McCleary v. Wells Fargo Securities, LLC
29 N.E.3d 1087
Ill. App. Ct.2015Background
- McCleary was hired as a director of sales and was eligible for the Wells Fargo Securities Group Bonus Plan (the Plan); his position was eliminated in May 2012 (termination effective July 2012). He met the Plan’s qualifying conditions for a pro‑rata 2012 bonus.
- The Plan stated its purpose, listed objective factors and a formula for creating a bonus pool, and provided that awards are made in the “sole and absolute discretion” of the Plan Administrator; it also said amendments would not adversely affect a participant’s "earned award" prior to the amendment’s effective date.
- After McCleary’s termination, a 2012 bonus pool was created and similarly situated employees received bonuses, but McCleary was not paid. Defendant later testified it adopted a rule excluding employees displaced prior to May 31, 2012 (i.e., working less than half the year).
- McCleary sought internal review; defendant refused to identify the decision factors and relied on its absolute discretion to deny a bonus. McCleary sued for breach of contract, violation of the Illinois Wage Payment and Collection Act, and unjust enrichment.
- The trial court dismissed under section 2‑615, reasoning the Plan’s reservation of “absolute discretion” foreclosed McCleary’s claims. The appellate court reversed and remanded.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether reservation of absolute contractual discretion bars review for abuse of that discretion | McCleary: Reservation of discretion is subject to implied covenant of good faith; alleged facts show a retroactive, adverse change and arbitrary denial | Wells Fargo: Plan’s “sole and absolute discretion” precludes any legal challenge to bonus decisions | Reversed — contractual discretion can be reviewed for abuse; allegations of bad faith suffice at pleading stage |
| Whether McCleary plausibly alleged a reasonable expectation or entitlement to a bonus | McCleary: Plan terms, qualifying events, and that a pool was created with payouts to peers create a reasonable expectation and entitlement to a prorated award | Wells Fargo: No guarantee of a bonus and discretion means no enforceable right | Held for McCleary — pleadings plausibly establish a reasonable expectation and eligibility |
| Whether the complaint sufficiently identifies the amount or method for computing the bonus | McCleary: Plan exhibits and described formula (blended percentage of pre‑SBI NIBT) provide the factors/method to calculate an award | Wells Fargo: Plaintiff failed to allege a specific dollar amount | Held for McCleary — alleged formula and factors are sufficient to survive a 2‑615 motion |
| Whether McCleary stated viable claims for breach of contract, the Wage Payment Act, and unjust enrichment | McCleary: Denial of an earned/pro‑rata bonus after satisfying qualifying conditions and alleged retroactive amendment states all three claims | Wells Fargo: Discretion and lack of guarantee defeat all claims | Held for McCleary — claims survive dismissal; facts present triable issues on bad faith and entitlement |
Key Cases Cited
- Pooh‑Bah Enterps., Inc. v. County of Cook, 232 Ill. 2d 463 (2009) (standard for a section 2‑615 motion testing legal sufficiency of the complaint)
- Phoenix Ins. Co. v. Rosen, 242 Ill. 2d 48 (2011) (de novo review of dismissal under section 2‑615)
- Wilson v. Career Educ. Corp., 729 F.3d 665 (7th Cir. 2013) (party with contractual discretion can still be liable for abusing that discretion)
- Carrico v. Delp, 141 Ill. App. 3d 684 (1986) (implied covenant of good faith limits exercise of contractual discretion)
- Horwitz v. Sonnenschein Nath & Rosenthal, LLP, 399 Ill. App. 3d 965 (2010) (factors identifying how a discretionary compensation award is determined can be sufficient pleading to state a claim)
- HPI Health Care Servs., Inc. v. Mt. Vernon Hosp., Inc., 131 Ill. 2d 145 (1989) (elements of unjust enrichment claim)