Court Opinion

ID: 2788619
Source: CourtListenerOpinion
Date Created: 2015-03-23 22:02:50.423752+00
Date Added: 2024-06-11T11:28:47.250790
License: Public Domain

2015 IL App (1st) 141287

                                                                             SECOND DIVISION
                                                                             March 17, 2015

No. 1-14-1287

THOMAS S. McCLEARY,                                          )      Appeal from the
                                                             )      Circuit Court of
                      Plaintiff-Appellant,                   )      Cook County
                                                             )
v.                                                           )      No. 13 L 9097
                                                             )
WELLS FARGO SECURITIES, L.L.C.,                              )      Honorable
                                                             )      Sanjay T. Tailor,
                      Defendant-Appellee.                    )      Judge Presiding.

       JUSTICE PIERCE delivered the judgment of the court, with opinion.
       Presiding Justice Simon and Justice Neville concurred in the judgment and opinion.

                                             OPINION

¶1     Plaintiff, Thomas McCleary, appeals the dismissal of his amended complaint under

section 2-615 of the Code of Civil Procedure (Code) (735 ILCS 5/2-615 (West 2012)).

McCleary's amended complaint alleged claims for breach of contract, violation of the Illinois

Wage Payment and Collection Act (Act) (820 ILCS 115/2 (West 2012)) and unjust enrichment.

We find plaintiff's amended complaint pled sufficient facts that, if proven, would entitle him to

relief. Therefore, we reverse the judgment of the circuit court and remand the cause for further

proceedings.

¶2                                    BACKGROUND

¶3     Plaintiff's complaint against his former employer, defendant Wells Fargo Securities,
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L.L.C., seeks payment of an earned bonus he reasonably expected that defendant awarded to

similarly situated employees. Defendant moved to dismiss the complaint pursuant to section

2-615 of the Code arguing that, pursuant to its bonus plan, it had full discretion to deny plaintiff

a bonus and that plaintiff had not pursued all internal procedures to dispute defendant's decision.

The circuit court allowed the parties to conduct limited discovery related to the motion to

dismiss. Thereafter, with leave of court, plaintiff filed an amended complaint. We restate the

following factual allegations that are relevant to the issues on appeal.

¶4       In October 2010 plaintiff was hired by defendant as a director of sales. As part of his

compensation, he was eligible to participate in the "Wells Fargo Securities Group Bonus Plan"

(Plan). In July 2012, 1 his job was eliminated for reasons unrelated to his performance. There is

no dispute that his termination did not affect his eligibility under the Plan.

¶5       The Plan's stated purpose was to, inter alia, "attract, retain, motivate and reward eligible

team members ('Participants') for their successful efforts and significant contributions" to the

achievement of defendant's annual financial goals and to ensure that participants comply with

"all rules, laws, regulations and procedures" applicable to their job and "strive[ ] to appropriately

reward [p]articipants for their achievements." Other than Plan participants, "[n]o other individual

shall have rights to incentive compensation under this Plan." In order to qualify for a bonus

under the Plan, certain factors existed and participants had to satisfy stated job-related factors.

These factors included: achievement of corporate and practice group financial goals, a

participant's performance ratings, compliance with the terms of the Plan, and execution of a trade

1
 The parties agree that although his job was actually eliminated in May 2012, the termination was not effective until
July 2012.

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secret agreement. The Plan was effective through December 31, 2012 and the participant was

required to be employed on the date of the bonus payment, unless the participant's employment

was terminated in a qualifying event. A participant "whose employment was terminated prior to

the end of the Performance Period, due to a qualifying event *** may be considered for a pro-

rated award" if the participant "(1) performed services in an eligible position for at least three

calendar months during the Performance Period and (2) met some [or] all of his/her performance

objectives." The Plan further provided that the notice period in the "Salary Continuation Pay

Plan" would be included in determining whether services were performed "for at least three

calendar months during the [p]erformance [p]eriod." Incentive goals and incentive opportunity

would "generally be pro-rated."

¶6     Once the plan administrator was authorized by corporate management to create a bonus

pool, "annual awards under the Plan [were] made in the sole and absolute discretion of the Plan

Administrator." Those awards could be "adjusted or denied for any reason," including the failure

to meet performance goals and adhere to company policy. Further, "[t]here [was] no guarantee

that a bonus of any amount will be awarded to any [p]articipant." The administrator "ha[d] full

discretionary authority to administer and interpret the plan." The Plan included specific criteria

for the creation of a bonus pool for each work group and delineated a formula for determining

which employees qualified for a bonus. Participants wishing to dispute their award were directed

to attempt to resolve the dispute with their unit manager. If the dispute was not resolved, then the

participant could request review by the plan administrator.

¶7     Although the Plan could be amended, suspended or terminated at any time, no such

change "shall adversely affect a [p]articipant's earned award under the Plan prior to the effective

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date of the amendment, suspension or termination, unless otherwise agreed to by the

[p]articipant." Any amendment that materially altered the terms of the Plan "shall be announced

on or before the effective date of the change." The Plan provided that "it is not an employment

contract" and "[n]o rights in the Plan may be claimed by any person whether or not she/he is

selected to participate in the Plan." Lastly, the Plan provided that if "a court of competent

jurisdiction determine[d] that a Plan provision is illegal or void, the remaining provisions shall

be legally enforceable."

¶8     At the time of his termination, plaintiff was informed by an agent of defendant that his

termination did not disqualify him from participation in the Plan and, if a 2012 bonus pool was

created, he would be included. Prior to his termination, plaintiff's performance met or exceeded

the legitimate expectations for his position and he met the necessary standards set forth in the

plan to qualify for a 2012 bonus. A bonus pool was created and other similarly situated

employees were paid performance bonuses for the 2012 calendar year. Plaintiff, who no longer

worked for defendant at the time of the bonus awards, was not awarded a performance bonus

under the Plan.

¶9     Plaintiff requested an internal company review of defendant's decision. In response,

defendant informed plaintiff that although plaintiff was eligible under the Plan, in deciding

whether to award a bonus, defendant retained "absolute discretion" to determine a bonus award

based on a "number of factors" and ultimately determined that plaintiff would not receive a 2012

bonus payment. Despite several requests by plaintiff and his counsel, defendant did not identify

the factors that influenced its decision. The Plan did not include any internal procedure for

disputing defendant's decision, so plaintiff filed this suit to collect payment under the Plan.

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Subsequent to filing the instant action, defendant explained in sworn testimony that it did not

award plaintiff a bonus because, after his termination, defendant decided that "any employee in

the Markets Division displaced prior to May 31, 2012 would not be paid any bonus because such

employees had not contributed sufficiently to the overall bonus pool as a result of working less

than half of the year."

¶ 10   Plaintiff alleged that the Plan provided that it was "legally enforceable" and the failure to

include him in the bonus pool and pay him a prorated bonus for the 2012 performance year was a

breach of the parties' agreement, including "the prohibition on unannounced and retroactive

amendments" as well as the obligation of good faith and fair dealing. Plaintiff also alleged that

defendant's failure to pay the bonus violated the Act (820 ILCS 115/2 (West 2010)) and also

constituted unjust enrichment for wrongful retention of his bonus compensation.

¶ 11   In response to the amended complaint, defendant filed a section 2-615 motion to dismiss.

Defendant argued that plaintiff's claims fail because they all rest on the premise that plaintiff has

a legal right to a bonus under the Plan. The Plan made it clear that the bonus would be awarded

in the sole and absolute discretion of the plan administrator and, therefore, any claim based on

plaintiff's allegations was "foreclosed as a matter of law."

¶ 12   Plaintiff responded arguing that defendant's motion ignores the well-pled facts alleged in

the complaint that: plaintiff was a Plan participant; his employment was terminated by a

qualifying event; he worked for at least three months in the 2012 calendar year; according to its

terms the Plan was "legally enforceable" and prohibits retroactive amendments; a 2012 bonus

pool was created; and 2012 bonuses were paid to similarly situated employees, however plaintiff

was denied a bonus because the Plan was amended after his termination to require six months'

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employment with the firm and this evidences bad faith in defendant's decision to deny plaintiff a

bonus. Plaintiff also argued that he sufficiently alleged a right to a bonus that can be determined

based on information uniquely within the possession of defendant regarding the number of

participants, experience and other factors.

¶ 13   On April 15, 2014, after hearing, the circuit court granted defendant's motion to dismiss

with prejudice. The circuit court found that the language of the Plan gave defendant the "absolute

discretion to determine whether a bonus should be awarded and, if so, the amount, ultimately

undermines the claim here on all counts." This timely appeal followed.

¶ 14                                      ANALYSIS

¶ 15   A section 2-615 motion to dismiss tests "the legal sufficiency of a complaint based on

defects apparent on its face." Pooh-Bah Enterprises, Inc. v. County of Cook, 232 Ill. 2d 463, 473

(2009). When the legal sufficiency of a complaint is challenged, we take all well-pled facts as

true, draw all reasonable inferences from those facts in favor of the plaintiff and determine

whether the allegations, construed in a light most favorable to plaintiff, are sufficient to establish

a cause of action upon which relief may be granted. Edelman, Combs & Latturner v. Hinshaw &

Culbertson, 338 Ill. App. 3d 156, 164 (2003) (citing Lykowski v. Bergman, 299 Ill. App. 3d 157,

162 (1998)). A complaint "will not be dismissed on the pleadings unless it clearly appears that no

set of facts can be proved which will entitle the plaintiff to recover." Rodgers v. Peoples Gas,

Light & Coke Co., 315 Ill. App. 3d 340, 345 (2000). Our review of the circuit court's dismissal of

a complaint pursuant to section 2-615 is de novo. Phoenix Insurance Co. v. Rosen, 242 Ill. 2d 48,

54 (2011).

¶ 16   The crux of defendant's motion to dismiss is that any claim based on plaintiff's alleged

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right to a bonus under the Plan is "foreclosed as a matter of law." Defendant sought dismissal of

plaintiff's claims on the grounds that: (1) defendant had the full discretion to deny plaintiff a

bonus and, thus, plaintiff can never seek a legal remedy for an abuse of that discretion; (2)

plaintiff had no reasonable expectation to receive a bonus and, therefore, cannot plead any set of

facts to support his claim to the entitlement of a bonus; and (3) plaintiff's claims fail because they

do not contain a specific monetary amount owed to plaintiff under the Plan.

¶ 17   Plaintiff's claims for breach of contract, violation of the Act and unjust enrichment all rest

on his alleged eligibility to participate in the 2012 bonus pool and his reasonable expectation and

entitlement to receive the 2012 prorated bonus. The circuit court dismissed plaintiff's amended

complaint in its entirety on the basis that plaintiff could not plead any entitlement to the bonus

because, according to the Plan, such distributions are discretionary.

¶ 18   Plaintiff argues the circuit court erred because: (1) defendant's discretion is restrained by

the covenant of good faith and fair dealing and the amended complaint sufficiently alleged that

defendant violated the covenant; and (2) plaintiff sufficiently pled that he had a reasonable

expectation to be considered for a bonus and to receive a bonus.

¶ 19   In order to state a cause of action for breach of contract, a plaintiff must plead: (1) the

existence of a valid and enforceable contract; (2) performance by the plaintiff; (3) a breach of the

subject contract by the defendant; and (4) that the defendant’s breach resulted in damages.

Unterschuetz v. City of Chicago, 346 Ill. App. 3d 65, 69 (2004). Every contract contains an

implied covenant of good faith and fair dealing. Northern Trust Co. v. VIII South Michigan

Associates, 276 Ill. App. 3d 355, 367 (1995). The purpose of this duty "is to ensure that parties

do not take advantage of each other in a way that could not have been contemplated at the time

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the contract was drafted or do anything that will destroy the other party's right to receive the

benefit of the contract." RBS Citizens, National Ass'n v. RTG-Oak Lawn, LLC, 407 Ill. App. 3d

183, 191 (2011). Disputes involving the exercise of good faith arise when one party is given

broad discretion in performing its obligations under the contract. The Reserve at Woodstock, LLC

v. City of Woodstock, 2011 IL App (2d) 100676, ¶ 42. "In order to plead a breach of the covenant

of good faith and fair dealing, a plaintiff must plead existence of contractual discretion."

Mid-West Energy Consultants, Inc. v. Covenant Home, Inc., 352 Ill. App. 3d 160, 165 (2004).

"Where a contract specifically vests one of the parties with broad discretion in performing a term

of the contract, the covenant of good faith and fair dealing requires that the discretion be

exercised 'reasonably and with proper motive, not arbitrarily, capriciously, or in a manner

inconsistent with the reasonable expectations of the parties.' " Id. (quoting Resolution Trust

Corp. v. Holtzman, 248 Ill. App. 3d 105, 112 (1993); Carrico v. Delp, 141 Ill. App. 3d 684, 690

(1986).

¶ 20      Defendant has cited no authority to support the major premise of its motion to dismiss:

because the Plan reserved discretion in defendant in determining bonus awards, plaintiff is

legally foreclosed from seeking a remedy based on a breach of the implied covenant of good

faith and fair dealing for abuse of that discretion. In fact, case law is clear that the opposite

principle may apply.

¶ 21      Where a party has full contractual discretion to deny an award or bonus, that "does not

mean that [the party] is necessarily incapable of abusing that discretion." Wilson v. Career

Education Corp., 729 F.3d 665, 675 (7th Cir. 2013) (citing Carrico v. Delp, 141 Ill. App. 3d 684

(1986)). A plaintiff sustains a cause of action for breach of contract for abuse of discretion based

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on a violation of the implied covenant of good faith and fair dealing by alleging that defendant

"exercised its discretion in a manner contrary to the reasonable expectations of the parties."

Wilson, 729 F.3d at 673-76. An employer that exercised its contractual discretion in a manner

inconsistent with the reasonable expectations of the parties to deprive an employee of reasonably

anticipated benefits may have acted in bad faith. Dayan v. McDonald's Corp., 125 Ill. App. 3d

972, 991 (1984).

¶ 22   Viewing the well-pled facts in the amended complaint and drawing reasonable inferences

from them, the Plan was part of plaintiff's compensation package and McCleary reasonably

expected that, if he worked for at least three months during 2012 and if he fulfilled the Plan's

other qualifying conditions, and the company's financial goals were met, a bonus pool would be

established, and he would receive a bonus. The Plan was legally enforceable and it would not be

altered during his employment unless he was notified and allowed to participate in discussing

possible changes to the Plan. If, after working for at least three months, he left defendant's

employ under certain qualifying circumstances, he would remain eligible for a pro-rata bonus

from a later established bonus pool. Plaintiff's position was terminated in May (effective in July)

under terms that did not disqualify him from the Plan and he failed to receive a bonus

distribution while other similarly situated participants received bonus compensation. Stated

differently, if defendant exercised its discretion properly, he too would have received a bonus.

Plaintiff's claim is that defendant abused its discretion and took advantage of him by arbitrarily

changing the length of service during the plan year to six months, rather than the stated

three-month service, and he did not reasonably contemplate this when he entered the Plan. This

was a retroactive change that was adverse to his reasonable expectation in violation of the Plan's

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provision. Given that the Plan provided for employee participation when amending the Plan,

plaintiff claims he did not contemplate material adverse changes after his qualified termination

and without his involvement. Plaintiff claims defendant breached their agreement because it did

not exercise its discretion properly: denial of a bonus was either unreasonable or improperly

motivated or arbitrary or capricious or inconsistent and not within the reasonable expectation of

the parties. This failure of defendant, if proven, would establish a breach of agreement, a

violation of the Act and unjust enrichment of defendant by retaining his earned bonus.

¶ 23    It is clear from defendant's motion and arguments on appeal that it draws a different

inference from plaintiff's well-pled facts founded on its contention that the exercise of its

discretion cannot be questioned or contested. The differences between the parties relate to

matters of proof of the reasonable and proper exercise of discretion, not pleading. Browning v.

Heritage Insurance Co., 33 Ill. App. 3d 943, 946 (1975) (reasonable conduct is a question of fact

for the jury). At this stage of the litigation, we are only concerned with matters of sufficient

pleading, not matters of proof (Schaffner v. 514 West Grant Place Condominium Ass'n, 324 Ill.

App. 3d 1033, 1044 (2001)). Furthermore, we are not permitted to consider factual issues in

ruling on a motion to dismiss. Urbaitis v. Commonwealth Edison, 143 Ill. 2d 458, 475 (1991) (a

court cannot consider evidentiary matters outside of the complaint on a section 2-615 motion to

dismiss); Samansky v. Rush-Presbyterian-St. Luke's Medical Center, 208 Ill. App. 3d 377,

383-84 (1990) (disputed questions of fact preclude dismissal of a complaint under section 2-

619).

¶ 24    The purpose of pleadings is to present, define and narrow the issues and limit the proof

needed at trial. Golf Trust of America, L.P. v. Soat, 355 Ill. App. 3d 333, 336 (2005); People ex

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rel. Fahner v. Carriage Way West, Inc., 88 Ill. 2d 300, 307 (1981). Pleadings are not intended to

erect barriers to a trial on the merits but instead to remove them and facilitate trial. People ex rel.

Fahner, 88 Ill. 2d at 307. The object of pleadings is to present a valid legal issue by one side and

denied by the other so that a trial may determine the actual truth. Id. at 307-08. To this end,

plaintiff has satisfactorily alleged a cause of action against defendant for breach of contract for

abusing its contractual discretion, such that defendant should answer the amended complaint,

conduct discovery and allow the parties to present their arguments before a trier of fact.

¶ 25   Defendant also argues that because the Plan's express terms provided that no participant

was guaranteed a bonus, plaintiff can never state a cause of action for payment of that bonus and

the complaint must be dismissed. Defendant cites several cases to support its position that

because the Plan did not "guarantee" plaintiff a bonus and defendant had unfettered discretion to

determine a bonus amount, plaintiff cannot sustain a claim for breach of contract or violation of

the Act. However, several of these cases are distinguishable because they involved matters

decided on summary judgment and whether the plaintiffs produced sufficient evidence to support

their claims. McLaughlin v. Sternberg Lanterns, Inc., 395 Ill. App. 3d 536, 546 (2009) (summary

judgment affirmed in favor of employer where the evidence did not support a finding that

defendant acted in bad faith in terminating the plaintiff's employment for "substantial cause" and

denying his bonus compensation on that basis); Tatom v. Ameritech Corp., 305 F.3d 737 (7th

Cir. 2002) (summary judgment affirmed where the evidence failed to established a breach of the

duty of good faith and fair dealing). Other authorities defendant cites are unpublished federal

district court decisions (Brand v. Comcast Corp., No. 12 CV 1122, 2013 WL 1499008 (N.D. Ill.

Apr. 11, 2013); Carroll v. Merill Lynch, No. 07 C 1575, 2011 WL 1838563 (N.D. Ill. May 13,

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2011)), which have no precedential value before this court. See County of Du Page v. Lake Street

Spa, Inc., 395 Ill. App. 3d 110, 122 (2009).

¶ 26   Again, the core issue is whether plaintiff has pled a cause of action, not whether he has

proven his claims. Where a plaintiff has pled that he had a reasonable expectation to a bonus

from a defendant that abused its broad contractual discretion by arbitrarily withholding the bonus

in a manner not reasonably anticipated by the parties at the time of contract formation, a valid

cause of action has been sufficiently pled to withstand a section 2-615 motion to dismiss. See

Horwitz v. Sonnenschein Nath & Rosenthal, LLP, 399 Ill. App. 3d 965 (2010).

¶ 27   Defendant also argues that plaintiff's claims to collect on the bonus cannot be pled or

proven as a matter of law because he did not allege the specific amount owed to him under the

Plan. Defendant is incorrect. Where an employer has discretion in determining a compensation

award based on a compensation agreement which identifies factors to be considered in

formulating that award, an allegation identifying those factors is specific enough to be actionable

to survive a section 2-615 motion to dismiss. See Horwitz, 399 Ill. App. 3d at 976-78.

¶ 28   In the amended complaint plaintiff alleged the qualifying events, performance objectives

and factors identified in the Plan used to determine whether and to what extent a participant

would be included in the bonus pool. He alleged that the Plan provided a specific formula for the

creation of a bonus pool for his division. While the dollar amount allocated to the pool for the

distribution of bonuses was within the discretion of the plan administrator, an exhibit to the Plan

set forth the formula used to derive the monetary amount of those bonuses. Specifically, those

bonuses were to be "derived as a blended percentage of Pre-SBI NIBT (Net Income Before Tax

before deducting for Salary, Benefits and Incentives) generated by the Fixed Income Sales and

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Trading Group." Here, plaintiff alleged that a 2012 bonus pool was created for plaintiff's sales

and trading group and other similarly situated employees were paid bonuses using this formula.

These allegations sufficiently assert plaintiff's claimed eligibility and entitlement to participate in

the bonus pool and the extent of his bonus award is a factual question to be determined by the

trier of fact. Therefore, under the principles of Horowitz, we find plaintiff sufficiently alleged the

factors, criteria and formula for the formulation of his bonus, to survive the section 2-615 motion

to dismiss.

¶ 29   Based on the above, we also find plaintiff sufficiently pled claims for violation of the Act

and unjust enrichment to withstand the section 2-615 motion to dismiss. Claims for violation of

the Act (820 ILCS 115/1 et seq. (West 2012)) are akin to breach of contract actions. Soh v.

Target Marketing Systems, Inc., 353 Ill. App. 3d 126, 129 (2004) (quoting Doherty v. Kahn, 289

Ill. App. 3d 544, 557-58 (1997)). To sufficiently plead a cause of action under the Act, the

employee must allege that he is owed compensation pursuant to an employment contract or

agreement between the two parties. Landers-Scelfo v. Corporate Office Systems, Inc., 356 Ill.

App. 3d 1060, 1067 (2005). To plead a cause of action for unjust enrichment, a plaintiff must

allege that the defendant unjustly retained a benefit to the plaintiff’s detriment and that retention

violates the fundamental principles of justice, equity, and good conscience. HPI Health Care

Services, Inc. v. Mt. Vernon Hospital, Inc., 131 Ill. 2d 145, 160 (1989). As discussed earlier,

plaintiff alleged that he was owed a bonus because he met all qualifying events under the Plan, a

bonus pool was created, other similarly situated employees in his group were awarded a bonus

and defendant wrongfully denied and retained plaintiff's bonus.

¶ 30   In viewing the complaint in the light most favorable to plaintiff and taking the well-pled

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factual allegations as true, we find that plaintiff sufficiently alleged the existence of facts under

which he may be entitled to recover and therefore survives dismissal of the amended complaint.

The circuit court dismissed plaintiff's amended complaint in its entirety based on its finding that

the defendant's "absolute discretion" under the Plan undermines plaintiff's claims. However, we

find plaintiff has sufficiently pled that defendant abused its discretion by amending the Plan,

after plaintiff satisfied all qualifying factors under the Plan and after defendant terminated his

employment, in order to disqualify plaintiff's participation in the 2012 bonus pool and be

awarded a prorated bonus. Whether defendant's decision was a reasonable exercise of its

discretion is a question of fact to be resolved by the trier of fact and it should not have been

resolved summarily on a section 2-615 motion to dismiss. Supra ¶ 25.

¶ 31                                   CONCLUSION

¶ 32   For the foregoing reasons, we reverse the judgment of the circuit court.

¶ 33   Reversed; cause remanded.

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