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SIXTH DIVISION

December 15, 2000

No. 1-99-2163

This action arises from an employment contract dispute. InOctober 1990, Richard Mandel, acting on behalf of defendant, MandelMetals, Inc. (MMI), entered into a contract with plaintiff WilliamKipnis. The contract gave Kipnis a 25% interest in the sale of oneor more of MMI's divisions, should such division(s) be sold. Alternatively, the contract gave Kipnis the right to make a bona fideoffer to purchase such division(s). MMI would then have the optionto accept or reject Kipnis' offer. In the latter case, MMI wouldpay Kipnis an amount equal to 25% of the gain MMI would haverealized had it accepted Kipnis' offer. In March 1998, MMIrejected Kipnis' offer, concluding that it was not a "bona fide offer"pursuant to the employment agreement. In April 1998, Kipnis fileda complaint for declaratory judgment and specific performanceagainst MMI. The complaint sought a declaration that Kipnis' offerconstituted a bona fide offer pursuant to the employment agreement. Alternatively, the complaint sought a declaration that MMI breachedthe employment agreement by refusing to provide Kipnis withappropriate financial information necessary to formulate a bona fideoffer. In June 1999, the trial court granted summary judgment inMMI's favor, rejecting both of Kipnis' arguments. Kipnis raisesthe same arguments on appeal. We reverse.

I. BACKGROUND

In 1982, MMI hired Kipnis to work in its scrap metal business. While employed at MMI, Kipnis helped MMI develop an aluminumdistribution business known as the Service Center Group (SCG). By1997, SCG constituted one of MMI's two components, while the scrapmetal division constituted the second component. SCG consisted ofthree subcomponents: (1) the Service Center Division, whichdistributes primary aluminum; (2) Lednam (also called the "Subsidiary"), which manufactures blank signs for the traffic industry;and (3) American Aerospace Materials, which sold aluminum to theaerospace industry. Kipnis operated SCG since its inception andeventually expressed an interest in buying it.

On October 31, 1990, Kipnis, MMI, and the Subsidiary enteredinto an employment agreement. The employment agreement, drafted byMMI, covered a 10-year term (ending November 1, 2000) and established Kipnis' salary, bonus, and severance package. Additionally,paragraph 4 of the employment agreement provided in pertinent part:

"(a) In the event that Service CenterDivision and/or the Subsidiary shall be sold,Kipnis shall be paid a sum equal to 25% of thegain from the sale of such division(s), computed as the difference between (a) the agreedvalue of the Service Center Division and/orthe Subsidiary as of November 1, 1990, and (b)the sale price of the Service Center Divisionand/or subsidiary ***. The agreed value ofthe Service Center Division and the Subsidiaryas of November 1, 1990, shall be determined bythe Corporation's independent accountant andapproved by Mandel and Kipnis, and saidamounts shall be stated in an [e]xhibit attached hereto.

(b) Subparagraph (a) shall not apply toany such sale unless Kipnis is a salariedemployee of the Corporation at the time ofsuch sale; provided that, (i) if Kipnis'employment shall be terminated by the Corporation without 'cause,' as defined in Paragraph6, and (ii) Kipnis shall not have violated theNoncompetition Agreement in Exhibit A, thenthis Paragraph 4 shall apply to any such salemade within 24 months after the termination ofhis employment."

Additionally, paragraph 5 provided in pertinent part:

(a) "This [p]aragraph 5 shall apply only

if (i) the Service Center Division or theSubsidiary, or both, has not been sold on orbefore November 1, 2000; (ii) Kipnis (representing himself alone or an investor group)submits a bona fide offer in writing to theCorporation, to purchase, at a cash price pay-able in a lump sum at the closing, the ServiceCenter Division and/or Subsidiary; and suchpurchase price is either agreed by the Corporation, or is determined, in the manner hereinafter provided, to be equal to or greaterthan the fair market value of the ServiceCenter Division and/or Subsidiary; (iii) theCorporation rejects such offer. In suchevent, Kipnis shall be entitled to receive 25%of the gain which the Corporation would haverealized if such sale had been consummated asprovided in Paragraph 4. A bona fide offer mustinclude evidence of the availability of fundsto pay the purchase price.

***

(d) This paragraph 5 shall not apply toany offer submitted by Kipnis unless he is asalaried employee of the Corporation; providedthat, (i) if Kipnis' employment shall beterminated by the Corporation without 'cause,'as defined in paragraph 6, and (ii) Kipnisshall not have violated the NoncompetitionAgreement in Exhibit A, then this Paragraph 5shall apply to an offer submitted by Kipniswithin 12 months after the termination of hisemployment."

In sum, paragraphs 4 and 5 collectively provided that, if MMIsold the Service Center Division and/or the Subsidiary within thecontractual period, it would pay Kipnis 25% of the gain. If it didnot sell the Service Center Division and/or the Subsidiary, Kipniscould make an offer for it. MMI then had the option to acceptKipnis' offer or, alternatively, reject Kipnis' offer and pay himan amount equal to 25% of the gain it would have realized had itaccepted. The foregoing was subject to Kipnis' continued employment at MMI. If Kipnis no longer worked for MMI, he could retainhis rights under the employment agreement for only 12 months fromthe termination date, and only if he was terminated without cause.

On March 25, 1997, MMI terminated Kipnis without cause. OnMay 17, 1997, the parties entered into a termination agreement. The termination agreement acknowledged that MMI terminated Kipniswithout cause and preserved his rights under paragraphs 4 and 5 ofthe employment agreement. The termination agreement also providedthat Kipnis could retain copies of certain financial records,already in his possession, for purposes of exercising his rightsunder the employment agreement. The termination agreement did notrequire MMI to provide other records nor did it expressly limitKipnis' access to those records in his possession.

In June 1997, Kipnis began requesting information regardingthe Service Center Division, advising MMI that such information wasnecessary to formulate his offer and to obtain financing. MMIforwarded several balance sheets, reports, and other financialstatements to Kipnis. Kipnis continued to request financialinformation and, in September 1997, Mandel informed Kipnis that MMIwould not release any other documents until Kipnis made a "bona fideoffer." Over the next several months, Kipnis continued to requestfinancial information. Kipnis also advised Mandel that bothKipnis' investor and lender requested audits and tours of the plantbefore they would commit financial backing, but Mandel refusedaccess. MMI continued to take the position that it would provideno further information until it received a bona fide offer.

On March 10, 1998, Kipnis sent MMI a letter expressing hisintention to purchase the Service Center Division and the Subsidiary. The letter stated that it "constitute[d] *** Kipnis['] for-mal submission of a bona fide offer" and set forth several terms,including the scope of purchased assets, the calculation of thepurchase price, and adjustment for uncollectible receivables andelimination of intercompany receivables. Kipnis' letter alsodeclared the existence of financial commitments subject to duediligence.

On March 25, 1998, the 12-month period in which Kipnis couldmake a bona fide offer expired. On March 26, 1998, MMI's counsel sentKipnis a letter in which it determined that the March 10, 1998,letter did not constitute a bona fide offer as contemplated by para-graph 5(a) of the employment agreement. MMI based its reasoning onseveral points, including (1) the letter, by its own terms, was notbinding on the parties; (2) the letter contained unreasonable con-ditions and ambiguities; (3) the terms set forth in the letter wereinconsistent; and (4) Kipnis failed to provide evidence that he hadsufficient funds.

In April 1998, Kipnis filed a complaint for declaratory judg-ment and specific performance against MMI. The complaint sought adeclaration that the March 10, 1998, letter constituted a bona fideoffer pursuant to paragraph 5(a) of the contract. Alternatively,the complaint sought a declaration that MMI breached the employmentagreement by refusing to provide Kipnis with appropriate financialinformation. As a remedy for the alleged breach, Kipnis asked thetrial court to order MMI to provide such information and to allowKipnis a reasonable period to submit a bona fide offer.

In June 1998, MMI filed a motion to strike and dismiss. Thetrial court denied MMI's motion and allowed discovery to proceed.

In March 1999, MMI moved for summary judgment, arguing thatthe March 10, 1998, letter did not constitute a bona fide offer andthat MMI had no obligation to provide Kipnis with financial infor-mation. In June 1999, the trial court granted summary judgment inMMI's favor. In its ruling, the trial court found that the March10, 1998, letter did not constitute a bona fide offer. The trialcourt essentially based its decision on the same factors MMI iden-tified in the March 26, 1998, letter to Kipnis. The court furtherfound that no implied duty of good faith and fair dealing requiredMMI to provide Kipnis with financial information or access to theplant. To impose such a duty, the trial court concluded, would betantamount to rewriting the employment agreement. The trial courtfurther noted that the termination agreement manifested theparties' agreement as to information that Kipnis could retain forpurposes of making an offer. Kipnis then filed the instant appeal.

II. ANALYSIS In cases involving summary judgment, the standard of review isde novo. Truman L. Flatt & Sons Co. v. Schupf, 271 Ill. App. 3d 983,986 (1995). Summary judgment is appropriate if the evidence showsno genuine issue exists as to any material fact, and the movingparty is entitled to a judgment as a matter of law. 735 ILCS 5/2-1005(c) (West 1998); Golla v. General Motors Corp., 167 Ill. 2d353, 358 (1995). On a defendant's motion for summary judgment,plaintiff need not establish its case as it would at trial, butmust present some factual basis that would arguably entitle it tojudgment. Hall v. Burger, 277 Ill. App. 3d 757, 761 (1996). Because summary judgment is a drastic means of disposing of litigation, the court has a duty to construe the record strictlyagainst the movant and liberally in favor of the nonmoving party. Espinoza v. Elgin, Joliet & Eastern Ry. Co., 165 Ill. 2d 107, 113(1995).

A. Whether a Bona Fide Offer Existed

Kipnis first argues that summary judgment was inappropriatebecause questions of fact exist as to whether the March 10, 1998,letter constituted a bona fide offer under the employment agreement. We disagree.

As a threshold matter, we note that the employment agreementdoes not specifically define a "bona fide offer." Paragraph 5(a) ofthe employment agreement does, however, require that such an offerbe made in writing and must propose a cash price payable in a lumpsum at closing. Further, a "bona fide offer must include evidence ofthe availability of funds to pay the purchase price."

In any event, we must recognize that, before we can find thatKipnis made a bona fide offer, we must first determine whether he madeany sort of offer at all. The trial court answered this questionin the negative, finding that the March 10, 1998, letter was simplya letter of intent to enter into further negotiation. We agreewith the trial court.

For a valid contract to exist, an offer must be so definite asto its material terms or require such definite terms in theacceptance that the promises and performances to be rendered byeach party are reasonably certain. Academy Chicago Publishers v.Cheever, 144 Ill. 2d 24, 29 (1991). The March 10, 1998, letter didnot meet this requirement. The letter stated unequivocally that"the provisions contained herein are not binding on the partiesunless specifically so stated, except to the extent that theyreflect the intent of the parties to enter into further negotiations and to develop a definitive written agreement for thepurchase of [a]ssets and the [s]tock, in a form mutually satisfactory to [Kipnis] and [MMI]." We conclude that such language ren-ders the letter a nonbinding letter of intent. See Quake Construction, Inc. v. American Airlines, Inc., 141 Ill. 2d 281, 288 (1990)(holding that letters of intent are not necessarily enforceableunless the parties intend them to be contractually binding). Additionally, the March 10, 1998, letter did not providesufficient evidence that Kipnis had sufficient funds to pay thepurchase price, as required under paragraph 5(a) of the employmentagreement. The letter contained a statement that Kipnis wouldpersonally pay $400,000 prior to closing. However, it offered noevidence that Kipnis had, or could obtain, such money. Similarly,the appended letter from Kipnis' investor, Richard Taxman, statedthat he would contribute $1,650,000, yet the letter contained noevidence that Taxman had such money. Finally, the March 10, 1998,letter contained a preliminary term sheet from the AmericanNational Bank. The first paragraph of the term sheet states,"[t]he following is an outline of preliminary financing termssubject to your comments and due diligence by American NationalBank and Trust Company of Chicago. *** Please understand thisoutline is solely for discussion purposes and does not represent acommitment to lend." (Emphasis added.) Based on these facts, weagree with the trial court's conclusion that the March 10, 1998,letter did not constitute a bona fide offer.

B. Implied Duty of Good Faith

Relying primarily on Spircoff v. Spircoff, 74 Ill. App. 3d 119(1979), Kipnis next argues that, even if we determine that hefailed to submit a bona fide offer, we should nevertheless reversebecause MMI breached its implied duty of good faith. We agree.

A covenant of good faith and fair dealing is implied in everycontract absent a provision that specifically states otherwise. Dayan v. McDonald's Corp., 125 Ill. App. 3d 972, 989 (1984). Eventhough such a covenant may be absent in the contract's expresslanguage, courts must compel performance in accordance with goodfaith and fair dealing. Spircoff, 74 Ill. App. 3d at 128.

The court in Spircoff examined this issue under similarcircumstances. There, a brother and sister entered into an agree-ment under which the sister retained ownership over a parcel ofland. However, the brother retained the right to sell the parcelwithin four years and, if he did so, he would receive $50,000 ofthe proceeds. Despite the brother's repeated requests, the sisterrefused to provide the financial statements necessary to effectuatea sale. The trial court held that an implied condition of coopera-tion existed between the parties and that such condition requiredthat the sister provide the financial information necessary tosecure a purchaser. Spircoff, 74 Ill. App. 3d at 126-27. Onappeal, the court agreed, acknowledging the well-settled rule thatevery contract contains an implied promise of good faith and fairdealing. Spircoff, 74 Ill. App. 3d at 128. The court noted thatthe evidence "established that a statement of income and expenseswould be necessary for the type of property in question" and that"a buyer *** would require such information." Spircoff, 74 Ill.App. 3d at 128. On that basis, the court concluded that the sisterbreached an implied duty of good faith and fair dealing. Spircoff, 74 Ill. App. 3d at 128.

In the instant case, the trial court rejected Kipnis' relianceon Spircoff. The court found the facts of Spircoff inapposite,stating that, "in Spircoff the parties had entered into a jointventure, thereby triggering an implied duty of cooperation. Nosuch relationship exists here." We find that a close reading ofSpircoff fails to support the trial court's conclusion. TheSpircoff court clearly did not rely on the nature of the parties'relationship but, rather, on the nature of the contract and theinherent necessities connected to the brother's ability to exercisehis rights under it. We agree that an implied duty to cooperateand to act in good faith and fair dealing existed here. Wheneverthe cooperation of one party is necessary for the other party'sperformance, there is an implied condition that such cooperationwill be given. See 6 W. Jaeger, Williston on Contracts