Opinion ID: 2994671
Heading Depth: 2
Heading Rank: 2

Heading: Houben Cross-Appeal

Text: On her cross-appeal, Houben argues that the district court erred in granting summary judgment for Telular on her fraud and constructive fraud claims. Briefly, the basis for those claims was as follows, taking the facts in the light most favorable to Houben. At the same time as Telular announced the first Motorola contract for the Hungary deal, it secretly decided not to continue employing an in-house sales force, but instead to outsource the sales function and to stop paying commissions to its sales people. It also decided to downsize its workforce more generally. In furtherance of this plan, it terminated its relationship with an outside consultant that had administered its computerized commission payment system. In November 1995, one of Houben’s subordinates asked her what was afoot, because he had seen troublesome documents on another person’s desk. When Houben inquired, however, her supervisor told her (up through mid-January 1996) that nothing will change. Houben continued to perform her job on that assumption. In order to establish fraud under Illinois law, a plaintiff must prove that (1) defendant made a false statement; (2) of material fact; (3) which defendant knew or believed to be false; (4) with the intent to induce plaintiff to act; (5) the plaintiff justifiably relied on the statement; and (6) the plaintiff suffered damage from such reliance. Williams v. Chicago Osteopathic Health Sys., 654 N.E.2d 613, 619 (Ill. App. Ct. 1995); Dresser Indus., Inc. v. Pyrrhus AG, 936 F.2d 921, 934 (7th Cir. 1991). Promissory fraud is a false representation of intent concerning future conduct, such as a promise to perform a contract when there is no actual intent to do so. Doherty v. Kahn, 682 N.E.2d 163, 176 (Ill. App. Ct. 1997). As a general rule, promissory fraud is not actionable in Illinois unless the promise is part of a scheme to defraud. Id. In granting Telular’s motion for summary judgment, the district court reasoned that Houben had failed to present any facts demonstrating that Telular intended to defraud her. In particular, Houben presented no evidence that when Telular promised her that she would receive sales commissions the company in fact had no intention of making those payments. Houben argues that Telular’s decision to restructure its sales operation and stop paying commissions to its salespeople provides the missing evidence of Telular’s intent to defraud her. She also points to company managers’ reassuring statements that nothing would change as further proof of a fraudulent scheme designed to induce her to continue working despite the planned changes in sales force structure and compensation. Like the district court, we find that Houben’s evidence was not enough to create a jury issue on either the question of Telular’s fraudulent intent or the scheme to defraud requirement of promissory fraud. Evidence regardingTelular’s decision not to pay commissions relates to events beginning in October 1995--after the commission plan was released in April 1995 and after Houben’s individual compensation memo was drafted in August 1995. The comment that nothing would change seems to be no more than the general sort of platitude that company managers are prone to utter when a workforce is being restructured. It cannot be stretched into evidence of a fraudulent scheme. And even if the comments could be seen as the kind of intentional and false statements of material fact Illinois requires, Houben’s claim would also fail because she has offered no evidence of any reliance on those statements. Houben’s constructive fraud theory was also properly rejected. Constructive fraud is a breach of a legal or equitable duty that the law declares fraudulent because of its tendency to deceive others, irrespective of the moral guilt of the wrongdoer. Beaton & Associates, Ltd. v. Joslyn Mfg. & Supply Co., 512 N.E.2d 1286, 1291 (Ill. App. Ct. 1987). An essential element of the claim is a breach of duty, especially fiduciary duty. Kohler v. Leslie Hindman, Inc., 80 F.3d 1181, 1188 (7th Cir. 1996). Such a breach can be shown where there is great inequality between the parties. See In re Estate of Neprozatis, 378 N.E.2d 1345, 1349-50 (Ill. App. Ct. 1978). But the mere breach of an employment contract is insufficient to give rise to a claim of constructive fraud. See Gross v. University of Chicago, 302 N.E.2d 444, 453-54 (Ill. App. Ct. 1973) (employer/employee relationship does not create fiduciary duty on the part of the employer). Houben argues that constructive fraud nonetheless applies because Telular was clearly dominant in the relationship: the company had superior knowledge and overmastering influence. See Mitchell v. Norman James Constr. Co., 684 N.E.2d 872, 879 (Ill. App. Ct. 1997). At bottom, however, Houben’s case is indistinguishable from any other case in which an employer allegedly breached an employment contract. She offers no legal authority that would justify treating this breach (assuming that is how it should be viewed for these purposes) differently from any other breach. We therefore find that the district court correctly granted summary judgment on this claim.