In the

United States Court of Appeals

For the Seventh Circuit

No. 16-1063

RILEY J. WILSON, on behalf of himself

and all others similarly situated,

Plaintiff-Appellant,

v.

CAREER EDUCATION CORPORATION,

Defendant-Appellee.

Appeal from the United States District Court for the 

Northern District of Illinois, Eastern Division.

No. 1:11-cv-05453 — Geraldine Soat Brown, Magistrate Judge.

ARGUED SEPTEMBER 23, 2016 — DECIDED DECEMBER 22, 2016

Before RIPPLE, ROVNER, and SYKES, Circuit Judges.

ROVNER, Circuit Judge. Riley Wilson sued Career Education

Corporation (CEC) alleging that CEC owed him the payment of

bonuses for students that he had recruited, as an admissions

representative, to CEC’s culinary arts college. This is the second

appeal by Wilson in this case. Wilson initially argued that he

was entitled to the bonuses under numerous legal theories,
2 No. 16-1063

including that: (1) CEC breached its employment contract with

him by failing to pay the bonuses; (2) CEC was unjustly

enriched; and (3) CEC violated an implied covenant of good

faith and fair dealing that is implicit in the contract. In his first

appeal to this court, we upheld the dismissal of the claim on the

first two grounds, but a majority held that the complaint

survived dismissal on the claim that CEC violated the implied

covenant of good faith and fair dealing. Wilson v. Career Educ.

Corp., 729 F.3d 665 (7th Cir. 2013) (Wilson I). We remanded for

further proceedings on that claim.

The facts underlying the case are set forth in detail in our

earlier opinion, and will only be briefly summarized here.

Wilson worked for CEC as an admissions representative

recruiting students to enroll in CEC’s culinary arts college.

Under the incentive compensation provision in his contract

(called the Plan) with CEC, Wilson was entitled to a bonus for

each student that he recruited above a definite threshold who

either completed a full course or a year of study. If a representative was terminated, he was entitled only to bonuses already

earned, which would not include students “in the pipeline”

who had enrolled but had not yet completed a full course or a

year of study as of the date of the representative’s termination.

Moreover, the Plan explicitly reserved to CEC the right to

“terminate or amend the terms of this Plan at any time, for

regulatory compliance purposes or any other reason that CEC

determines, in its sole discretion.” Accordingly, Wilson would

have been entitled to a bonus only as to recruited students

above his minimum threshold who completed the full course or

a year of study, during a time at which he remained employed,
No. 16-1063 3

and at a time in which CEC had not exercised its discretion to

terminate the Plan before those conditions were met.

In October 2010, the Education Department released

regulations that would become effective in July 2011, that

would prohibit institutions such as CEC which were participating in Title IV student financial aid programs from providing

bonuses based directly or indirectly on securing enrollment.

Accordingly, as of July 2011, CEC would be prohibited from

paying bonuses under the Plan. CEC did not wait until July

2011 to cease the payment of bonuses, however. Instead, after

internal discussions, CEC decided to pay only bonuses that

were earned as of February 28, 2011, thereby depriving Wilson

of bonuses that were in the pipeline at that time. In place of the

incentive compensation structure, CEC implemented a revised

compensation program. That program provided to every

currently employed admissions representative a raise in base

salary of at least the total of 3% plus 75% of his or her previous

two years’ bonuses. Some representatives received higher

compensation under the revised plan, while others fared worse.

Wilson sued on behalf of himself and others similarly situated;

the only claim still remaining is his claim that the decision to

terminate the bonus payments in February 2011 constituted a

breach of the implied covenant of good faith and fair dealing. 

A majority held in Wilson I that CEC had the unambiguous

right to terminate the contract and to refuse to pay the bonuses

for students in the pipeline. Id. at 671. Although CEC retained

the right to terminate the contract, we further held that under

the implied covenant of good faith and fair dealing, CEC’s

discretion to terminate the Plan and refuse to pay the unearned

bonuses was limited by the reasonable expectations of the
4 No. 16-1063

parties. Id. at 673. Accordingly, we held that Wilson could

succeed in his claim if he could prove that CEC exercised its

discretion in a manner contrary to the reasonable expectations

of the parties. Id. at 675 (citing Jordan v. Duff & Phelps, Inc.,

815 F.2d 429, 438 (7th Cir. 1987)).

Wilson argued to the district court on remand that cost

savings, not the desire to comply with the regulations, was the

primary driver in CEC’s decision to terminate the Plan in

February 2011. But the district court rejected that argument,

holding that the facts did not support it. Among the facts

refuting Wilson’s contention, the court identified as most

significant that Wilson admitted there were no cost savings to

CEC, and that the alteration in the compensation structure left

macro-costs stagnant. The court held that there was no evidence

that CEC retained for itself $5 million in bonus payments that

were due admissions representatives, as Wilson alleged.

Because no reasonable jury could conclude that CEC chose

February 28 as the date to end the Plan bonuses in order to

retain the bonuses for itself, the court granted CEC’s motion for

summary judgment. Wilson now appeals that determination to

this court.

As we recognized in Wilson I, an avowedly opportunistic

decision to terminate bonuses would not comport with the

reasonable expectations of the parties. Id. at 675, citing Jordan v.

Duff & Phelps, Inc., 815 F.2d 429, 438 (7th Cir. 1987). Thus, if CEC

used the excuse of the impending regulations to prematurely

terminate the bonuses in a “money grab” unrelated to any

legitimate business expectations, that arbitrary termination of

bonuses would violate the objectively reasonable expectations

of the parties. The parties could reasonably expect that alter-
No. 16-1063 5

ations in the Plan terms would be made in good faith, although

the good faith requirement is a limited inquiry:

The element of good faith dealing implied in a

contract ‘is not an enforceable legal duty to be

nice or to behave decently in a general way.‘

[citation omitted] It is not a version of the Golden

Rule, to regard the interests of one's contracting

partner the same way you regard your own. An

employer may be thoughtless, nasty, and mistaken. Avowedly opportunistic conduct has been

treated differently, however.

Jordan, 815 F.2d at 438. If CEC used the impending regulation

as an excuse to avoid payments arbitrarily, that would be the

type of avowedly opportunistic conduct that would evince a

lack of good faith and fair dealing. Thus, “it was reasonable for

Wilson to expect that avoiding the three conditions needed for

Wilson to earn a bonus on a recruited student would not be the

but-for reason for CEC exercising its discretion.” Wilson I,

729 F.3d at 675. Wilson argues that CEC’s decision to terminate

the Plan was made in violation of the covenant of good faith

and fair dealing in that it was inconsistent with Wilson’s

reasonable expectation that CEC would not terminate the Plan

early and that CEC acted with improper motivation.

As regards the first argument,Wilsonacknowledges that the

inquiry is an objective one, with the proper focus on whether

the decision was inconsistent with the objectively reasonable

expectations. In arguing that this standard was met, Wilson

relies on evidence that: CEC had historically paid for all Plan

compensation; CEC had never made substantive Plan changes
6 No. 16-1063

during the period of performance; CEC promoted the Plan in

late 2010 as if it was going to continue paying through 2011; and

Wilson was surprised that the Plan was ending early. The last

factor rested on Wilson’s testimony that he did not think the

Plan would be terminated early and that “it was a big surprise”

to him. But the determination as to whether an expectation is

reasonable is an objective not a subjective determination. If

Wilson’s belief that the Plan would not be terminated or altered

was not objectively reasonable, it would not matter that he

actually held that belief. 

The other arguments essentially amount to a contention that

the Plan had never made changes in the past and had given no

indication it was about to do so, and therefore any alteration in

the Plan defied Wilson’s objectively reasonable expectations.

The failure of CEC to alter the Plan terms earlier did not create

a reasonable expectation that it would never do so given the

language in the contract preserving that right. Aswe recognized

in Wilson I, the contract by its plain language makes clear that

bonuses are only actually earned once the student has completed the academic program or one year of study. In short, a

reasonable expectation that the Plan will be continued cannot

arise solely from CEC’s failure to exercise that option earlier or

its failure to provide six months’ notice of the termination.

Nothing in the contract or the dealings between the parties

would render such an expectation reasonable. 

Moreover, in Wilson I, the majority held that under the plain

language of the contract, Wilson could not have reasonably

expected that CEC would only terminate the bonuses for good

cause because the express terms of the Plan preclude such an

expectation. Id. at 675. We recognized in Wilson I that CEC may
No. 16-1063 7

have had a number of reasons, including but not limited to

regulatory compliance, for terminating the Plan early and

refusing to pay bonuses that otherwise would have been earned

before the new regulations became effective. It was not objectively reasonable for Wilson to expect that CEC would never

exercise that option, or would do so only by following a certain

notice procedure not required by the Plan, simply because it

had failed to exercise the option in the past. Wilson has pointed

to no evidence that CEC explicitly disavowed any intention to

exercise its rights under the Plan in the future, and in fact the

evidence in the record established that Wilson expected that the

bonuses would be terminated but he hoped it would happen at

a later date. Wilson’s argument that CEC promoted the Plan as

if it was going to continue paying cannot create an expectation

that the provision will never be changed. Because the bonuses

are earned only after a long period of time, the reality is that at

any point in which the bonuses were eliminated, some of the

payments would likely be in the pipeline at that time. 

Significantly, Wilson does not argue that CEC promoted the

recruitment bonus at a time at which it knew it would not pay

the bonuses. It is undisputed that throughout the summer and

fall of 2010, when the recruitment that would trigger the unpaid

bonuses was occurring, there was no consensus among the CEC

leadership as to when the Plan should be terminated. The

timing of the termination was a topic of debate within CEC,

with termination dates ranging from December 2010 to June

2011 proposed. Given the impending regulations, CEC’s

employees certainly knew that the bonuses would end, and in

fact an interoffice memorandum to its admissions representatives in June 2010—before the start of the third quarter—stated
8 No. 16-1063

that CEC was reviewing the incentives compensation rules

proposed by the Department of Education. In addition, on

November 2, 2010, the CEO informed all employees of CEC that

the Plan would need to change in order to comply with the

Department of Education rules issued on October 29, 2010.

Nothing in CEC’s past conduct or its statements to the employees gave them a reasonable expectation that the bonuses would

be paid right up to the regulatory deadline. The decision to

terminate bonuses as of February 2011 was not made until early

December 2010, and was immediately communicated to the

admissions representatives. Although Wilson may have

reasonably expected that CEC would not promise a bonus

which it intended to withdraw before payment, there is no

allegation of such behavior here. See Trovare Capital Group, LLC

v. Simkins Industries, Inc., 794 F.3d 772, 779 (7th Cir. 2015) (can

show violation of implied covenant of good faith and fair

dealing by demonstrating the party had no intention of completing the deal but continued the sham negotiations). Given

the contract language, Wilson could not reasonably expect that

bonuses would not be terminated prior to the July 2011 effective

date of the regulation.

Wilson additionally argues that he demonstrated that the

termination of the bonus was made in bad faith. He asserts that

the district court failed to credit his evidence on summary

judgment, and that he provided evidence that the actual reason

for CEC’s action was because of its deteriorating financial

condition rather than the regulation. 

As we stated, if CEC chose to use the impending regulation

and the need to end the bonuses in July as an excuse to terminate it early merely to deprive its employees of their bonuses,
No. 16-1063 9

without any business necessity or otherreason than an intent to

exploit the opportunity, such an action could be beyond the

reasonable expectation of the parties that the employer would

act in good faith and change the Plan only for a legitimate

reason. Wilson argues that CEC acted in bad faith because it

altered the salary structure in response to its deteriorating

economic condition, and not because of the impending regulation. We noted in Wilson I, however, that the mere presence of

a reason other than the regulation does not itself render the

actions in bad faith. Wilson I, 729 F.3d at 676 (noting that CEC

might have had a number of reasons to terminate the Plan early,

but the stated reason raised questions given the timing of the

termination). The relevant question is whether that reason

demonstrates bad faith, or is the type of reason that would be

beyond the reasonable expectations of the parties.

Wilson argues that he should survive summary judgment

because he provided sufficient evidence that CEC terminated

the bonuses because it was facing an economic crisis and

eliminated the bonuses to save money. The district court

characterized the undisputed evidence as indicating that no

money was saved by the changes to the bonuses because the

salary structure was changed so that employees received higher

base salaries plus salary increases that correlated with 75% of

their bonus average for the past two years. The record appears

to bear out that conclusion. Even if we accept Wilson’s characterization of the record, however, that CEC acted to cut expenses in response to an economic crisis, that is precisely the

type of reason that employees would reasonably expect would

result in an alteration of salary. The covenant of good faith and

fair dealing requires only that discretion be exercised reason-
10 No. 16-1063

ably with proper motive rather than arbitrarily or capriciously

or in a manner inconsistent with reasonable expectations.

McCleary v. Wells Fargo Sec., LLC, 29 N.E.3d 1087, 1093 (Ill. App.

Ct. 2015); Resolution Trust Corp., v. Holtzman, 618 N.E.2d 418, 424

(Ill. App. Ct. 1993). A need to address a significant financial

crisis is unquestionably a proper—as opposed to arbitrary or

capricious—motive for a business. 

The contract reserved the right to terminate the Plan and

retain unearned bonuses at any time, and it would be objectively unreasonable for Wilson to believe that such discretion

would not be exercised where a changing business climate

significantly worsened the financial condition of the company.

A business that retains the right to alter salaries of a compensation structure cannot be said to have acted in bad faith when it

does so in times of a substantial financial downturn. 

Wilson himself argues that CEC in fact faced such a financial

downturn and that the termination of the bonuses was enacted

to cut costs in response to that. In his brief, Wilson asserts that

CEC was faced with decreasing student admissions and a

concomitant decline in revenues. He states that the second

quarter of 2010 reflected a weaker financial performance, the

third quarter was worse, and the downward trend continued

into the fourth quarter of 2010. He further states that in the

meantime, costs were increasing. He argues that CEC saw

where the business was heading, particularly with the growing

hostility to for-profit schools, knew that it would face increasing

financial pressure, and viewed the termination of the Plan as a

way to manage those issues. Wilson asserts that whether CEC’s

decision to terminate the Plan was entirely cost-savings driven,

or because it wanted to be perceived as a good corporate
No. 16-1063 11

citizen, or because it wanted to synchronize its payment and

performance reviews with the other employees, it made that

decision in bad faith because it was done at the expense of its

employees and redirected those funds to its own corporate

interests. But an employer does not act in bad faith when acting

in furtherance of legitimate corporate interests that would

reasonably have been in the contemplation of the parties. See

McCleary, 29 N.E.3d at 1093, quoting RBS Citizens, Nat’l Assoc.

v. RTG-Oak Lawn, LLC, 943 N.E.2d 198, 207 (Ill. App. Ct. 2011))

(the purpose of the duty of good faith and fair dealing “‘is to

ensure that parties do not take advantage of each otherin a way

that could not have been contemplated at the time the contract

was drafted or do anything that will destroy the other party’s

right to receive the benefit of the contract.’”). Wilson already

lost his breach of contract claim and therefore cannot merely

allege that the bonuses were owed to him and that CEC could

not properly retain it. A termination of bonuses to address a

financial downturn, or to mitigate the damage to reputation or

salary structure caused by the impending regulation, is not an

action that can be characterized as being in bad faith or beyond

the objectively reasonable expectations. Those are all legitimate

business reasons for altering a salary and compensation

structure, and a decision based on such reasons could not

violate the objectively reasonable expectations of the parties.

We note that the relevant issue here is not whether CEC was

forthcoming in stating that the termination of the bonuses in

February 2011 was due to the regulations rather than acknowledging that the timing related to its financial peril. Instead, the

proper issue is whether CEC eliminated the bonus for an

improper motive. We held in Wilson I that the claim could
12 No. 16-1063

proceed beyond the dismissal stage because the timing of the

termination cast doubt on CEC’s claim that the motive was

compliance with the regulation. Wilson I, 729 F.3d at 676.

Although that timing left open the possibility of an improper

motive, Wilson on summary judgment argues that the record

reveals the actual motive, which was to address its precipitous

financial decline. But having a different motive than the one

expressed to its employees does not violate the contract’s

implied duty of good faith and fair dealing. The relevant

question is whether that actual motive was improper and

whether the termination failed to comport with the parties’

reasonable expectations. Wilson does not argue that CEC in fact

did not face financial difficulties, or that an alteration in the

salary structure was unnecessary to address that problem; to

the contrary, Wilson argues that CEC actually faced a serious

financial decline. Wilson has failed to argue that the evidence

allows a jury to infer an improper motive, as opposed to a proper

motive different from the one expressed to its employees.

Accordingly, even accepting Wilson’s characterization of the

record, the evidence is insufficient to allow a jury to reasonably

conclude that CEC breached the implied covenant of good faith

and fair dealing. 

The decision of the district court granting summary judgment to the defendant is AFFIRMED.