as good cause for termination any failure by
the franchisee to substantially comply with obligations
under the agreement, but also noted that good cause turns
generally on commercial reasonability. Dayan’s reasoning
does not save the Samsung Dealers’ claims for a few
reasons. First, the cases on which Dayan relied dealt with
contracts that contained no express provision that the
contract could be terminated without good cause. Dayan,
466 N.E.2d at 972-73. The Dealer Agreements each con-
tained an express clause allowing termination without
cause. Second, the Dayan court’s rationale depended in part
on the unilateral nature of the franchisor’s right to termi-
nate without cause, and abuses of that practice. In our case,
both the franchisor and the franchisee hold the right to
terminate. We have no doubt that if Volvo began producing
an inferior product, the Samsung Dealers would be here
enforcing their right to terminate the franchise agreements.
The clause protected both parties in the event that
Samsung’s business was sold. Third, later cases in Illinois
clarify that the duty of good faith and fair dealing cannot
override an express term of a contract. Northern Trust, 657
N.E.2d at 1104; Jespersen, 681 N.E.2d at 71. In short, Volvo
cannot be held to have breached the covenant of good faith
and fair dealing for simply enforcing the contracts as
written.
3.
The Samsung Dealers sought relief on quasi-contractual
grounds in the alternative. They claimed that Volvo was
unjustly enriched by the Dealers’ substantial investments
of time and money in building up business for Samsung
(and subsequently Volvo) products. They complain that they
30 No. 01-3770
relied on Samsung’s promises of continued business so long
as they performed adequately. As a result of their efforts,
the Dealers believe that Volvo has been unjustly enriched
by co-opting the product lines that had been developed by
the Dealers for Volvo’s own dealership network. The
Dealers also brought a claim for recoupment. The substance
of that claim is that the Dealers invested considerable
resources into the establishment of dealerships for
Samsung’s products and Volvo then terminated the dealer-
ships without giving the Dealers an opportunity to recoup
their investment.
The district court granted summary judgment on the
Samsung Dealers’ claims for unjust enrichment and
recoupment on the grounds that, in Illinois, quasi-contrac-
tual relief is available only where there is no express con-
tract between the parties. We agree. “Quasi-contractual
relief is available when one party has benefitted from the
services of another under circumstances in which, according
to the dictates of equity and good conscience, he ought not
to retain such benefit.” Barry Mogul & Assoc., Inc. v.
Terrestris Dev. Co., 643 N.E.2d 245, 251 (Ill. App. 2d Dist.
1994). But a plaintiff may not pursue a quasi-contractual
claim where there is an enforceable, express contract be-
tween the parties. Id.; Wagner Excello Foods, Inc. v. Fearn
Int’l, Inc., 601 N.E.2d 956, 964 (Ill. App. 1st. Dist. 1992)
(promissory estoppel not available when parties have
entered a binding contract on the same subject matter).
“Quasi-contract is not a means for shifting a risk one has
assumed under a contract.” Barry Mogul, 643 N.E.2d at
251-52 (quoting Industrial Lift Truck Serv. Corp. v.
Mitsubishi Int’l Corp., 432 N.E.2d 999, 1002 (Ill. App. 1st
Dist. 1982)). The Samsung Dealers signed an unambiguous
contract that gave both parties the right to terminate
without cause on sixty days’ notice. They cannot now use
quasi-contractual theories to shift the risk that they know-
ingly assumed. They misconstrue the doctrine of pleading
No. 01-3770 31
in the alternative. Under that doctrine, a party is allowed
to plead breach of contract, or if the court finds no contract
was formed, to plead for quasi-contractual relief in the
alternative. Once a valid contract is found to exist, quasi-
contractual relief is no longer available.
4.
Finally, the district court granted summary judgment in
favor of Volvo on the Samsung Dealers’ claims for tortious
interference. The Dealers argue that they had valuable
long-term relationships with their customers and with
Samsung and Volvo. They claim to have invested heavily in
their commercial relationships with Samsung, Volvo, their
customers and prospective customers in reliance on
Samsung’s representations. The Dealers claim a two-fold
tortious interference with contract and prospective eco-
nomic advantage. First, they maintain that Volvo’s cancella-
tion of the Dealer Agreements amounted to tortious in-
terference with the Dealers’ customers. They also contend
that Volvo contacted the Dealers’ customers to encourage
them to buy products from Volvo dealers rather than from
the Samsung Dealers, even prior to terminating the Dealer
Agreements.
Second, they argue that the termination of the Dealer
Agreements constituted tortious interference with the
contractual relationships between Volvo and each of the
Dealers. This latter argument is easily addressed. A party
may not be charged with tortious interference with respect
to its own contract. That is, termination of the Dealer
Agreements by Volvo cannot constitute tortious interference
by Volvo because Volvo is a party to those contracts. See
Douglas Theater Corp. v. Chicago Title & Trust Co., 681
N.E.2d 564, 567 (Ill. App. 1st Dist. 1997) (“a party cannot
tortiously interfere with his own contract; the tortfeasor
must be a third party to the contractual relationship”).
32 No. 01-3770
The Dealers’ other theory requires a little more analysis.
It is unclear from the Dealers’ briefs and even from the
complaint whether the Dealers are claiming interference
with customer contracts or with prospective contracts with
customers. The elements of the tort of intentional interfer-
ence with contractual relations are: (1) the existence of a
valid and enforceable contract; (2) the defendant’s aware-
ness of the contractual relation; (3) the defendant’s inten-
tional and unjustified inducement of breach of the contract;
(4) a subsequent breach by the other contracting party
caused by the defendant’s wrongful conduct; and (5)
damages resulting from the breach. Hi-Tek Consulting
Services, Inc. v. Bar-Nahum, 578 N.E.2d 993, 997 (Ill. App.
1st Dist. 1991). On reviewing these elements, we note that
the Dealers have not alleged or presented any evidence that
customers breached already-existing agreements because of
Volvo’s conduct. Thus they cannot make out a claim for
tortious interference with contract.
The Dealers’ claims seem instead to be more in the nature
of interference with prospective business or economic
advantage. The elements of that claim are: (1) the plaintiff’s
reasonable expectation of entering into a valid business
relationship; (2) the defendant’s knowledge of the plaintiff’s
expectancy; (3) purposeful or intentional interference by the
defendant that prevents the plaintiff’s legitimate expec-
tancy from ripening into a valid business relationship; and
(4) damages to the plaintiff resulting from the interference.
Soderlund Bros., Inc. v. Carrier Corp., 663 N.E.2d 1, 7-8 (Ill.
App. 1st Dist. 1995). The Samsung Dealers have arguably
established material questions of fact on each of these
elements.
Volvo counters with two arguments. First, Volvo main-
tains that the Samsung Dealers’ claims are barred by the
Illinois economic loss rule, sometimes called the Moorman
doctrine. See Moorman Mfg. Co. v. National Tank Co., 435
N.E.2d 443, 453 (Ill. 1982) (a plaintiff may not recover for
No. 01-3770 33
solely economic loss under the tort theories of strict liabil-
ity, negligence and innocent misrepresentation). We can
dispense with this argument easily. The Moorman doctrine
does not apply to actions for intentional interference with
contract or intentional interference with prospective busi-
ness advantage. See 2314 Lincoln Park West Condo. Assoc.
v. Mann, Gin, Ebel & Frazier, Ltd., 555 N.E.2d 346, 352 (Ill.
1990) (collecting cases).
Second, Volvo maintains that the third element of inten-
tional interference with prospective business advantage
requires a plaintiff to prove that the defendant acted with-
out legal justification or with malice in preventing the
plaintiff’s expectancy from ripening into a valid business
relationship. See IK Corp. v. One Fin. Place P’ship, 558
N.E.2d 161, 172 (Ill. App. 1st Dist. 1990) (requiring inten-
tional and malicious interference to establish the tort). See
also Bar-Nahum, 578 N.E.2d at 997 (“[l]ack of legal justifi-
cation for the conduct of the defendant is essential
in establishing a claim for tortious interference with con-
tractual relations.”). Other cases characterize this as an
affirmative defense, holding that a defendant may have
a privilege to compete that defeats an action for intentional
interference with prospective business advantage.
Soderlund Bros., 663 N.E.2d at 8. “The privilege to engage
in business and to compete allows one to divert business
from one’s competitors generally as well as from one’s par-
ticular competitors provided one’s intent is, at least in part,
to further one’s business and is not solely motivated by
spite or ill will.” Id. One court characterized interference as
“justified” when it is done to protect one’s financial interest,
or to further one’s own goals. IK Corp., 558 N.E.2d at 172.
Whether it is an element of the claim or an affirmative
defense, if the Samsung Dealers are unable to demonstrate
a genuine issue of material fact on that point, their claim
cannot survive summary judgment.
34 No. 01-3770
A defendant is entitled to the protection of the privilege
of competition provided that the defendant has not em-
ployed a wrongful means or is not motivated solely by
malice or ill will. Soderlund Bros., 663 N.E.2d at 10. The
crux of the Samsung Dealers complaint is that Volvo
“recruited” the Dealers’ customers prior to the time of
termination. That is, Volvo encouraged the Dealers’ custom-
ers to buy products from Volvo dealers rather than from the
Samsung Dealers. The Samsung Dealers state without
citation to the record that they have provided sufficient
evidence to establish that Volvo recruited the Samsung
Dealers’ customers prior to the time of termination. We
could affirm the grant of summary judgment on this failure
of evidence alone, but we will address the claim in sub-
stance because Volvo responds to the Dealers’ citations to
the record in the district court. Volvo states that the Deal-
ers’ claim is based on Volvo’s truthful statements to the
customers that Samsung-brand excavators would no longer
be available, having been replaced by new, redesigned Volvo
products that would be sold by Volvo dealers. The Samsung
Dealers do not challenge this characterization of the
evidence in their reply brief, and this is fatal to the claim.
“There is no liability for interference with a prospective
contractual relation on the part of one who merely gives
truthful information to another.” Soderlund Bros., 663
N.E.2d at 10. Volvo’s statements to the customers were true
and were protected by the privilege of competition. Without
any evidence to the contrary, the Samsung Dealers’ claim
for tortious interference with prospective business advan-
tage cannot survive summary judgment.
III.
We therefore affirm the district court’s grant of summary
judgment with respect to all of the claims except for FMS’s
No. 01-3770 35
statutory claim under Maine law. That claim we remand to
the district court for further proceedings consistent with
this opinion. Costs are awarded to the defendants on all
claims except in the case of FMS’s statutory claim under
Maine law. As to that claim, each party shall bear their own
costs.
AFFIRMED IN PART, VACATED AND REMANDED IN PART.
A true Copy:
Teste:
________________________________
Clerk of the United States Court of
Appeals for the Seventh Circuit
USCA-02-C-0072—11-7-03