iMotorsports, Inc. v. Vanderhall Motor Works, Inc.

224 N.E.3d 221

2022 IL App (2d) 210785

IMOTORSPORTS, INC., Plaintiff-Appellant,

v.VANDERHALL MOTOR WORKS, INC., Defendant-Appellee.

No. 2-21-0785

Appellate Court of Illinois, Second District.

Filed December 1, 2022

Appeal from the Circuit Court of Du Page County. No. 21-CH-71, Honorable Bonnie M. Wheaton, Judge, Presiding.

Richard Lee Stavins, William A. Castle Jr., and Diana H. Psarras, of Robbins DiMonte, Ltd., of Chicago, and Nicholas A. Bader and Micah A. Andrews, of Bass Sox Mercer, of Tallahassee, Florida, for appellant.

David M. Poell, Paul Werner, and Amanda Witt, of Sheppard Mullin Richter & Hampton LLP, of Chicago, Jedediah McClure, of JW McClure Law, of Sycamore, and Jedediah Knight (pro hac vice), of Vanderhall Motor Works, Inc., of Provo, Utah, for appellee.

OPINION

JUSTICE HUDSON delivered the judgment of the court, with opinion.

¶ 1 Plaintiff, iMotorsports, Inc., filed in the circuit court of Du Page County a three-count first amended complaint against defendant, Vanderhall Motor Works, Inc. The counts alleged breach of contract, breach of implied-in-fact contract, and a violation of the Motor Vehicle Franchise Act (Act) (815 ILCS 710/1 et seq. (West 2020)). Defendant moved to dismiss the complaint, pursuant to section 2-615 of the Code of Civil Procedure (Code) (735 ILCS 5/2-615 (West 2020)). The trial court granted defendant’s motion and dismissed the complaint in its entirety, with prejudice. On appeal, plaintiff argues that the trial court erred in dismissing the complaint. We affirm.

¶ 2 I. BACKGROUND

¶ 3 Plaintiff’s first amended complaint alleged in relevant part as follows. Plaintiff, a corporation organized and existing under the laws of Illinois with its principal place of business located in Elmhurst, Du Page County, Illinois, operates a motor vehicle dealership. Defendant is a corporation organized and existing under the laws of Utah with its principal place of business located in Provo, Utah. Defendant manufactures motor vehicles under the Vanderhall name and distributes them to dealers throughout the country. On February 7, 2018, plaintiff and defendant entered into a written franchise agreement (Agreement). The Agreement granted plaintiff the rights to self and service Vanderhall products from an authorized retail location in Elmhurst. Paragraph 2(f) of the Agreement provided as follows:

"(f) Nonexclusive. The rights granted herein are nonexclusive. VANDERHALL reserves the right to appoint additional dealers of any or all of VANDERHALL Products and Related Products at any time pursuant to VANDERHALL’s marketing programs and policies. However, Vanderhall agrees not to authorize any dealer within 75 miles of dealer’s address[.]"

Paragraph 9(f) provided that the Agreement "will terminate on [the] 31st day of October 2019." Since the execution of the Agreement, plaintiff has sold and serviced Vanderhall products from its authorized retail location in Elmhurst. Defendant has never given notice to plaintiff of its intent to terminate, cancel, not renew, or otherwise modify the parties’ Agreement.

¶ 4 Notwithstanding the stated expiration date in the Agreement, the parties’ business relationship continued after October 31, 2019. To this end, defendant continued to provide plaintiff with new motor vehicle products, reimburse plaintiff for warranty service, provide plaintiff with trademarked material and signage, and list plaintiff as a Vanderhall dealer on its website. Plaintiff continued to sell and service Vanderhall motor vehicles, advertise new Vanderhall motor vehicles for sale, display Vanderhall trademarks, and receive new Vanderhall products from defendant.

¶ 5 On or about February 1, 2021, defendant appointed a new Vanderhall motor vehicle dealer in Hickory, Hills, Illinois, approximately 16 miles from plaintiff’s location in Elmhurst. Plaintiff demanded that defendant cease and desist authorization of the Vanderhall dealer in Hickory Hills. Defendant refused and provided the Hickory Hills dealer with new Vanderhall motor vehicle products.

¶ 6 On March 4, 2021, plaintiff filed in the circuit court of Du Page County a two-count complaint for injunctive and other relief. On defendant’s motion, the trial court dismissed the complaint, pursuant to section 2-615 of the Code (735 ILCS 5/2-615 (West 2020)) but granted plaintiff leave to file an amended complaint.

¶ 7 On September 10, 2021, plaintiff filed its first amended complaint for injunctive and other relief. The first amended complaint consisted of three counts. Count I asserted a cause of action for breach of contract. Specifically, plaintiff alleged that defendant’s authorization of a Vanderhall dealership in Hickory Hills constituted a breach of paragraph 2(f) of the Agreement and that plaintiff sustained damages as a result of the breach. Count II alleged that, if the Agreement is found to have expired in 2019, the parties’ continued business relationship resulted in the formation of an implied-in-fact contract. Count II further alleged that the terms of the implied-in-fact contract consisted of those in the Agreement, that defendant breached the implied-in-fact contract by authorizing the Vanderhall dealership in Hickory Hills, which is less than 75 miles from plaintiff’s authorized retail location, and that plaintiff sustained damages as a result of the breach. Count III alleged that defendant’s action of "openly and intentionally" breaching the Agreement or the implied-in-fact contract was done in bad faith and was unconscionable, thereby violating section 4(b) of the Act (815 ILCS 710/4(b) (West 2020) (providing that it is a violation of the Act for a manufacturer "to engage in any action with respect to a franchise which is arbitrary, in bad faith or unconscionable and which causes damage to any of the parties or to the public")). Plaintiff attached a copy of the Agreement to the amended complaint.

¶ 8 On October 20, 2021, defendant filed a motion to dismiss plaintiff’s first amended complaint, pursuant to section 2-615 of the Code (735 ILCS 5/2-615 (West 2020)). Defendant argued that plaintiff could not assert a breach-of-contract claim based on conduct that occurred after the parties’ contract automatically expired. Defendant further argued that plaintiff failed to allege a viable claim for breach of an implied contract. In this regard, defendant asserted that its alleged conduct in authorizing another Vanderhall dealer within plaintiff’s purported exclusive area demonstrated its intent not to be bound by the 75-mile limitation in the expired contract. Finally, defendant contended that, in the absence of a valid written or implied contract, there could be no breach, so it could not have acted unfairly or in bad faith or violated the Act.

¶ 9 A hearing on defendant’s motion to dismiss plaintiff’s first amended complaint was held on December 3, 2021. Following argument by the parties, the trial court granted defendant’s motion to dismiss. The court acknowledged authority requiring a manufacturer to "send a letter to the dealer" if a manufacturer intends to terminate, not renew, or substantially change or modify a franchise agreement. See Crossroads Ford Truck Sales, Inc. v. Sterling Truck Corp., 2011 IL 111611, 355 Ill.Dec. 400, 959 N.E.2d 1133; 815 ILCS 710/4(d)(6) (West 2020). However, the court found that the contract at issue "was not terminated, it was not not renewed." Rather, it expired by its own terms. Moreover, the court noted that, under the Act, "the area of exclusivity" for Du Page County, which has a population greater than 300,000 persons, is the area within a radius of 10 miles from plaintiff’s authorized retail location. See 815 ILCS 710/2(q), 4(e)(8) (West 2020). Since the Hickory Hills dealership was "much further" from plaintiff’s facility than the 10-mile area of exclusivity provided for by the Act, the court reasoned, authorizing another Vanderhall dealer 16 miles away did not constitute a substantial modification. On December 6, 2021, the court entered a written order in conformity with its oral pronouncement and dismissed plaintiff’s complaint in its entirety, with prejudice. On December 30, 2021, plaintiff filed a notice of appeal.

¶ 10 II. ANALYSIS

¶ 11 On appeal, plaintiff argues that the trial court erred in granting defendant’s section 2-615 motion and dismissing with prejudice its first amended complaint. According to plaintiff, the first amended complaint stated a viable cause of action for either breach of an express contract or breach of a contract implied in fact and for a violation of section 4(b) of the Act (815 ILCS 710/4(b) (West 2020)).

¶ 12 A. Standard of Review

[1–7] ¶ 13 A dismissal motion filed under section 2-615 of the Code challenges the legal sufficiency of the complaint. Wilson v. County of Cook, 2012 IL 112026, ¶ 14, 360 Ill.Dec. 148, 968 N.E.2d 641. In ruling on a section 2-615 motion, all well-pleaded facts and all reasonable inferences that may be drawn from those facts are accepted as true. Marshall v. Burger King Corp., 222 Ill. 2d 422, 429, 305 Ill.Dec. 897, 856 N.E.2d 1048 (2006). However, a plaintiff may not rely on mere conclusions of law or fact unsupported by specific factual allegations. Pooh-Bah Enterprises, Inc. v. County of Cook, 232 Ill. 2d 463, 473, 328 Ill.Dec. 892, 905 N.E.2d 781 (2009). The critical inquiry in reviewing a section 2-615 motion is whether the allegations in the complaint, construed in the light most favorable to the plaintiff, are sufficient to state a cause of action upon which relief may be granted. Doe-3 v. McLean County Unit District No. 5 Board of Directors, 2012 IL 112479, ¶ 16, 862 Ill.Dec. 484, 973 N.E.2d 880. Thus, only those facts apparent from the face of the pleadings, documents attached to the complaint (including exhibits, depositions, and affidavits), matters of which the court can take judicial notice, and judicial admissions in the record may be considered in ruling on a section 2-615 motion. Bruss v. Przybylo, 385 Ill....