‘Closely Intertwined’ Business Relationship Equals Possible Joint Venture – Says Illinois Court

Consider this: a multi-national plastics seller (“Seller”) has a written contract with a plastics manufacturer (the “Manufacturer”) that labels the Manufacturer as an independent contractor of the Seller.  Under the agreement, the Seller supplies material to the Manufacturer who then makes plastic products exclusively for the Seller and sells the products back to the Seller.  The Seller buys the finished products from the Manufacturer at a pre-set price and then sells them to its (Seller’s) own customers.  The Seller and Manufacturer do not share any profits on Seller’s product sales.

An employee of the Manufacturer then gets injured on the job and sues both the Seller and Manufacturer for damages claiming they are joint venturers and therefore equally responsible for his injuries.  This is a significant event given the size and financial resources of the Seller.

Question: does this claim possibly have legs?

Answer: “Maybe.”  The First District held that the question of whether there is a joint venture between Seller and Manufacturer was open enough to survive summary judgment.

The plaintiff in Hyatt v. Western Plastics, 2014 IL App (2d) 140178, suffered severe injuries when his arms got caught in an extruding machine. He sued his employer – the “Manufacturer” in the above snippet – along with the Seller on the theory that there was a joint venture between the Manufacturer and Seller.  The trial court entered summary judgment for the Seller.  The plaintiff appealed.

Reversing the trial court, the First District engaged in a detailed analysis of some Illinois business structure basics:

A joint venture is an association of two or more persons to carry on a single enterprise for profit;

– Joint venture members  owe fiduciary duties to one another and are vicariously liable for negligent acts of the other joint venturers carried out in the course of the enterprise;

– No formal agreement is necessary to form a joint venture and it can be inferred from the parties’ conduct and surrounding circumstances;

– Joint venture is a creature of contract law; not a statute and depends on the parties’ intent;

– Cardinal joint venture traits include (1) a community of interest – manifested by the joint contribution of money, property, effort, skill or knowledge; (2) an express or implied agreement to carry on an enterprise; (3) a sharing of profits; and (4) joint control and management of the enterprise;

(¶¶ 72-77)

Synthesizing the case’s thick discovery record, the court found there was a disputed question of fact on whether the parties formed a joint venture.

Some of the evidence pieces that was key to the court’s summary judgment reversal included:

(1) The Manufacturer-Seller contract was nearly thirty years’ old (automatically renewing every year) and required the Manufacturer to make some 800,000 pounds of plastic products annually and to sell them exclusively to the Seller at a pre-set formula.;

(2) Exclusivity: the contract prevented the Manufacturer from selling the plastic product to anyone other than Seller and gave Seller the final say over any product or process changes;

(3) A “Cost Improvement” section of the contract provided that Seller and Manufacturer would share the benefits of cost improvements on a 50/50 basis;

(4) Multiple emails revealed that Seller’s and Manufacturer’s personnel discussed a mutually beneficial business relationship and alluded to long-term collaboration and cost savings sharing.

(¶¶ 80-101)

In the end, the Court really didn’t know what to make of the parties’ plastics making arrangement.  The most it could say was that it was  a “long-term, closely intertwined relationship.” (¶ 101).

Taken together, the evidence of the parties’ unique business model raised a material fact question (as to whether it was a joint venture) that should have survived summary judgment.


Definitely a pro-plaintiff case in the sense that a company that’s arguably twice removed from an injured plaintiff and who sells to a universe of consumers unrelated to those the plaintiff’s employer sells to can still be deemed a joint venturer of that employer.

The case could have huge liability ramifications.  If a deep-pocketed seller can be viewed as being in a joint venture with a separate manufacturer, that seller is potentially on the hook for a high dollar jury verdict or settlement for actions of the manufacturer alone.

The case lesson for business defendants is clear: If the intent is to be considered separate and independent, they should document that and take pains not to jointly control business property or share in its profits.


Illinois Sales Representative Act Doesn’t Apply to Construction Repair “Services” – IL 1st Dist



The Illinois Sales Representative Act, 820 ILCS 120/1 (the “ISRA”) provides a cause of action for independent sales representatives who are owed sales commissions.  By covering independent contractors (as opposed to employees), the ISRA serves as a powerful gap filler to the Illinois Wage Payment and Collection Act, which applies specifically to employees owed wages by their employers.

Key ISRA terms include “sales representative”, “commission” and “principal.”  A sales representative is someone who solicits orders on behalf of a principal.  A principal is defined as a person who manufactures, sells, imports or distributes a “product” and who pays a sales representative on commission.  The ISRA defines  a commission as a percentage of the total dollar amount of sales or percentage of profits.  820 ILCS 120/1(1)-(3).

The ISRA principal must pay an earned commission to the sales representative within 13 days of either (a) the termination of the principal-sales rep contract or (b) the date on which the commissions are earned.  If the principal fails to pay within that 13-day period, the sales representative can recover treble damages (3 times the amount of the best commissions) plus attorneys’ fees and costs.  820 ILCS 120/1(1)-(3).

Johnson v. Safeguard Const. Co., Inc., 2013 ILApp (1st) 123616, examines whether a sales representative who solicits orders for a combination of goods and services can state an ISRA claim.

The plaintiff’s job was to try and sign up homeowner clients for the defendant’s  construction restoration services.  The plaintiff was paid a commission based on a percentage of the defendant’s profits.  The defendant didnt ‘t actually perform the construction repair work or supply the materials.  It did all work through subcontractors.

Plaintiff sued under the ISRA and for breach of contract for unpaid commissions.  The court entered summary judgment on the ISRA claim and plaintiff voluntarily dropped his breach of contract claim.  Plaintiff appealed the dismissal of the ISRA count.

Held: Affirmed.  The ISRA doesn’t apply because defendants don’t manufacture or sell a “product” under the ISRA.


The ISRA applies to principals who manufacture, produce, import, or distribute “products” for sale.  Illinois caselaw has interpreted “products” to mean tangible goods, not services.  (¶16).  In “mixed product” cases – ones that involve goods and services, the Court looks to the main purpose of the contract and looks to whether goods are incidental to the services offered.  (¶¶ 18-20).  If services are the contract’s central aim and tangible materials are only tangential to the contract, the ISRA doesn’t apply.  Id.

The Court rejected plaintiff’s argument that the defendant supplied both goods and services to its construction restoration clients.  Even though the contract mentioned “products and services”, the Court still found that the ISRA didn’t apply.  The key factor was that the defendant didn’t perform the work or furnish any materials; but instead, sub-contracted the work and materials to third parties.

The Court held that since defendant didn’t actually perform the work or supply any tangibles  materials to its homeowner clients, the main purpose of the contract between plaintiff and defendant and between defendant and the homeowners clients was for plaintiff’s home restoration services.  Any goods or products offered were purely incidental to the contract’s main goal: signing up accounts for the defendant.  (¶¶ 21-22).

Notes:  This case espouses  a literal interpretation of a statute and shows that where a contract’s main purpose is rendition of services – as opposed to supplying tangible goods – the ISRA won’t apply.  The court distinguished this case from a Federal case (Nicor Energy v. Dillon, 2004 WL 51234) where the court allowed an ISRA claim involving the sale of energy and natural gas services.  In that case, because the contract required the plaintiff to sell specific quantities of natural gas and electricity to end users, the “goods” portion of the contract predominated over the services portion.