Economy Folding Box v. Anchor Frozen Foods ( 2008 )

In the
United States Court of Appeals
For the Seventh Circuit
____________
No. 07-1893
ECONOMY FOLDING BOX CORP.,
Plaintiff-Appellant,
v.
ANCHOR FROZEN FOODS CORP.,
Defendant-Appellee.
____________
Appeal from the United States District Court for
the Northern District of Illinois, Eastern Division.
No. 04 C 4485—Blanche M. Manning, Judge.
____________
ARGUED DECEMBER 6, 2007—DECIDED JANUARY 25, 2008
____________
Before EASTERBROOK, Chief Judge, and CUDAHY and
RIPPLE, Circuit Judges.
CUDAHY, Circuit Judge. Here we have a suit for
breach of contract by Economy Folding Box Corp. (Econ-
omy) against Anchor Frozen Foods Corp. (Anchor). Econ-
omy and Anchor entered into a contract wherein Econ-
omy agreed to provide Anchor with boxes in which
Anchor could ship frozen seafood. Economy delivered the
first shipment of boxes and Anchor filled them with its
product and shipped them off to its distributors. Anchor
soon received word from its distributors that the boxes
were falling apart. After Anchor refused to pay for the
boxes or accept any further deliveries, Economy sued for
2 No. 07-1893
breach of contract. Following a two-day bench trial, the
district court found that Anchor properly revoked its
acceptance of the first shipment and that it had a right
to cancel the contract. The court entered judgment in
Anchor’s favor. We affirm.
I. Background
Prior to the transaction at issue, Anchor regularly
ordered boxes from Economy.1 Early in 2004, Anchor
asked Economy to design a new packaging system that
would consist of six inner boxes of frozen seafood con-
tained in a single outer box. Anchor planned to sell these
“six-packs” to distributors for resale to customers. The
outer box was to be the shipping carton and needed to
be sturdy enough to withstand being stacked on pallets
and shipped on freezer trucks to distributors. Ken Green,
Economy’s sales representative, assured Anchor that the
outer box Economy designed would be freezer-worthy and
would withstand being palletized. When samples of the
inner and outer boxes were ready, Economy sent them to
Anchor. Anchor’s president, Roy Tucillo, tested the boxes
by filling them with frozen seafood and freezing them
for a week. Anchor approved the samples and ordered
180,000 inner cartons and 30,000 outer cartons from
Economy. That order could be increased or decreased up
to 20% based on overrun or underrun of boxes by Economy.
In the spring of 2004, Economy sent Anchor a shipment
of 6,300 outer boxes and 36,800 inner boxes. Anchor
accepted those boxes and Economy issued an invoice for
204,000 inner boxes and 34,000 outer boxes on or about
April 14, 2004. Approximately two weeks later, Economy
issued an invoice for the remainder of the boxes.
1
As neither party disputes the trial court’s findings of fact, we
rely on them in recounting the events giving rise to this appeal.
No. 07-1893 3
After receiving the first delivery of boxes, Anchor sent
shipments of frozen food in the new boxes to two of its
distributors, Colorado Choice Distributors (Colorado
Choice) and American Gold Label (American Gold).
Approximately two and a half weeks later, Anchor began
receiving complaints from Jay Raulerson at Colorado
Choice that the outer boxes were splitting open and
collapsing at some of Colorado Choice’s cold storage
facilities. Raulerson told Anchor not to send any more
shipments in those boxes. Tucillo asked Raulerson to
put his complaints in writing. On May 28, 2004, Economy
asked Anchor to pay the two outstanding invoices for
the boxes, and that same day, Anchor sent Economy a
written rejection of the boxes. Tucillo subsequently
received a written complaint from Raulerson describing
the problem with the boxes and a facsimile from American
Gold conveying a similar complaint. Anchor forwarded
these complaints to Economy. Throughout June, the
parties had conversations and exchanged letters about the
allegedly defective boxes. However, they were unable to
resolve the problem. On July 7, 2004, Economy filed
suit against Anchor for breach of contract and account
stated. In its answer, Anchor asserted that the boxes
were not merchantable or fit for their intended purpose
and violated these implied warranties.
The district court analyzed Economy’s claims under the
Illinois version of the Uniform Commercial Code (UCC)
and found that, although Anchor accepted the boxes, it
properly revoked its acceptance under 810 ILCS 5/2-608
after learning of the boxes’ defects. The court also con-
cluded that Anchor had proven its defense of breach of an
implied warranty of fitness for a particular purpose under
810 ILCS 5/2-315 and entered judgment in Anchor’s favor.
Economy appeals the district court’s decision, arguing
that it erred in failing to analyze the contract under
810 ILCS 5/2-612, which applies to installment contracts.
4 No. 07-1893
II. Discussion
We review a district court’s conclusions of law de novo
and its findings of fact and application of law to fact for
clear error. Keach v. U.S. Trust Co., 419 F.3d 626, 634 (7th
Cir. 2005). “A finding of fact is clearly erroneous only when
the reviewing court is left with the definite and firm
conviction that a mistake has been committed.” Gaffney v.
Riverboat Servs. of Ind., Inc., 451 F.3d 424, 447 (7th Cir.
2006) (citation omitted).
Economy argues that the district court erred in analyz-
ing the contract as a single delivery contract rather than
as an installment contract under 810 ILCS 5/2-612.
Unfortunately for Economy, it did not raise this argu-
ment before the district court and, as we have long held,
“[i]t is axiomatic that an issue not first presented to the
district court may not be raised before the appellate
court as a ground for reversal.” Christmas v. Sanders,
759 F.2d 1284, 1291 (7th Cir. 1985) (citation omitted). See
also Robyns v. Reliance Standard Life Ins. Co., 130 F.3d
1231, 1238 (7th Cir. 1997) (“The well-established rule
in this Circuit is that a plaintiff waives the right to
argue an issue on appeal if she fails to raise the issue
before a lower court.”) (citing Milwaukee Area Joint
Apprenticeship Training Comm. v. Howell, 67 F.3d 1333,
1337 (7th Cir. 1995)). Economy did not discuss install-
ment contracts or cite 810 ILCS 5/2-612 in its Trial
Memorandum (R. 38), its Proposed Findings of Fact and
Conclusions of Law (R. 46) or its Reply Memorandum
(R. 51.) In fact, Economy framed its breach of contract case
under the UCC sections that apply to single delivery
contracts. Having asked the court to apply that law,
Economy cannot now ask us to fault the district court for
having done so. For “[t]o reverse the district court on
grounds not presented to it would undermine the essential
function of the district court.” Boyers v. Texaco Ref. &
Mktg, Inc., 848 F.2d 809, 812 (7th Cir. 1988).
No. 07-1893 5
Economy attempts to circumvent our well-established
waiver rule by arguing that it relied on the UCC in the
district court proceedings, and thus it implicitly reserved
its installment contract argument. This argument is a
nonstarter. A plaintiff cannot rely on the entire UCC and
leave it to the court to determine what code sections
apply to her claim. It is not the court’s responsibility to
research the law and construct the parties’ arguments
for them. See APS Sports Collectibles, Inc. v. Sports Time,
Inc., 299 F.3d 624, 631 (7th Cir. 2002); Jackson v. Casio
PhoneMate, Inc., 105 F. Supp.2d 858, 874 (N.D. Ill. 2000)
(“The court will not construct defendant’s argument
for it.”). Economy also points out that in its Trial Brief
and Supplemental Proposed Findings of Fact and Con-
clusions of Law, Anchor quoted 810 ILCS 5/2-601, which
defines a buyer’s right to reject non-conforming goods
and states that it is “[s]ubject to the provisions of this
Article on breach in installment contracts (Section 2-612).”
Economy contends that because Anchor quoted a section
of the UCC that references 810 ILCS 5/2-612, the install-
ment contract issue was raised before the district court.
This argument is unavailing as well. Economy’s analysis
of its claims was under the single delivery sections of
the UCC. It is the parties’ responsibility to allege facts
and “indicate their relevance under the correct legal
standard.” APS Sports Collectibles, 299 F.3d at 631.
Economy alleged facts and indicated their relevance
under the single delivery contract provisions of the UCC
and must accept the consequences of that decision.
Having determined that Economy did not raise its
installment contract argument before the district court,
we note that the rule against considering new argu-
ments on appeal is subject to certain limited exceptions,
such as “where jurisdictional questions are presented or
where, in exceptional cases, justice demands more flexibil-
ity.” Stern v. United States Gypsum, Inc., 547 F.2d 1329,
6 No. 07-1893
1333 (7th Cir. 1977) (citation omitted). This case does
not implicate those limited exceptions, however, and we
find that Economy has waived its installment contract
argument.
Economy also argues that it had a right to cure any
defects before Anchor could lawfully reject the first
installment of boxes or cancel the contract. In the deci-
sion below, the district court did not make a finding
whether the defect in the outer box was curable or wheth-
er Economy had an opportunity to cure. The court ap-
plied 810 ILCS 5/2-608, which provides that a buyer can
revoke acceptance of a delivery of non-conforming goods
if he “accepted it (a) on the reasonable assumption that
its non-conformity would be cured and it has not been
seasonably cured; or (b) without discovery of such non-
conformity if his acceptance was reasonably induced
either by the difficulty of discovery before acceptance or
by the seller’s assurances.” A small number of courts
have found that a seller who accepts goods without
knowing they are non-conforming and later discovers
the defect must give the seller a chance to cure before
revoking acceptance. See 18 Richard A. Lord, Williston on
Contracts, § 52:25 (4th ed. 2004). However, most courts
“have concluded that the seller’s right to cure does not
apply to situations in which the buyer revokes accept-
ance based on a subsequently discovered defect.” Id.
(citation omitted). Noting that there is no dispositive
Illinois case on the issue, the district court found that
since 810 ILCS 5/2-608 does not expressly provide a
seller a right to cure prior to a buyer’s revocation of
acceptance, Economy had no right to cure under that
section. Economy does not challenge the district court’s
conclusion. Indeed, at oral argument, counsel for Economy
conceded that the district court’s analysis was correct
and asserted that the court’s only error was in not ap-
plying 810 ILCS 5/2-612, which does provide a seller with a
No. 07-1893 7
right to cure before a buyer can reject an installment.
Because Economy did not argue before the district court
that it had a right to cure under 810 ILCS 5/2-612, and
because it does not challenge the district court’s conclusion
that there is no right to cure under 810 ILCS 5/2-608,
Economy has waived its cure argument as well.
III. Conclusion
For the foregoing reasons, we AFFIRM the district court’s
judgment in favor of Anchor.
A true Copy:
Teste:
________________________________
Clerk of the United States Court of
Appeals for the Seventh Circuit
USCA-02-C-0072—1-25-08