Riley J. Wilson v. Career Education Corporation
729 F.3d 665
7th Cir.2013Background
- Riley Wilson worked as a CEC admissions representative under a 2010 Plan that paid bonuses only after a student completed a year or the full course.
- In Oct 2010 ED issued rules prohibiting such bonuses; CEC accelerated the rule's impact and announced a February 28, 2011 end date for bonuses under the Plan.
- Wilson recruited many pipeline students in 2010; by Feb 28, 2011 only some had completed, so CEC paid only a partial bonus and terminated the Plan.
- Wilson sued alleging breach of the Plan, unjust enrichment, and breach of the implied covenant of good faith and fair dealing.
- The district court dismissed, leading to a multi-judge panel with partial reversals and dissents focused on the implied covenant and contract theory.
- Key issue: whether the Plan was an enforceable contract, and whether CEC acted in bad faith or enriched itself by terminating the plan early.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Is the Plan an enforceable contract? | Wilson contends the Plan created binding rights to bonuses. | CEC argues the Plan was illusory due to reserved termination/amendment rights. | Contract is enforceable; Plan is not illusory. |
| Did CEC breach express terms by terminating bonuses for pipeline students? | Termination before pipeline outcomes should not bar earned bonuses. | CEC could terminate or amend at any time under explicit reserved rights. | Terminating early did not violate express terms; focus on implied covenant on remand. |
| Did CEC breach the implied covenant of good faith and fair dealing by terminating early? | Discretion to terminate must be exercised in good faith and consistent with reasonable expectations. | Plan expressly reserves discretion; termination for regulatory compliance is permissible. | Plausible breach of the implied covenant; remand to develop facts on bad-faith termination. |
| Was Wilson's unjust enrichment claim viable given the contract? | Even with a plan, enrichment could be unjust if bonuses were withheld after substantial performance. | Existence of a contract precludes unjust enrichment. | Majority view: contract precludes unjust enrichment; dissenting views exist but remand focuses on implied covenant. |
| What law governs the contract and implied covenant analysis? | Illinois law should apply to implied covenant analysis. | Minnesota law should apply. | Court applies Illinois law. |
Key Cases Cited
- Tymshare, Inc. v. Covell, 727 F.2d 1145 (D.C. Cir. 1984) (limits on contractual discretion when applied to implied good faith)
- Jordan v. Duff & Phelps, Inc., 815 F.2d 429 (7th Cir. 1987) (bad-faith discharge can breach contract even in at-will contexts)
- Beraha v. Baxter Health Care Corp., 956 F.2d 1436 (7th Cir. 1992) (covenant of good faith as construction aid; not independent tort)
- Interim Health Care of N. Ill., Inc. v. Interim Health Care, Inc., 225 F.3d 876 (7th Cir. 2000) (discretion must be exercised reasonably and in good faith)
- Quiello v. Reward Network Establishment Servs., Inc., 420 F.Supp.2d 23 (D. Conn. 2006) (ambiguous contract silence on pipeline bonuses; parol evidence relevant)
- Martindell v. Lake Shore National Bank, 154 N.E.2d 683 (Ill. 1958) (constructive approach to contract interpretation; good-faith considerations)
- Gassner v. Raynor Mfg. Co., 350 N.E.2d 315 (Ill. App. 2011) (ambiguous contract allows parol evidence)
- 10th Cir. 2010, 306 F.3d 17 (10th Cir. 2010) (motion to compel arbitration standard akin to summary judgment (illustrative))