W.W. Grainger Inc. v. Witz

Filing 53

OPINION AND ORDER. For the reasons stated in the accompanying Opinion and Order, the Court grants in part and denies in part Grainger's motion for summary judgment 35 . The Court enters judgment for Grainger on its request for enforcement of the incentive recoupment provisions of the Award Agreements (Count I of the complaint). Signed by the Honorable Sara L. Ellis on 5/13/2024:Mailed notice(rj, )

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
W.W. GRAINGER, INC.,
Plaintiff,
v.
SCOTT WITZ,
Defendant.

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No. 23 C 1690
Judge Sara L. Ellis

OPINION AND ORDER
Plaintiff W.W. Grainger, Inc. (“Grainger”) filed this action to recoup certain incentive
compensation it had awarded to its former employee, Defendant Scott Witz, based on its
determination that Witz had used a Grainger-issued laptop to create and store illegal content.
Grainger brings claims for recoupment, breach of fiduciary duty, and fraudulent concealment.
Witz filed a counterclaim, alleging that Grainger violated Section 2-103 of the Illinois Human
Rights Act (the “IHRA”), failed to pay him certain compensation, and violated the Illinois Wage
Payment and Collection Act. Grainger has now moved for summary judgment on its complaint
pursuant to Federal Rule of Civil Procedure 56. 1 Because no genuine issue of fact exists as to
Grainger’s entitlement to recoup Witz’s incentive compensation, the Court enters judgment for
Grainger on its recoupment claim. But because Grainger has not sufficiently supported its
request for summary judgment on the remaining two claims, the Court denies Grainger’s motion
without prejudice to renewal after the close of discovery.

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Neither party seeks summary judgment on Witz’s counterclaim at this time.

BACKGROUND 2
I.

Witz’s Employment and Award Agreements
Witz worked for Grainger from March 1, 2001 through July 31, 2021. He served as

Grainger’s Vice President, Total Rewards from 2008 until his employment with Grainger ended
in 2021. Throughout his employment, Witz received incentive compensation in the form of
long-term equity and cash incentive awards. After 2015, Grainger granted these awards to Witz
and other employees in accordance with the shareholder-approved Grainger 2015 Incentive Plan
(the “2015 Plan”) and specific Award Agreements for each year in which he received an award.
The 2015 Plan provided that Grainger could recoup the awards under circumstances set forth in
an award agreement by the Compensation Committee of the Board of Directors, which could
include, as relevant here, “violation of material Company, Affiliate, and/or Subsidiary policies,
. . . or other conduct by the Participant that is detrimental to the business or reputation of the
Company, its Affiliates, and/or its Subsidiaries.” Doc. 37 ¶ 17.
Witz’s 2016 and 2017 Award Agreements allowed for recoupment where an executive
committed fraud against Grainger, engaged in criminal conduct involving or related to Grainger,
or otherwise engaged in misconduct. The 2018 Award Agreement added that “any other conduct
that violates Company policy” could trigger recoupment. Id. ¶ 24. The 2019, 2020, and 2021
Award Agreements additionally provided that Grainger could recoup incentive compensation
where the executive “causes or is discovered to have caused, any loss, damage, injury or other
endangerment to the Company’s property or reputation.” Doc. 36-6 at 4; Doc. 37 ¶ 26. All the
relevant Award Agreements gave Grainger’s Board “sole discretion in determining whether the
The Court derives the facts in this section from the Joint Statement of Undisputed Material Facts and
Witz’s additional facts included in his response brief. The Court has included in this background section
only those portions of the statements that are appropriately presented, supported, and relevant to
resolution of the pending motion for summary judgment. The Court takes all facts in the light most
favorable to Witz, the non-movant.
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Executive’s conduct was in compliance with applicable law or Company policy and the extent to
which the Company will seek recovery of the Incentive Compensation notwithstanding any other
remedies available to the Company.” Id. ¶¶ 22, 24, 26. The Award Agreements further allowed
Grainger to recoup not only the incentive compensation itself but also any gain Witz realized
upon the sale of the shares he received as incentive compensation.
Upon receiving each award, Witz electronically acknowledged receipt of the applicable
Award Agreement. Between January 1, 2020 and April 1, 2022, Witz vested in or exercised
approximately $1,346,798.41 in equity-based awards and also received approximately $295,782
in cash incentive payments pursuant to Grainger’s Management Incentive Program.
II.

Grainger’s Technology Policies
Throughout his employment, Grainger provided Witz with a company-issued laptop,

which he returned when his employment with Grainger ended. Grainger’s Personal Computer
Policy provided that all company-issued devices were company assets and Grainger’s sole
property. Grainger also had an Acceptable Use Policy, implemented on or before 2016, that
governed employees’ use of Grainger technology and devices. Specifically, it prohibited
employees from using such devices to “[s]tore, access, transfer, download, upload, communicate,
post, or create any fraudulent, harassing, embarrassing, sexually explicit, profane, obscene,
intimidating, libelous, slanderous, threatening, abusive, defamatory, inappropriate, or otherwise
unlawful materials.” Id. ¶ 7. It also prohibited the use of Grainger’s devices in a way that did
“not adhere to applicable laws . . . jeopardizing the reputation of Grainger and its stakeholders.”
Id. Witz received a notice each time he logged into his Grainger-issued laptop that his “access
to, and use of, Grainger’s systems [was] governed by the Grainger acceptable use policy” and
that, by proceeding, he “agree[d] to be bound by Grainger’s policies.” Id. ¶ 8.

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III.

Witz’s Criminal Activity
After Witz left Grainger’s employ, Grainger received a request from local law

enforcement for Witz’s Grainger-issued laptop. Grainger provided the laptop to local law
enforcement on August 12, 2021. A year later, on August 10, 2022, the state charged Witz by
criminal complaint with felony offenses. According to law enforcement and the state
prosecutor’s statements at Witz’s bond hearing, the charges arose from illegal content he created
and/or stored on his company-issued laptop. Local media outlets, including the Chicago
Tribune, reported on the charges, indicating that Witz stored the illegal content on a computer his
employer had issued to him. A Cook County grand jury returned a five-count indictment against
Witz on September 22, 2022. Witz initially entered a not guilty plea. He ultimately pleaded
guilty to one count of possession of child pornography, a Class 3 felony, on September 18, 2023.
The court sentenced Witz to thirty months’ probation and imposed a $1,374 fine.
IV.

Recoupment Action
In December 2022, the Board determined that Witz’s conduct, as set forth in the

indictment and described by the prosecutor in open court, triggered the recoupment provisions in
Witz’s Award Agreements. Specifically, on December 14, 2022, based on the Board
Compensation Committee’s recommendation, the Board passed a resolution authorizing the
recoupment of certain of Witz’s incentive compensation, also noting that Grainger had cancelled
Witz’s equity awards set to vest in 2023 and 2024. The resolution provided as the basis for
recoupment the fact that, “as described to the Board, Mr. Witz’s misconduct, among other things,
violate[d] the Company’s prohibitions on the use of Company-issued electronic devices to store
or create any materials that are sexually explicit, obscene, inappropriate, or otherwise unlawful,
involves allegations of criminality and is conduct that could cause harm to the Company’s

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reputation given the seriousness of the charged crimes and Mr. Witz’s tenure and senior role at
the Company.” Id. ¶ 39.
On December 15, 2022, Grainger notified Witz of its intent to recoup the incentive
compensation that he had received and exercised or that had vested after January 1, 2020. The
letter also identified Grainger’s bases for seeking recoupment. On February 22, 2023, Witz’s
counsel responded to Grainger that he would not agree to repay any of the compensation for
which Grainger sought recoupment. On March 17, 2023, Grainger instituted this action, seeking
enforcement of the recoupment provisions in the relevant Award Agreements. Specifically,
Grainger seeks the return of $1,389,789 in incentive awards and $292,692 in cash incentive
payments.
LEGAL STANDARD
Summary judgment obviates the need for a trial where “there is no genuine dispute as to
any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P.
56(a). To determine whether a genuine dispute of material fact exists, the Court must pierce the
pleadings and assess the proof as presented in depositions, documents, answers to
interrogatories, admissions, stipulations, and affidavits or declarations that are part of the record.
Fed. R. Civ. P. 56(c)(1); A.V. Consultants, Inc. v. Barnes, 978 F.2d 996, 999 (7th Cir. 1992).
The party seeking summary judgment bears the initial burden of demonstrating that no genuine
dispute of material fact exists. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986); Bunn v. Fed.
Deposit Ins. Corp. for Valley Bank Ill., 908 F.3d 290, 295 (7th Cir. 2018). In response, the nonmoving party cannot rest on mere pleadings alone but must use the evidentiary tools listed above
to identify specific material facts that demonstrate a genuine dispute for trial. Fed. R. Civ. P.
56(c)(1); Celotex, 477 U.S. at 324; Sterk v. Redbox Automated Retail, LLC, 770 F.3d 618, 627

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(7th Cir. 2014). The Court must construe all facts in the light most favorable to the non-moving
party and draw all reasonable inferences in that party’s favor. Wehrle v. Cincinnati Ins. Co., 719
F.3d 840, 842 (7th Cir. 2013). However, a bare contention by the non-moving party that an issue
of fact exists does not create a factual dispute, Bellaver v. Quanex Corp., 200 F.3d 485, 492 (7th
Cir. 2000), and the non-moving party is “only entitled to the benefit of inferences supported by
admissible evidence, not those ‘supported by only speculation or conjecture,’” Grant v. Trs. of
Ind. Univ., 870 F.3d 562, 568 (7th Cir. 2017) (citation omitted).
ANALYSIS
I.

Claim for Enforcement of the Award Agreements’ Recoupment Provisions
Grainger argues that the undisputed facts entitle it to judgment on its request for

recoupment pursuant to the 2015 Plan and applicable Award Agreements. Under Illinois law, a
breach of contract claim consists of four elements: (1) the existence of a contract,
(2) performance by the plaintiff, (3) breach by the defendant, and (4) injury to the plaintiff.
Gallagher Corp. v. Russ, 309 Ill. App. 3d 192, 199 (1999).
Witz acknowledges that, pursuant to the Award Agreements, Grainger has the right to
recover his incentive compensation for certain misconduct, including conduct that violated
company policy and criminal conduct involving or relating to Grainger. Witz attempts to explain
away the conduct underlying his conviction, claiming that he never intended to capture any
pornographic images on his Grainger-issued laptop. But his allegedly innocent explanation does
not change the fact that he has acknowledged facing criminal charges based in part on illegal
content he created and/or stored on his work laptop. He further has agreed that Grainger’s Board
authorized recoupment of certain incentive compensation under the Award Agreements based on
the fact that his use of a Grainger-issued laptop to allegedly commit five felonies “violate[d] the

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Company’s prohibitions on the use of Company-issued electronic devices to store or create any
materials that are sexually explicit, obscene, inappropriate, or otherwise unlawful, involve[d]
allegations of criminality and [was] conduct that could cause harm to the Company’s reputation
given the seriousness of the charged crimes and Mr. Witz’s tenure and senior role at the
Company.” Doc. 37 ¶ 39. Finally, Witz has acknowledged that he has not repaid the amounts
Grainger seeks to recoup.
Although Witz’s admissions establish the elements of Grainger’s breach of contract
claim, Witz argues that Grainger cannot recover because the Board abused its discretion in
seeking to recoup the incentive compensation from him. This amounts to an argument that the
Board violated the implied covenant of good faith and fair dealing. The covenant of good faith
applies where “the contract vested the opposing party with discretion in performing an obligation
under the contract and the opposing party exercised that discretion in bad faith, unreasonably, or
in a manner inconsistent with the reasonable expectations of the parties.” Hickman v. Wells
Fargo Bank N.A., 683 F. Supp. 2d 779, 792 (N.D. Ill. 2010). The covenant of good faith,
however, “cannot override an express term of a contract.” Cromeens, Holloman, Sibert, Inc. v.
AB Volvo, 349 F.3d 376, 396 (7th Cir. 2003).
The parties disagree as to whether the covenant of good faith applies in this case, where
the Award Agreements vested the Board with “sole discretion” in determining whether
misconduct occurred and whether to pursue recoupment. Doc. 37 ¶¶ 22, 24, 26. “When one
party’s contractual obligation is ‘contingent upon a condition particularly within the power of
that party,’ the controlling party’s discretion in bringing about the condition is limited by the
implied covenant of good faith.” Wilson v. Career Educ. Corp., 729 F.3d 665, 675 (7th Cir.
2013) (Darrow, J., concurring) (quoting Dayan v. McDonald’s Corp., 125 Ill. App. 3d 972, 990

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(1984)). 3 Some courts have applied the covenant of good faith to all cases in which one party
has any, even absolute, discretion. See Acheron Med. Supply, LLC v. Cook Med. Inc., 958 F.3d
637, 643–44 (7th Cir. 2020) (“[W]here a contract grants a party discretion in performing its
obligations, this implied duty requires that party to exercise its discretion in good faith, rather
than take opportunistic advantage of the other party.”); Ragan v. BP Prod. N. Am., Inc., No. 1:17
C 9208, 2019 WL 6309927, at *11 (N.D. Ill. Nov. 25, 2019) (“The fact that contractual
discretion is express does not limit the application of the covenant.”); McCleary v. Wells Fargo
Sec., L.L.C., 2015 IL App (1st) 141287, ¶ 21 (“An employer that exercised its contractual
discretion in a manner inconsistent with the reasonable expectations of the parties to deprive an
employee of reasonably anticipated benefits may have acted in bad faith.”). Other courts have
instead concluded that where no ambiguity exists and a contract provides one party with absolute
discretion, the covenant of good faith plays no role in determining whether a breach occurred.
See Ocean Tomo, LLC v. PatentRatings, LLC, 262 F. Supp. 3d 553, 557–58 (N.D. Ill. 2017)
(covenant of good faith did not impose a limitation on a board’s “sole discretion” to make a
determination where the provision granting the board discretion was unambiguous); Lakeview
Pharmacy of Racine, Inc. v. Catamaran Corp., No. CV 3:15-0290, 2015 WL 8331908, at *6–7
(M.D. Pa. Dec. 9, 2015) (“Because the covenant of good faith and fair dealing is a tool of
contract construction for determining the intent of contracting parties, a contract term that
explicitly grants discretion to a party does not invoke application of the covenant unless such
term is ambiguous or open to more than one interpretation. An unambiguous, explicit term is
presumed to be within contemplation of parties to the contract and within the reasonable
expectations of the parties. As a result, such discretion does not invoke the covenant, even if the
Judge Darrow’s opinion addressing the covenant of good faith serves as the majority opinion on that
issue. See Wilson, 729 F.3d at 671.

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term creates an unfavorable result for one of the parties.” (citations omitted) (applying Illinois
law)); see also Wilson, 729 F.3d at 689 (Wood., J., dissenting in part) (“Where there is an
express reservation of rights to terminate or amend at any time and for any reason, as there is in
our case, there is no baseline against which to find termination arbitrary, capricious, or
inconsistent with expectations. The disappointed party has no right to expect non-arbitrary
modification or termination, because the contract expressly declines to condition those
possibilities on good cause or anything else.”).
The Court need not definitively resolve whether the covenant of good faith applies in this
situation. Even assuming that the covenant of good faith limited the Board’s discretion, Witz has
not created a question of fact as to whether the Board violated the covenant. Because the Award
Agreements provided that the Board could authorize recoupment of Witz’s incentive
compensation based on the Board’s determination of whether Witz complied with applicable
laws and Grainger policies, the parties expressly contemplated the situation at hand, an attempt at
recoupment based on Witz’s violation of the Acceptable Use Policy. In other words, Grainger
did not act in bad faith when it exercised its discretion to recoup Witz’s incentive compensation
for violating a company policy. See Cont’l Mobile Tel. Co. v. Chicago SMSA Ltd. P’ship, 225
Ill. App. 3d 317, 324 (1992) (no breach of the covenant of good faith where the contract gave the
defendant sole discretion to raise rates, meaning the parties contemplated such actions); see also
Knezovic v. Urb. P’ship Bank, 589 B.R. 351, 359 (N.D. Ill. 2018) (“[T]he fact that the Note
commits the interest rate to the lender’s sole discretion compels the conclusion that the parties
knew UPB could decline to adjust its interest rate at any time, ‘thereby negating any inference
that defendant’s actions were outside the contemplation of the parties and could be characterized
as a breach of good faith.’” (quoting Cont’l Mobile Tel. Co., 225 Ill. App. 3d at 324)); cf. Ragan,

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2019 WL 6309927, at *12–13 (factual question existed as to whether the defendant breached the
covenant of good faith where “substantial factual uncertainty” existed as to whether the
plaintiff’s termination fell within the contract’s meaning of termination for cause).
Witz’s arguments to the contrary are red herrings. He first argues that the Board acted in
bad faith because its decision to recoup benefits violated the IHRA, which prohibits
discrimination based on an arrest record. See 775 Ill. Comp. Stat. 5/2-103 (“[I]t is a civil rights
violation for any employer . . . to inquire into or to use an arrest record. . . as a basis to refuse to
hire, to segregate, or to act with respect to recruitment, hiring, promotion, renewal of
employment, selection for training or apprenticeship, discharge, discipline, tenure or terms,
privileges or conditions of employment.”). 4 But Witz does not explain why an alleged violation
of the IHRA would indicate bad faith. Moreover, the IHRA does not prohibit an employer “from
obtaining or using other information which indicates that a person actually engaged in the
conduct for which he or she was arrested.” 775 Ill. Comp. Stat. 5/2-103(B). Here, Witz has
agreed that the Board relied on the information contained in the indictment, as well as the
prosecutor’s statements in open court, in authorizing recoupment, undermining any claim that
Grainger violated the IHRA and based its recoupment decision solely on the fact of his arrest. 5
The IHRA defines an arrest record, for purposes of Section 2-103, as “(1) an arrest not leading to a
conviction; (2) a juvenile record; or (3) criminal history record information ordered expunged, sealed, or
impounded under Section 5.2 of the Criminal Identification Act.” 775 Ill. Comp. Stat. 5/1-103(B-5).

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Although Witz agreed in the Joint Statement of Facts that the Board determined that his misconduct
violated the Acceptable Use Policy, involved allegations of criminality, and amounted to conduct that
could cause harm to Grainger’s reputation, he argues in his response that the Board did not have sufficient
information to make such a decision because Grainger only sets forth inadmissible hearsay that also lacks
the proper foundation to support this fact. Witz cannot now attempt to undo his agreement to this fact,
however, where Witz made a binding judicial admission when he agreed to this allegation in his answer.
See Crest Hill Land Dev., LLC v. City of Joliet, 396 F.3d 801, 805 (7th Cir. 2005) (admission in answer to
complaint “constitutes a binding judicial admission” and “has the effect of withdrawing the question . . .
from contention”). Additionally, Grainger has provided the Board resolution and a declaration from
Grainger’s senior vice president and chief legal officer, Nancy Berardinelli-Krantz, attesting to the
authenticity of the resolution and the foundation for her knowledge related to the resolution. To the

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Next, Witz argues that only three of Grainger’s twelve directors voted on the resolution
to recoup Witz’s incentive compensation, extrapolating this conclusion from Grainger’s
interrogatory answers that identified only three directors with knowledge of the facts related to
this case. Even crediting the fact that Grainger only identified three directors in its
interrogatories to mean that only three directors voted to authorize the resolution, Witz has not
provided any basis for a jury to infer that the Board’s resolution did not comply with Board
procedures and so was made in bad faith or contrary to the parties’ expectations.
Witz also argues that the Board acted in bad faith because it did not seek to recoup
incentive compensation from former employees who engaged in more serious violations of the
law or company policy. While Witz provides examples of these other employees, he does not
name them or provide additional details regarding the dates of the alleged violations or the
relevant recoupment provisions for these individuals. Even had he done so, it would not matter.
The parties agreed in the Award Agreements that the Board had sole discretion in determining
the extent to which it would seek recovery of any incentive compensation, meaning that Witz
cannot argue that he did not contemplate the Board pursuing recoupment if he violated a policy,
regardless of its allegedly selective enforcement of the provision.
Finally, Witz contends that a question exists as to the materiality of Witz’s alleged
violation of the Acceptable Use Policy. But again, the parties did not include a materiality
requirement in the recoupment provisions of the Award Agreements. Instead, by giving the
Board sole discretion, the parties essentially agreed that the Board could pursue recoupment for
even the slightest violations. Similarly, along these lines, the fact that Grainger did not have to
extent Witz challenges another paragraph in Berardinelli-Krantz’s declaration describing the information
presented to the Board on December 14, 2022, see Doc. 36-9 ¶ 12, Grainger has not relied on that
paragraph to support its request for summary judgment and so the Court need not address Witz’s hearsay
and foundation objections to that paragraph.

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pursue recoupment under the law or that Grainger has not shown that Witz’s actions could have
had an effect on its share price has no relevance to whether Grainger acted in good faith in
accordance with the parties’ reasonable expectations, where the Award Agreements did not
include such requirements and instead left the decision as to recoupment to the Board’s
discretion. In other words, Witz cannot show that Grainger acted in bad faith where he agreed
that Grainger could pursue recoupment for any of the circumstances outlined in the Award
Agreements’ recoupment provisions, regardless of their materiality, legality, effect on share
prices, or otherwise. See Wilson v. Career Educ. Corp., 844 F.3d 686, 691 (7th Cir. 2016)
(“[A]n employer does not act in bad faith when acting in furtherance of legitimate corporate
interests that would reasonably have been in the contemplation of the parties.”); Roan v. Keck,
Mahin & Cate, 962 F.2d 10 (Table), 1992 WL 104789, at *6 (7th Cir. 1992) (“The extreme
breadth of [a contract providing a party with “unlimited”] discretion imposes a similar breadth
upon ‘the reasonable expectations of the parties’ and concomitantly reduces the scope of judicial
review in this regard virtually to zero.”).
Because Witz has failed to raise a material question of fact as to whether he breached the
Award Agreements by failing to repay his incentive compensation and whether the Board
violated the covenant of good faith in seeking recoupment, the Court grants summary judgment
for Grainger on its request for recoupment.
II.

Breach of Fiduciary Duty and Fraudulent Concealment Claims
Grainger also seeks summary judgment on its claims that Witz breached his fiduciary

duty and fraudulently concealed his conduct from Grainger. But it makes only cursory
arguments to support this request, failing to set forth the entirety of the elements required to
prove a fraudulent concealment claim or provide supporting caselaw for its argument that Witz’s

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conduct in using his Grainger-issued laptop to engage in illegal conduct “necessarily
constitute[d] a breach of Witz’s fiduciary duty to Grainger.” Doc. 36 at 9; see Carmichael v.
Vill. of Palatine, 605 F.3d 451, 460 (7th Cir. 2010) (burden of defeating summary judgment did
not shift to non-movant where movants did not cite the “basic facts and law which, in their view,
warranted summary judgment on this claim”); Dal Pozzo v. Basic Mach. Co., 463 F.3d 609, 613
(7th Cir. 2006) (“An advocate’s job is to make it easy for the court to rule in his client’s
favor[.]”). Further, Grainger did not include any arguments in its reply addressing these claims,
focusing only on its request for recoupment. Because the Court does not have sufficient facts or
supporting caselaw before it to determine whether Witz breached his fiduciary duty or engaged
in fraudulent concealment, especially given that the parties have not completed discovery and the
Court need not conduct the parties’ legal research for them, the Court denies Grainger’s request
for summary judgment on these claims. See Schaefer v. Universal Scaffolding & Equip., LLC,
839 F.3d 599, 607 (7th Cir. 2016) (“Perfunctory and undeveloped arguments are waived, as are
arguments unsupported by legal authority.”); Econ. Folding Box Corp. v. Anchor Frozen Foods
Corp., 515 F.3d 718, 721 (7th Cir. 2008) (“It is not the court’s responsibility to research the law
and construct the parties’ arguments for them.”). To the extent Grainger continues to pursue
these claims, Grainger may renew its request for summary judgment at the close of discovery,
marshaling additional evidence and proper legal support.

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CONCLUSION
For the foregoing reasons, the Court grants in part and denies in part Grainger’s motion
for summary judgment [35]. The Court enters judgment for Grainger on its request for
enforcement of the incentive recoupment provisions of the Award Agreements (Count I of the
complaint).

Dated: May 13, 2024

______________________
SARA L. ELLIS
United States District Judge

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