Gerald Deom v. Walgreen Company, 591 F. App'x 313

Deom sold three pharmacies’ assets to Walgreen for $3,500,000 with a $600,000 earnout if Walgreen averaged at least 308 prescriptions daily for nine months after the sale.
Walgreen actually filled far fewer prescriptions than 308 on average and did not trigger the earnout.
Deom alleged Walgreen breached the implied covenant of good faith and fair dealing by failing to be adequately prepared and to provide adequate customer service, allegedly driving Deom’s former customers away to frustrate the bonus.
The district court dismissed the implied-duty claim under Rule 12(b)(6) but allowed Deom’s other claims to proceed.
The court held Illinois law requires contractual discretion for the implied covenant to apply and that Deom failed to plead bad faith; the dismissal was affirmed.
On appeal, the Sixth Circuit affirmed the dismissal, agreeing Walgreen had, at least to some extent, contractual discretion over how it served customers, but Deom did not plead improper motive or bad faith sufficient to state a claim.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Does Illinois law impose an implied duty when earnout depends on post-sale performance	Deom: yes, Walgreen had discretion to meet target and must act in good faith	Walgreen: no independent duty; no discretionary obligation to meet earnout beyond contract terms	Discretion may exist, but not enough to plead bad faith
Whether the complaint adequately pleads bad faith or improper motive to sustain the implied covenant claim	Deom alleges inadequate preparation and poor service aimed at retaining customers to trigger the bonus	Walgreen acted with ordinary business judgment; no evidence of improper motive toward Deom's customers	Complaint insufficient; no plausible inference of bad faith

Beraha v. Baxter Health Care Corp., 956 F.2d 1436 (7th Cir. 1992) (implied covenant guides contract interpretation; improper motive required)
Dayan v. McDonald’s Corp., 468 N.E.2d 972 (Ill. Ct. App. 1984) (contractual discretion and bad faith standardsGuidance on actions to bring about a condition)
Original Great Am. Chocolate Chip Cookie Co. v. River Valley Cookies, Ltd., 970 F.2d 273 (7th Cir. 1992) (no blanket duty of good faith; reasonableness not sole test)
E.B. Harper & Co. v. Nortek, Inc., 104 F.3d 913 (7th Cir. 1997) (unreasonable conduct alone not always bad faith; improper motive required)
Wilson v. Career Educ. Corp., 729 F.3d 665 (7th Cir. 2013) (plausible claim for breach where termination of incentive plan shown improper motive)
O’Tool v. Genmar Holdings, Inc., 387 F.3d 1188 (10th Cir. 2004) (bad faith standard in implied covenant cases; improper motive required)