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 at

28 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