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Illinois Plaintiffs Can Recover Under Promissory Estoppel, Illinois Supreme Court Rules

 

Promissory estoppel is an affirmative cause of action in Illinois, the Illinois Supreme Court decided April 2. Newton Tractor Sales v. Kubota Tractor Corporation, Ill. Sup. Co. No. 106798, (April 2, 2009). In this Illinois business lawsuit, the court allowed plaintiff Newton Tractor Sales to continue its lawsuit against defendants Kubota Tractor Corporation and Michael Jacobson for allegedly reneging on a promise to make Newton an authorized dealer of Kubota farm equipment.

Newton, a farm equipment dealership in Fayette County, purchased competitor Vandalia Tractor & Equipment (VTE) in July of 2003. As a condition of that sale, the contract specified that the deal could be canceled if Newton did not get permission to sell several makes of equipment, including Kubota. Kubota asked Newton to apply to their local representative, defendant Michael Jacobson. Jacobson required VTE to first cancel its relationship with Kubota, which it agreed to do only if it was assured that Newton would be authorized to sell Kubota products. Jacobson said it would, and both dealerships relied on that statement in signing those papers. Newton further relied on it when it began selling and servicing Kubota products.’
Unfortunately, Kubota’s corporate office denied Newton’s application, as well as a later appeal for reconsideration. Newton sued Kubota for promissory estoppel, common-law fraud and negligent misrepresentation. A Fayette County court granted Kubota summary judgment on all three counts, and after an appeal, the appellate court affirmed that judgment. On the promissory estoppel count, both courts found that Illinois appellate decisions said promissory estoppel is not a recognized cause of action in Illinois. Newton appealed as to the promissory estoppel claim to the Illinois Supreme Court.

In its analysis, the Supreme Court noted that Illinois law incorporates the common-law doctrine of promissory estoppel through the Second Restatement of Contracts. The relevant part of that law says that a promise that can reasonably expect to produce action on the part of the promisee, and does induce action, is binding — as long as enforcing it is the only way to avoid injustice. Furthermore, the doctrine was expressly recognized in multiple decisions, the court wrote, notably in Bank of Marion v. Robert “Chick” Fritz, Inc., 57 Ill. 2d 120 (1974) and with less detail in Quake Construction, Inc. v. American Airlines, Inc., 141 Ill. 2d 281 (1990), which laid out a test for proving a promissory estoppel claim.

The court then went on to reject several arguments of Kubota’s, starting with its assertion that promissory estoppel is only appropriate as a defense. While it is most often used that way, the court wrote, caselaw and Kubota’s own citations show that it can also be an affirmative cause of action. It also rejected Kubota’s argument that using promissory estoppel as an affirmative cause of action would undermine contract law. The Supreme Court has already decided that the doctrine cannot create unilateral contracts, it wrote. As for the contention that it would create “contracts” from vague promises made in negotiations, the court wrote, it is perfectly possible for courts to avoid construing contracts and return only a judgment appropriate to the statements allegedly relied on.

Finally, the court considered whether Newton had established a genuine issue of material fact well enough to survive summary judgment. Because the trial court and the appellate court had both incorrectly decided there was no promissory estoppel in Illinois, the Supreme Court wrote, neither had considered whether there was such an issue — requiring a remand for further consideration. For those reasons, the Supreme Court reversed the judgment of the appellate court and sent the case back to Fayette County trial court.

The Chicago and Wheaton, Ill. law firm of DiTommaso Lubin Austermuehle focuses on Illinois business litigation and trials such as this for businesses of all sizes. DiTomasso-Lubin’s practice includes representing plaintiffs and defendants in complex business litigation including breach of contract, real-estate, partnership and shareolder disputes in closely held corporations. Our Chicago, Naperville, Oak Brook and Wheaton trial attorneys have handled a number of breach of express warranty cases as well as implied-contract cases such as breach of implied warranty, promissory estoppel and quantum meruit. With offices in downtown Chicago and Oakbrook Terrace, we handle high-stakes business dispute lawsuits throughout Illinois and the Midwest. If you need experienced legal counsel to handle a high-stakes business case and you’d like to learn more about DiTommaso Lubin Austermuehle, please contact us online or call 1-877-990-4990 for a consultation.