The Northern District of Illinois recently discussed the pleading and proof elements of tortious interference with contract and the promissory estoppel doctrine in a commercial railcar lease dispute. In Midwest Renewable Energy, LLC v. Marquis Energy-Wisconsin, LLC 2014 WL 4627921 (N.D. Ill. 2014), the plaintiff sublessor of railcars sued the sublessee for damages after the plaintiff’s lessor terminated a lease (“Master Lease”) for the same cars. The sublessee moved for summary judgment.
Result: Motion granted. Plaintiff’s tortious interference and promissory estoppel claims are defeated.
Q: Why?
A: After the railcar lessor terminated the Master Lease with the plaintiff and started dealing directly with the sublessee, the plaintiff sued it’s sublessee for tortious interference and promissory estoppel. Granting summary judgment for the sublessee , the Court enunciated the key tortious interference with contract elements under Illinois law.
Tortious Interference with Contract
A tortious interference with contract plaintiff must show (1) the existence of a valid and enforceable contract between the plaintiff and another, (2) the defendants’ awareness of the contract, (3) the defendants’ intentional and unjustified inducement of a breach of the contract, (4) subsequent breach of the contract caused by the defendants’ wrongful conduct, and (5) damages. If a plaintiff fails to perform its contractual obligations, it can’t prove breach and its tortious interference claim will fail.
Here, the plaintiff’s tortious interference claim failed because it couldn’t show that its lessor breached the Master Lease. The plaintiff actually breached it by subletting it to defendant without the (Master) lessor’s knowledge and consent (the Master Lease required the lessor’s consent to any sublease or assignment) and also by failing to make several months’ of railcar lease payments. Since the lessor was able to terminate the lease on plaintiff’s breach, the plaintiff failed to establish that the lessor breached – an essential tortious interference element.
Promissory Estoppel
Next, the Court rejected the plaintiff’s promissory estoppel count. Plaintiff predicated this claim on the defendant/sublessee’s promise to buy out plaintiff’s rights under the Master Lease.
Promissory estoppel is a doctrine under which the plaintiff may recover without the presence of a contract. To prove promissory estoppel, a plaintiff must show (1) defendant made n unambiguous promise to plaintiff, (2) plaintiff relied on such promise, (3) plaintiff’s reliance was expected and foreseeable by defendants, and (4) plaintiff relied on the promise to its detriment. Aspirational negotiations or proposals don’t equate to a clear promise under the doctrine.
Plaintiff’s promissory estoppel claim failed because it couldn’t show a clear promise by the defendant to buy out plaintiff’s Master Lease rights. The evidence reflected that any lease buy-out talks were merely negotiations; not ironclad promises.
The promissory estoppel clam was also defeated by the statute of frauds – which requires certain contracts to be in writing. Under Section 2A of the UCC, lease contracts for goods (like railcars) have to be in writing unless the total lease payments are less than $1,000. 810 ILCS 5/2A–201(1). Where the statute of frauds applies, to a contract, it also requires an assignment of the contract to be in writing and signed by the party being sued.
Here, since the statute of frauds applied to the Master Leases and well over $1,000 was at stake, any assignment from plaintiff to defendant of the Master Lease had to be in writing. The Court rejected the plaintiff’s claim that several e-mail exchanges with the sublessee satisfied the statute’s writing requirement. The Court found that since the none of the emails contained the contract parties, subject matter or price term of the supposed assignment agreement, the sporadic emails didn’t meet the writing requirement. (*5).
Take-aways: The case is post-worthy for its discussion of the key tortious interference with contract elements and how important it is for a plaintiff to show that it complied with the contract it is claiming was wrongfully interfered with. The case also provides good summary of promissory estoppel elements and cements the proposition that the statute of frauds will still apply to bar the claim if the subject matter is one that has to be in writing under the law. Finally, this case amplifies the importance of careful lease drafting and review. Parties to lease agreements – whether for real estate or tangible goods – should be cognizant of assignment and sublease provisions. They almost always require the prime lessor’s knowledge and written consent.