No. 1-13-2639 Opinion filed October 29, 2014 Third Division ______________________________________________________________________________

IN THE

APPELLATE COURT OF ILLINOIS

FIRST DISTRICT

______________________________________________________________________________

SALETECH, LLC, ) ) Appeal from the Circuit Court Plaintiff-Appellant, ) of Cook County. ) v. ) ) No. 12 L 18 EAST BALT, INC., EAST BALT OF EASTERN ) EUROPE, LLC, and LOU-EL, LTD, All ) Individually and d/b/a/ East Balt Ukraine, and ) The Honorable EAST BALT UKRAINE, ) Thomas L. Mulroy, Jr., ) Judge, presiding. Defendants-Appellees. ) ) ______________________________________________________________________________

JUSTICE HYMAN delivered the judgment of the court, with opinion. Justice Lavin and Justice Mason concurred in the judgment and opinion.

OPINION

¶1 After an agreement governed by Ukrainian law to distribute bakery products made by a

Ukrainian company went sour, plaintiff, also a Ukrainian company, sued for breach of contract

but never served the complaint on the Ukrainian company. Instead, plaintiff pursued three

American companies that were not signatories to the contract asserting theories of agency,

contract ratification, alter ego, promissory estoppel and unjust enrichment. The trial court

granted defendants’ motion to dismiss the third amended complaint under section 2-615 of the 1-13-2639

Illinois Code of Civil Procedure (Code) with prejudice. 735 ILCS 5/2-615 (West 2012). Plaintiff

now asks us to reverse the order of dismissal and permit the case to proceed to discovery. We

affirm, finding that the third amended complaint failed to state a cause of action for breach of

contract under theories of agency, ratification, and alter ego, and also failed to state a claim for

promissory estoppel and unjust enrichment.

¶2 BACKGROUND

¶3 Plaintiff Saletech, LLC (Saletech), is a distribution company organized under the laws of

the Ukraine. Defendants are (i) East Balt Ukraine (EB Ukraine), organized under the laws of

Ukraine and registered with the Ukraine government as an "Enterprise with Foreign

Investments," and three American entities—(ii) East Balt, Inc. (EB Inc.), a Delaware corporation

with its principal place of business in Chicago, which owns commercial bakeries globally and is

the parent company of (iii) East Balt of Eastern Europe, LLC (EB Europe), an Illinois limited

liability company with its principal place of business in Chicago, which in turn, owns EB

Ukraine. (Another defendant, Lou-El, Ltd., a subsidiary of EB Inc. and a Delaware company

with its principal place of business in Chicago, had no ownership interest in or involvement with

EB Ukraine and was not the subject of any claims or allegations in the third amended complaint.

Accordingly, we affirm the dismissal of Lou-El, Ltd.)

¶4 On August 12, 2011, Saletech entered into an agreement with EB Ukraine to be the

exclusive distributor of its bakery products. Under the agreement, which was amended on

September 15, 2011, Saletech would buy and distribute on a monthly basis a minimum of 4

million units of EB Ukraine's bakery items. Saletech contends that less than two months later, in

November, EB Ukraine breached the agreement. Saletech contacted EB Ukraine's general

director but when the problem was not resolved, Saletech's vice president, Simon Gordon,

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contacted Edward Gin, EB Inc.'s vice president and chief financial officer, who put Gordon in

touch with Stuart Lee, EB Inc.'s executive vice president of the European region. According to

Gordon, Lee told him EB Inc. and EB Europe suspected improprieties by management at EB

Ukraine, and stated that if Saletech would help investigate and obtain proof of those

improprieties, EB Ukraine's management team would be replaced and the terms of the exclusive

distribution agreement would be honored. Saletech agreed to help and claims it incurred all sorts

of expenses, including frequent flights from Ukraine to Chicago to meet with EB Inc.

representatives and the cost of hiring armed security, which it claimed it needed to protect its

offices and personnel after EB Ukraine sent threatening text messages.

¶5 The record does not reveal whether the investigation uncovered any improprieties or

whether EB Ukraine’s management was replaced but despite Saletech's assistance, EB Ukraine

remained in breach of the agreement. On January 3, 2012, Saletech filed a three-count complaint

against EB Inc., individually and doing business as EB Ukraine, alleging breach of contract,

promissory estoppel, and unjust enrichment. EB Inc. was served with the complaint; EB Ukraine

was not. On February 27, 2012, EB Inc. filed a motion to dismiss the complaint. Next, Saletech

filed an amended complaint, which named two additional defendants, EB Eastern Europe and

Lou-El, Ltd., individually and on behalf of EB Ukraine, and again raised breach of contract,

collateral estoppel, and unjust enrichment claims. Defendants filed a motion to dismiss, which

the trial court granted, with 28 days leave to file an amended complaint. Saletech filed its second

amended complaint on September 28, 2012. In count I of its six-count complaint, Saletech

alleged breach of contract against EB Ukraine. The remaining five counts against the other

defendants alleged breach of contract under a ratification theory (count II), an agency theory,

(count III), and an alter ego theory (count IV). Saletech also brought claims for promissory

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estoppel (count V) and unjust enrichment (count VI). All of the defendants except EB Ukraine

were served. The served defendants filed a motion to dismiss counts II through VI, which the

trial court again granted with leave to amend.

¶6 On January 18, 2013, Saletech filed its third amended complaint. In count I, Saletech

alleged breach of contract against EB Ukraine. Counts II through V alleged breach of contract by

ratification against EB Inc. (count II) and EB Europe (count III), breach of contract by actual or

apparent agency by EB Inc. (count IV), and breach of contract by EB Europe as an alter ego of

EB Ukraine (count V). Saletech also raised a promissory estoppel claim against EB Inc. (count

VI) and an unjust enrichment claim against EB Inc. and EB Europe (count VII). Again, all of the

named defendants except EB Ukraine were properly served.

¶7 On January 28, 2013, the served defendants moved to dismiss Saletech's third amended

complaint under section 2-619.1 of the Code (735 ILCS 5/2-619.1 (West 2012)), which allows a

party to combine a section 2-615 motion to dismiss and a section 2-619 motion for involuntary

dismissal in one pleading. On April 9, 2013, after oral arguments, the trial court entered an order

dismissing counts II through VII of Saletech's third amended complaint under section 2-615 of

the Code (735 ILCS 5/2-615 (West 2012)). (Because EB Ukraine had not been served, the court

did not address count I of the amended complaint.) As to counts II and III alleging ratification

and count IV alleging agency, the trial court found Saletech failed to properly plead an agency

relationship between EB Ukraine and EB Inc. or EB Europe. The court found that the request by

EB Inc. and EB Europe for Saletech's assistance in investigating improprieties by EB Ukraine

and their assurances to Saletech that the agreement would then be honored did not establish an

agency relationship or constitute ratification because the defendants could not ratify acts that

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were not done on their behalf. The trial court also found Saletech's complaint failed to properly

allege EB Ukraine as the alter ego of EB Europe (count V).

¶8 The court found Saletech's amended complaint failed to allege a claim for promissory

estoppel (count VI) because it did not specify promises made by EB Inc. or detriment Saletech

incurred based on those alleged promises. As for the unjust enrichment claim (count VII), the

trial court found that Saletech failed to allege a specific benefit EB Inc and EB Europe unjustly

retained to Saletech's detriment. Noting that the amended complaint constituted the fourth

attempt by Saletech to plead its claims against EB Inc. and EB Europe, the trial court dismissed

counts II through VII with prejudice. The trial court also noted that although Lou-El, Ltd. was

named as a defendant, Saletech made no allegations against it in its third amended complaint and

dismissed Lou-El, Ltd from the case with prejudice.

¶9 Saletech requested an alias summons for defendant EB Ukraine, which the trial court

granted. But EB Ukraine was never served, and on July 18, 2013, the trial court dismissed count

I of the third amended complaint for want of prosecution. Saletech filed a timely notice of appeal

on August 16, 2013.

¶ 10 ANALYSIS

¶ 11 A section 2-615 motion to dismiss attacks the legal sufficiency of the complaint based on

defects apparent from its face (Simpkins v. CSX Transportation, Inc.,

) and

the relevant inquiry is whether the allegations, considered in the light most favorable to the

plaintiff, are sufficient to state a cause of action. Sheffler v. Commonwealth Edison Co.,

, ¶ 61. "In ruling on a section 2-615 motion, the court may not consider affidavits,

products of discovery, documentary evidence not incorporated into the pleadings as exhibits, or

other evidentiary materials." Cwikla v. Sheir,

(2003). A motion to

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dismiss under section 2-619(a)(9) admits the legal sufficiency of the complaint and asserts an

affirmative matter outside the pleading that avoids the legal effect of or defeats the claim. Relf v.

Shatayeva,

. We review the dismissal of a claim under either section 2-615

or section 2-619(a)(9) de novo. Kean v. Wal-Mart Stores, Inc.,

(2009).

Although defendants filed section 2-619.1 motion to dismiss, the trial court dismissed counts II

through VII under section 2-615 of the Code, and thus we must determine whether any of the

allegations, when considered in a light most favorable to Saletech, suffice to state a cause of

action.

¶ 12 Agency

¶ 13 Saletech first contends count IV of its amended complaint properly alleged EB Ukraine

entered the exclusive distribution agreement not on its own behalf but as the actual or apparent

agent of EB Inc.

¶ 14 “An agency is a fiduciary relationship in which the principal has the right to control the

agent's conduct and the agent has the power to act on the principal's behalf.” Powell v. Dean

Foods Co.,

, ¶ 65 (citing Letsos v. Century 21-New West Realty,

(1996)). An agent's authority may be either actual or apparent, and actual

authority may be either express or implied. C.A.M. Affiliates, Inc. v. First American Title

Insurance Co.,

(1999). Actual express authority exists where "the

principal explicitly grants the agent the authority to perform a particular act."

Apparent

authority, by contrast, arises when the principal holds an agent out as possessing the authority to

act on its behalf, and a reasonably prudent person, exercising diligence and discretion, would

naturally assume the agent to have this authority in light of the principal's conduct. Patrick

Engineering, Inc. v. City of Naperville,

. To hold the principal liable under

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an apparent agency theory, the aggrieved third party must prove: “(1) the principal's consent to or

knowing acquiescence in the agent's exercise of authority, (2) the third party's knowledge of the

facts and good-faith belief that the agent possessed such authority, and (3) the third party's

detrimental reliance on the agent's apparent authority.” Weil, Freiburg & Thomas, P.C. v. Sara

Lee Corp.,

(1991) (citing Northern Trust Co v. St. Francis Hospital,

(1988)).

¶ 15 While the existence of an agency relationship is generally a question reserved to the trier

of fact, a plaintiff must still plead facts, which, if proved, could establish the existence of an

agency relationship. Knapp v. Hill,

(1995). The party seeking to charge

the alleged principal carries the burden of proving the existence of an agency relationship and the

scope of its authority. Daniels v. Corrigan,

(2008). A principal-agent

relationship exists when the principal has the right to control the manner in which the agent

performs his work and the agent has the ability to subject the principal to liability. Lang v. Silva,

(1999). Generally, actual authority of an agent requires the authority be

founded on the principal’s words or act, not on the agent’s. Wadden v. Village of Woodridge,

(1990). Nevertheless, the existence of an agency relationship may be

demonstrated by circumstantial evidence, including the situation of the parties, their acts, and

other relevant circumstances. Prodromos v. Everen Securities, Inc.,

(2003).

¶ 16 Saletech first contends it properly plead that EB Ukraine was the actual agent of EB Inc.

when it entered into the exclusive distribution agreement. We disagree. Saletech's amended

complaint merely stated, "At the time the Agreement was entered into, East Balt Ukraine was

acting as the apparent or actual agent of East Balt, Inc." Saletech failed to allege facts showing

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that EB Inc. gave EB Ukraine authority to enter the agreement on its behalf. The exclusive

distribution agreement identifies Saletech and EB Ukraine as the parties to the agreement and

nowhere indicates EB Ukraine was signing on EB Inc.'s behalf. Saletech also failed to allege any

communications with EB Inc. before entering into the agreement. Saletech did file a response to

defendants' motion to dismiss, which included an affidavit from Simon Gordon, Saletech's vice

president, stating before entering the agreement he met with officers and employees of EB Inc. to

discuss the exclusive distribution agreement and that EB Ukraine's general manager told him that

before he could sign the agreement it would "have to be confirmed in Chicago." As noted, in

ruling on a section 2-615 motion, the court may not consider affidavits, products of discovery,

documentary evidence not incorporated into the pleadings as exhibits, or other evidentiary

materials.

¶ 17 Saletech also asserts the circumstances under which the parties operated created an

agency relationship, noting that the certificate of exclusivity state that EB Ukraine is a "[b]ranch

of East Balt, Inc." and the EB Inc. website lists Dnepropetrovsk, Ukraine, as one of its facilities.

Defendants concede that EB Inc. is the parent company of EB Europe, which owns EB Ukraine,

but there are no factual allegations in Saletech's complaint to establish that EB Ukraine was

acting as an agent for EB Inc. when it signed the exclusive distribution agreement.

¶ 18 Saletech alternatively contends even if EB Ukraine lacked actual authority, it had

apparent authority to enter into the exclusive distribution agreement on behalf of EB Inc. But

again, Saletech's third amended complaint fails to allege facts showing EB Inc. consented to or

knew EB Ukraine entered into the agreement on its behalf, that Saletech had a good-faith belief

that EB Ukraine had authority to bind EB Inc. or that it relied on EB Ukraine's authority to its

detriment. In the absence of these necessary allegations, the trial court did not err in finding

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Saletech failed to properly allege an agency relationship between EB Ukraine and EB Inc. and in

dismissing count IV of the amended complaint with prejudice.

¶ 19 Ratification

¶ 20 Saletech next contends it properly stated claims against EB Inc. and EB Europe for

breach of contract based on their alleged ratification of the exclusive distribution agreement.

Specifically, Saletech asserts EB Inc. and EB Europe ratified the agreement by telling Saletech's

vice president that if Saletech assisted in the investigation of improprieties by EB Ukraine

management, the terms of the agreement would be honored. Thus, Saletech argues the trial court

erred in dismissing counts II and III of its amended complaint under section 2-615 of the Code

(735 ILCS 5/2-615 (West 2012)).

¶ 21 For ratification to be effective, the principal, with full knowledge of an unauthorized

transaction, must manifest an intent to abide and be bound by it either retaining its benefits or

taking a position inconsistent with nonaffirmance. Gambino v. Boulevard Mortgage Corp.,

(2009). “[R]atification does not result from the affirmance of a transaction

*** unless the one acting as agent purported to be acting for the ratifier." (Internal quotation

marks omitted.) Owen Wagener & Co. v. U.S. Bank,

(1998).

¶ 22 As noted, there is no evidence that EB Ukraine was acting as EB Inc.'s agent when it

entered into the exclusive distribution agreement with Saletech. Also, although EB Europe is the

parent company, there were no allegations in the complaint that EB Ukraine was acting as an

agent for EB Europe when it entered the agreement. Further, nothing in the third amended

complaint supports a finding that once EB Inc. and EB Europe learned of the agreement when

they were notified by Saletech of the breach, they retained any benefits of the agreement or took

any steps manifesting an intent to be bound by it. Telling Saletech's vice president that if

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Saletech helped investigate EB Ukraine, the terms of the agreement would be honored was not a

promise by EB Inc. or EB Europe to be bound by and fulfill the agreement. Because defendants

also told Saletech that the management of EB Ukraine would be replaced, a more reasonable

interpretation is that the new management would be honoring the terms of the agreement. Absent

allegations that either defendant retained a benefit or expressed an intent to be bound by the

distribution, the trial court did not err in dismissing counts II and III of Saletech's amended

complaint.

¶ 23 Alter Ego

¶ 24 In count V, Saletech alleged a claim for breach of contract against EB Europe under the

theory that EB Ukraine was the alter ego of EB Europe, its parent company, thereby warranting

piercing of the corporate veil.

¶ 25 A primary purpose of doing business as a corporation is to insulate stockholders from

unlimited liability for corporate activity. Peetoom v. Swanson,

(2002).

In certain circumstances, however, the corporate form may be disregarded, such as where the

corporation stands as the alter ego or the business conduit of another, dominating personality.

Tower Investors, LLC v. 111 East Chestnut Consultants, Inc.,

(2007). "This doctrine fastens liability on the individual or entity that uses a corporation merely

as an instrumentality to conduct that person's or entity's business." Peetoom,

. “A party seeking to pierce the corporate veil has the burden of making ‘a substantial

showing that one corporation is really a dummy or sham for another’ [citation], and courts will

pierce the corporate veil only reluctantly [citation].” In re Estate of Wallen,

(1994).

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¶ 26 Particularly, in breach of contract cases, courts apply an even more stringent standard to

determine when to pierce the corporate veil than in tort cases. Tower Investors,

(citing 1 William Meade Fletcher, Cyclopedia of Corporations § 41.85, at 692 (1999)).

The reason is that a party seeking relief for a breach of contract presumably entered into the

contract with the corporate entity voluntarily and knowingly and expecting to suffer the

consequences of the limited liability status of the corporate form. Id. (citing 1 William Meade

Fletcher, Cyclopedia of Corporations § 41.85, at 692 (1999)).

¶ 27 Illinois courts will pierce the corporate veil where: (1) a unity of interest and ownership

appears so strong that the separate personalities of the corporation and the parties who compose

it no longer exist, and (2) under the circumstances, adhering to the fiction of a separate

corporation would promote injustice or inequitable circumstances. Tower Investors,

-34 (citing Pederson v. Paragon Pool Enterprises,

(1991)). In a breach of contract case, “ ‘ "additional compelling facts," ’ ” such as a finding of

fraud, may also be required.

at 1034 (citing Main Bank of Chicago v. Baker,

(1981)). "Where there is no evidence of any misrepresentation, no attempt to conceal any

facts, and the parties possess a total understanding of all of the transactions involved, Illinois

courts will not pierce the corporate veil in a breach of contract situation." Tower Investors,

.

¶ 28 In its third amended complaint, Saletech alleged EB Ukraine was the alter ago of EB

Europe because the two entities had commingled funds as a means of defrauding creditors, had a

unity of interests so that their separate identities ceased, and had the same Chicago business

address. In its brief, Saletech further alleged EB Ukraine’s bylaws show EB Europe’s control

over EB Ukraine, including overseeing the day-to-day activities of EB Ukraine, keeping all of

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EB Ukraine's after-tax profits, hiring and firing EB Ukraine management, setting compensation

for EB Ukraine employees, and selecting EB Ukraine's organizational structure and amending its

bylaws. Saletech contends these facts establish EB Ukraine is the alter ego of one or more of the

EB entities and, at minimum, support denial of the motion to dismiss count V.

¶ 29 Although Saletech's complaint alleges EB Europe and EB Ukraine commingled funds "as

a means of defrauding creditors," the complaint lacks factual allegations to support that

conclusory statement. In its brief, Saletech refers to an affidavit from Simon Gordon but, as

previously discussed, in deciding a section 2-615 motion, the trial court may not consider

affidavits, products of discovery, documentary evidence not incorporated into the pleadings as

exhibits, or other evidentiary materials. Cwikla,

. Thus, the trial court did

not err in dismissing count V of Saletech's amended complaint in the absence of factual

allegations to warrant piercing the corporate veil.

¶ 30 Promissory Estoppel

¶ 31 Next, Saletech contends the trial court erred in dismissing count VI because it properly

stated a claim for promissory estoppel against EB Inc. To establish a claim for promissory

estoppel, a plaintiff must prove that (i) defendant made an unambiguous promise to plaintiff, (ii)

plaintiff relied on that promise, (iii) plaintiff's reliance was expected and foreseeable by

defendants, and (iv) plaintiff relied on the promise to its detriment. Newton Tractor Sales, Inc. v.

Kubota Tractor Corp.,

(2009) (citing Quake Construction, Inc. v. American

Airlines, Inc.,

(1990)). Saletech alleges it relied on EB Inc.'s promise that

the terms of the exclusive distributorship agreement would be honored if Saletech agreed to

assist EB Inc. and EB Europe in their investigation of EB Ukraine management. Saletech claims

this promise states a claim for promissory estoppel.

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¶ 32 In response, defendants argue Saletech cannot state a claim for promissory estoppel as a

matter of law because promissory estoppel only applies in the absence of a contract.

¶ 33 “ ‘[P]romissory estoppel is a doctrine under which the plaintiff may recover without the

presence of a contract.’ ” Newton,

(quoting Illinois Valley Asphalt, Inc. v. J.F.

Edwards Construction Co.,

(1980)). Thus, a party will generally be

barred from seeking redress under the doctrine of promissory estoppel “where the performance

which is said to satisfy the requirement of detrimental reliance is the same performance which

supplies the consideration for [a] contract.” Prentice v. UDC Advisory Services, Inc.,

(1995). This is because promissory estoppel provides a means to enforce

promises unsupported by consideration; “[i]t is not intended ‘to give a party to a negotiated

commercial bargain a second bite at the apple in the event it fails to prove breach of contract.’ ”

(Internal quotation marks omitted.)

quoting Wagner Excello Foods, Inc. v. Fearn

International, Inc.,

(1992)).

¶ 34 The performance giving rise to Saletech’s detrimental reliance in the promissory estoppel

claim is not the same performance that supplied the consideration for the contract. Saletech

alleges it agreed to assist defendants with their investigation of EB Ukraine improprieties in

exchange for a new management team honoring the terms of the agreement. Saletech's assistance

in the investigation could not have been part of the consideration for the distribution agreement

when Saletech contacted the management of EB Inc. and EB Europe seeking recourse. Thus, the

existence of the distribution agreement itself bars Saletech's claim for promissory estoppel.

¶ 35 Unjust Enrichment

¶ 36 Finally, we address the claim for unjust enrichment against EB Inc. and EB Europe. To

state a claim for unjust enrichment, “a plaintiff must allege that the defendant has unjustly

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retained a benefit to the plaintiff's detriment, and that defendant's retention of the benefit violates

the fundamental principles of justice, equity, and good conscience.” HPI Health Care Services,

Inc. v. Mt. Vernon Hospital, Inc.,

(1989). Even when a person has received a

benefit from another, he or she is liable for payment “only if the circumstances of its receipt or

retention are such that, as between the two persons, it is unjust for him to retain it. The mere fact

that a person benefits another is not of itself sufficient to require the other to make restitution

therefor.” (Internal quotation marks omitted.) Hayes Mechanical, Inc. v. First Industrial, L.P.,

(2004). Unjust enrichment does not constitute an independent cause of

action. Martis v. Grinnell Mutual Reinsurance Co.,

(2009) (citing

Mulligan v. QVC, Inc.,

(2008)). Rather, “it is a condition that may be

brought about by unlawful or improper conduct as defined by law, such as fraud, duress or undue

influence” (internal quotation marks omitted) (Alliance Acceptance Co. v. Yale Insurance

Agency, Inc.,

(1995)), or, alternatively, it may be based on contracts

which are implied in law. Perez v. Citicorp Mortgage, Inc.,

(1998).

¶ 37 Saletech claims EB Inc. and EB Europe induced Saletech into assisting in their

investigation of EB Ukraine's management and then "refus[ed] to honor the terms of the

agreements." But Saletech fails to articulate what benefit defendants obtained to Saletech's

detriment. For example, Saletech does not allege that it paid expenses incurred by a defendant. It

was Saletech who contacted EB Inc. and EB Europe after EB Ukraine breached the exclusive

distribution agreement; it was Saletech who requested help and offered to participate in the

investigation for its own benefit. In the absence of allegations that defendants obtained any

benefit from Saletech’s assistance in the investigation, the claim for unjust enrichment fails as a

matter of law.

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¶ 38 Conclusion

¶ 39 The judgment of the circuit court is affirmed.

¶ 40 Affirmed.

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