BRYNER, Justice.
United Airlines terminated a catering contract with Saucy Sisters Catering in Anchorage. Saucy Sisters sued, claiming fraud, breach of contract, and breach of the implied covenant of good faith and fair dealing. The trial court dismissed the breach of contract claim but allowed the other claims to be tried. A jury, finding no fraud but a breach of the implied covenant, awarded Saucy Sisters damages. We hold that under Illinois law, which the parties agree governs, the contract could be terminated at will, and the implied covenant did not require United to have a legitimate business reason for termination. We therefore remand for entry of judgment for United.
The background facts are undisputed; the trial court summarized them concisely as follows:
Saucy Sisters sued United, alleging wrongful termination of the Catering Agreement, fraud, and breach of the covenant of good faith and fair dealing. The parties filed opposing motions for summary judgment: United sought judgment on all three claims; Saucy Sisters moved for judgment on its claim of fraud. Superior Court Judge Brian C. Shortell ruled on these motions. Relying on Section 22 of the Agreement,1 Judge Shortell initially found that Illinois law would apply to all claims. The judge went on to find: (1) that the facts surrounding the fraud claim were disputed and should go to the jury; (2) that the ninety-day termination clause was an unambiguous no-cause termination provision and that United did not breach the express terms of that clause; and (3) that a genuine factual dispute existed as to Saucy Sisters' covenant of good faith and fair dealing claim, which was permissible under Illinois law, despite existence of a no-cause termination clause.
As to the implied covenant claim, the judge specifically stated:
(Citation omitted.)
United unsuccessfully moved for reconsideration of this ruling. Later, at the close of evidence at trial, it unsuccessfully moved for a directed verdict on the covenant claim. The jury returned a verdict finding that United had not engaged in fraud but had breached the covenant of good faith and fair dealing. The jury awarded Saucy Sisters $1,541,000 in damages. After adding prejudgment interest, costs, and attorney's fees to the verdict, Judge Shortell entered judgment in Saucy Sisters' favor for $3,604,843.57. United moved for a judgment notwithstanding the verdict and, in the alternative, for a new trial. Judge Shortell denied these motions.
United appeals, claiming that the superior court misconstrued Illinois law in denying United's motion for summary judgment on Saucy Sisters' claim for breach of the implied covenant of good faith and fair dealing. United further contends that the jury's award of damages also was contrary to Illinois law and that the court erred in applying Alaska law in awarding attorney's fees and prejudgment interest. Saucy Sisters cross-appeals, claiming that, because the Agreement was ambiguous and extrinsic evidence concerning its meaning differed, the trial court erred in granting summary judgment against Saucy Sisters on its breach of contract claim. For simplicity's sake, we consider Saucy Sisters' argument on cross-appeal before we take up United's direct appeal arguments.
Saucy Sisters asserts that the Agreement's ninety-day termination clause was ambiguous and allowed for varying interpretations, one of which might have sustained a breach of contract claim. Saucy Sisters asserts that this ambiguity created a genuine issue of material fact as to its claim for breach of contract, precluding summary judgment and requiring the claim to be submitted to the jury.
This court reviews trial court orders granting summary judgment de novo, drawing all inferences in favor of the opposing party, to determine whether genuine issues of material fact exist and whether the moving party is entitled to judgment as a matter of law.2 In the present case, the Agreement's ninety-day termination clause provided:
The superior court found this provision clear and unambiguous, ruling that it "has only one reasonable interpretation, which is that the contract period is for three years unless one of the parties decides to take[] affirmative action to end it early." Accordingly, the court determined as a matter of law that United did not breach the express terms of the contract when it terminated the catering contract upon ninety days' written notice.
Under Illinois law, the question of whether a contract is ambiguous is ordinarily one for the court to determine.3 A disagreement as to contract terms does not in itself create an ambiguity; the reviewing court must initially seek to ascertain the meaning of the contract from the provisions of the contract itself.4 Contract terms are to "be given their plain, ordinary, popular, and natural meaning."5 And "[w]hen the language of a contract is unambiguous, the express provision governs and there is no need for construction or inquiry as to the intention of the parties."6
Here, the meaning of the disputed termination clause is clear and unambiguous on its face when its words are given "their plain, ordinary, popular, and natural meaning."7 This provision clearly fixes the Agreement's term at three years, but allows each party to end it earlier by doing nothing more than giving the other party ninety days' notice. As the superior court aptly noted, such termination clauses are hardly uncommon:
Because the Agreement's no-cause termination provision was clear and unambiguous on its face, the trial court, applying Illinois law, had no occasion to consider extrinsic evidence supporting Saucy Sisters' assertion that it actually understood the provision to have a different meaning.8 And because United undisputedly abided by the literal terms of the provision—terminating the Agreement upon ninety days' written notice to Saucy Sisters—the trial court properly concluded that no genuine issue of material fact existed and that United was entitled to summary judgment on Saucy Sisters' breach of contract claim.
United asserts that Illinois law does not permit an implied covenant of good faith and fair dealing to supplant the clear language of a contract allowing termination without cause. According to United, because the disputed Agreement clearly and unambiguously allowed either party to terminate upon ninety days' notice and did not require good cause for termination, the trial court erred in finding the implied covenant applicable and in denying United summary judgment on this claim.
Saucy Sisters responds that the ninety-day termination clause gave both parties broad discretion to terminate their agreement. In such situations, Saucy Sisters argues, Illinois law applies the implied covenant of good faith and fair dealing as a limit on the permissible bounds of contractual discretion. Thus, in Saucy Sisters' view, the implied covenant applied in this case, and the trial court properly allowed this claim to go to the jury.
We review orders denying summary judgment de novo and affirm if we find that a genuine issue of material fact exists or that the moving party is not entitled to judgment as a matter of law.9 In deciding if a genuine issue of material fact exists, we draw all reasonable inferences in favor of the non-moving party.10 Here, the primary dispute concerning the trial court's summary judgment ruling centers on the correct interpretation of Illinois law. This is a purely legal question that we decide independently, based on our review and evaluation of applicable Illinois precedent.
The covenant of good faith and fair dealing is well accepted in Illinois, and its broad contours are firmly established: the covenant is implied in every contract.11 The implied covenant guides the construction of contracts without creating independent duties for the contracting parties.12 Its implied terms cannot modify the express terms of the contract.13
The covenant operates to define the intent of contracting parties when a contract is ambiguous or when it vests the parties with broad discretion as to its performance.14 In cases involving unambiguous contracts that vest broad discretion in one of the parties, the covenant operates by constraining that party to exercise its discretion reasonably and fairly: "not arbitrarily, capriciously, or in a manner inconsistent with the reasonable expectation of the parties."15
Of course, a contractual no-cause termination clause may accurately be characterized as vesting the parties with broad discretion as to the termination of their contract; for this reason, it might be plausible to argue in the case of a no-cause termination clause that the implied covenant requires the parties to terminate reasonably—that is, for some legitimate reason. This is essentially the view that Saucy Sisters advocated at trial. And in denying United's pretrial motion for summary judgment on the implied covenant claim, the court adopted Saucy Sisters' theory:
Saucy Sisters thereafter relied on this theory at trial. It expressly argued to the jury that even if United made no misrepresentations concerning the ninety-day no-cause termination clause, the implied covenant prevented it from violating Saucy Sisters' reasonable expectation that the agreement would be terminated only for a legitimate business reason:
Saucy Sisters invoked the same theme in opposing United's motions for judgment notwithstanding the verdict and a new trial on the implied covenant claim:
Applying this view of the law to the facts here, Saucy Sisters insisted that the jury's verdict on the implied covenant claim should be upheld because "reasonable jurors could have found that [Saucy Sisters] performed the contract properly, that any problems in performance were caused by United, and that United terminated the contract without any legitimate business reason whatsoever."
But as far as we can determine, Illinois courts have never held the implied covenant to require good cause or a legitimate business reason for terminating a contract with an express no-cause termination provision. To the contrary, Illinois courts seem to have recognized consistently that "terminable-at-will contracts are generally held to permit termination for any reason, good cause or not, or for no cause at all."16 The courts have likewise recognized that applying the implied covenant to limit the terms of a no-cause termination provision would be "incongruous" with this general rule17 and might "eviscerate the at will doctrine altogether."18
Several courts have reconciled this tension between no-cause termination clauses and the implied good faith covenant by explaining that parties to contracts with such clauses must reasonably expect the possibility of termination for any reason or no reason at all.19 But in any event, the prevailing rule in Illinois, however rationalized, unmistakably favors the provisions of an express no-cause contract over potentially conflicting demands of the implied covenant: "[T]he duty of good faith and fair dealing does not override the clear right to terminate at will, since no obligation can be implied which would be inconsistent with and destructive of the unfettered right to terminate at will."20
To be sure, some Illinois precedent hints that the implied covenant might apply in particular at-will termination situations. In Hentze v. Unverfehrt, the Illinois Court of Appeals, finding bad faith conduct that amounted to "opportunistic advantage-taking," held the implied covenant applicable when a company terminated an at-will dealership contract and engaged in a variety of other bad-faith tactics specifically aimed at driving one of two competing dealers out of business.21
Saucy Sisters relies heavily on Hentze. It asserts that, as interpreted in Hentze, "[T]he covenant of good faith and fair dealing requires, at a minimum, a proper motive to exercise the power [of termination without cause]." Because, in Saucy Sisters' view, the evidence at trial supported the conclusion that United ended its catering contract to seek a more lucrative arrangement with a competing caterer (Marriott), Saucy Sisters asserts that United's action, under Hentze's approach, amounted to impermissible advantage-taking: "[A] party engages in opportunistic advantage-taking in Illinois when exercising the reserved power to terminate unreasonably and with an improper motive[.]"
But Saucy Sisters reads Hentze too broadly. The Hentze court took pains to acknowledge that, under the settled Illinois rule, the defendant company, DECO, "had the right to terminate the [dealership] contract for no reason at all."22 So too, the Hentze court emphasized that, "[h]ad DECO merely ... sent Hentze a termination letter ..., we would be hard-pressed to find any absence of good faith."23 The court thus made clear that its invocation of the implied covenant rested not on DECO's termination of the contract without, as Saucy Sisters puts it, "a proper motive to exercise the power," but rather on DECO's deliberate efforts to drive Hentze out of business by using other "tactics... [that] went far beyond the intendments of any at-will clause."24
In short, the opportunistic advantage-taking described in Hentze was considerably more than an absence of the "legitimate business reason" that Saucy Sisters insists is a necessary ingredient for a valid at-will termination under Illinois law; it was instead a subjectively improper purpose—the malicious goal of driving Hentze out of business—combined with a variety of objectively unfair tactics designed to achieve that goal.25
Stripped of its implied covenant trappings, Saucy Sisters' broad reading of Hentze—its contention that United could not act arbitrarily or capriciously, but instead was required to have a legitimate business reason for termination—amounts to a claim that United could terminate the catering contract only for cause. But, as we have seen, this claim cannot be countenanced under Illinois law. The settled rule in Illinois remains that a contract expressly terminable at will may be ended for any reason or no reason at all.26Hentze does indicate that Illinois law might provide a measure of protection against a termination specifically motivated by bad faith and accompanied by unfair tactics.27 But Saucy Sisters neither alleged nor proved "opportunistic advantage-taking"28 of this kind. To the contrary, Saucy Sisters' complaint alleged no ulterior motive or subjective bad faith on United's part for terminating the contract, and its evidence at trial suggested only that United might have ended the contract in order to strike a better bargain with Marriott, not—as United claimed— because of Saucy Sisters' poor performance.
United's alleged desire for a more advantageous arrangement with Marriott certainly might not amount to "good cause" for terminating Saucy Sisters' contract, and from Saucy Sisters' perspective termination for this reason might even amount to arbitrary or capricious conduct, carried out for no legitimate business reason. But under Illinois law, the goal of achieving higher profits from a lower-bidding supplier is not itself inherently impermissible and does not amount to opportunistic advantage-taking; neither does reliance on an express at-will termination clause to attain this goal evince subjective bad faith or amount to an objectively unfair tactic.
Citing Dayan v. McDonald's Corporation,29 the dissent concludes that Illinois would invoke the implied covenant to preclude United from terminating its contract "in a manner inconsistent with the reasonable expectations of the parties."30 But Dayan does not support this conclusion.31 Instead, it narrowly limits its broad view of the implied covenant to franchise contracts, noting that this view reflects "judicial concern over longstanding abuses in franchise relationships, particularly contract provisions giving the franchisor broad unilateral powers of termination at will."32 And even in franchise cases, Dayan seemingly would apply its broad interpretation of the good faith requirement only when "the exercise of discretion [is] vested in one of the parties to a contract."33
In fact, Dayan expressly recognizes that Illinois law applies a narrower interpretation of the implied covenant outside the area of franchise contracts. Dayan describes Illinois law as holding that the covenant protects at-will employees only when a termination is "inspired by an improper motive, such as a desire to deprive the employee of health or pension benefits[.]"34 This is essentially the rule of law that we conclude Illinois would apply to the present case. As a matter of Illinois law, the appropriateness of this narrow view of the implied covenant— rather than Dayan's broader franchise rule—seems apparent given that the contract at issue here does not involve a franchise. Moreover, the contract's termination clause applied not just to United but to Saucy Sisters as well, giving both parties contractual discretion to terminate at will upon ninety days' notice.
That Illinois law would narrowly construe the implied covenant's effect on this contract seems unmistakable in light of Jespersen v. Minnesota Mining and Manufacturing Co.35 The Illinois Court of Appeals there emphatically rejected a claim that the implied covenant barred termination of an at-will distributorship contract without good cause:
The Illinois Supreme Court recently affirmed the decision of the court of appeals, observing, "Both parties here enjoyed the right to terminate the agreement at will, which means they could terminate the agreement for any reason or no reason without committing a breach of contract."37
In sum, we conclude that the trial court was mistaken in ruling that the implied covenant of good faith and fair dealing might "require both United and Saucy Sisters to exercise the discretion afforded to them by the termination clause in a manner consistent with the reasonable expectation of both parties." Under Illinois law, Saucy Sisters could not reasonably expect something other than what it expressly bargained for: a contract expressly terminable for any cause or no cause upon ninety days' notice. Because we conclude that the court erred in submitting Saucy Sisters' implied covenant claim to the jury, we reverse the judgment against United.38 Our disposition makes it unnecessary to consider any other arguments raised on appeal or cross-appeal.
We AFFIRM the trial court's order granting United summary judgment on Saucy Sisters' breach of contract claim, but REVERSE its order denying United summary judgment on the implied covenant claim. Accordingly, we VACATE the judgment and REMAND for entry of judgment in favor of United.