In the

United States Court of Appeals

For the Seventh Circuit

No. 08-2727

A.T.N., INC., an Illinois corporation,

Plaintiff-Appellant,

v.

MCAIRLAID’S VLIESSTOFFE GMBH& CO. KG, a foreign

corporation of the Federal Republic of Germany,

AIRLAID ALLIANCE SP.Z.O.O., a joint venture of the

Republic of Poland, and NEWCO ABSORBENTS

GMBH & CO. KG, a foreign corporation of

the Federal Republic of Germany,

Defendants-Appellees.

Appeal from the United States District Court

for the Northern District of Illinois, Eastern Division.

No. 05 C 7286—John F. Grady, Judge.

ARGUED DECEMBER 11, 2008—DECIDED FEBRUARY 25, 2009

Before MANION, EVANS, and TINDER, Circuit Judges.

MANION, Circuit Judge. Plaintiff A.T.N., Inc. (“ATN”)

entered into an agreement with the defendants to

import absorbent medical underpads. The agreement

contained a clause granting ATN the right to retain its

customers as long as it purchased the underpads from
2 No. 08-2727

Both NewCo and AA were majority-owned by McAirlaid. 1

the defendants. A year later, the defendants informed

ATN’s sole customer that ATN would no longer supply

the underpads. ATN sued for breach of contract and

unjust enrichment. ATN now appeals from the grant of

summary judgment in favor of the defendants on the

breach of contract claim. We AFFIRM.

I.

ATN is an Illinois corporation that provides financing

and marketing services to other businesses. Its president

and sole shareholder is Yossi Azaraf. In 2003, Azaraf

became interested in “absorbent cores,” which can be

used to make hygiene products such as absorbent

underpads for use in medical facilities. These cores

were manufactured by defendant McAirlaid’s Vliesstoffe

GmbH & Co. KG (“McAirlaid”), a German manufacturer.

In early 2004, Azaraf traveled to Germany and met with

Alex Maksimow, the chief executive officer and sole

shareholder of McAirlaid. In September 2004, Azaraf

returned to Germany with Robert Shapiro, a potential

investor, and again met with Maksimow and representatives from defendant NewCo Absorbents GmbH &

Co. KG (“NewCo”), a German manufacturer that used

McAirlaid’s absorbent cores to make the underpads,

and from defendant Airlaid Alliance Sp.z.o.o. (“AA”),

a Polish supplier of machinery necessary to make absorbent cores and finished products with those cores.1
No. 08-2727 3

Following this meeting, on September 24, 2004, ATN,

NewCo, McAirlaid, and AA signed a three-page “Letter

of Intent.” The preamble to the Letter of Intent stated

that “ATN wishes to develop sales of hygiene products

in the North American market based on finished products

manufactured by Newco a company affiliated with

McAirlaids and AA.” The letter stated that “ATN intends

to install” manufacturing equipment in the United

States to create the absorbent cores and to make finished

products from them. The companies also agreed that “ATN

will use its best efforts to rapidly develop sales of

finished products made by Newco Absorbents.” NewCo

granted ATN “exclusive rights to manufacture the products in North America for a period of 12 months from

the date of this agreement.” Finally, paragraph 7 of the

letter stated that “[c]ustomers of ATN who purchase the

products will remain exclusive to ATN for as long as

they continue to purchase the products from ATN and

ATN purchases the products from Newco in the agreed

quantities.”

Despite the Letter of Intent, ATN did not install any

manufacturing equipment. ATN did find a customer for

the finished products: namely, Medline Industries, Inc.

(“Medline”), a distributor of medical products. ATN sold

products to Medline until December 2005, when

Maksimow wrote to ATN to end their business relationship. The letter stated that “we have informed Medline

that if they have further requirements, they should place

the orders with McAirlaids direct and they have agreed

to this.” Medline sent an email to ATN, stating that

NewCo had claimed that ATN would no longer be able

to sell its products.
4 No. 08-2727

ATN responded by filing suit against defendants

McAirlaid, NewCo, and AA, claiming that the defendants

had breached their contract with ATN and had unjustly

enriched themselves. NewCo filed counterclaims against

ATN for breach of contract and unjust enrichment. Upon

their motion, the district court granted summary judgment for the defendants on both of ATN’s claims. The

parties subsequently settled NewCo’s counterclaims

and a final judgment was entered. ATN appeals, solely

challenging the grant of summary judgment for the

defendants on its breach of contract claim.

II.

The district court had jurisdiction over this diversity

suit between an Illinois entity and foreign entities under

28 U.S.C. § 1332(a)(2). The district court applied the law of

the forum state, Illinois. Because the parties do not contest the application of Illinois law, we apply that state’s

law as well. Employers Mut. Cas. Co. v. Skoutaris, 453

F.3d 915, 923 (7th Cir. 2006). When interpreting a contract, “[t]he primary objective of the court is to determine and give effect to the intent of the parties as expressed in the language of the policy.” Clayton v. Millers

First Ins. Cos., 892 N.E.2d 613, 615 (Ill. App. Ct. 2008). A

reviewing court will “assume that every provision in the

contract serves a purpose” and the contract should be

“construed as a whole.” Id.

ATN claims that the defendants breached the contract

by preventing it from making future sales to Medline,

thereby violating the terms of the exclusivity clause in
No. 08-2727 5

NewCo claims that ATN has waived this argument by 2

failing to raise it in the district court. ATN responds that it

did raise the general issue of the meaning of the provision.

Because we conclude that ATN cannot obtain relief even if

ATN preserved this issue and the issue were resolved in ATN’s

favor, we need not decide whether ATN has waived this

argument.

paragraph 7. That clause states that “[c]ustomers of ATN

who purchase the products will remain exclusive to

ATN for as long as they continue to purchase the

products from ATN and ATN purchases the products

from Newco in the agreed quantities.” The district court

rejected this claim, concluding that “agreed quantities”

referred to amounts that ATN agreed to purchase from

NewCo. Because the parties had left open a material term

in the contract, the district court concluded that the

parties did not intend for the exclusivity clause to be

binding. ATN argues on appeal that the district court

misinterpreted paragraph 7 of the Letter of Intent and

contends that “agreed quantities” refers to amounts

agreed to be purchased by customers from ATN. At 2

first blush, ATN’s argument seems to have merit. The

first part of paragraph 7 refers to customers purchasing

products from ATN. Paragraph 7 then indicates that

these customers will remain customers of ATN as long as

they purchase “the products” from ATN and ATN then

purchases “the products” from NewCo. The only agreement mentioned in paragraph 7 prior to the phrase “agreed

quantities” is the agreement between the customers

and ATN. It is not unreasonable to conclude that the
6 No. 08-2727

ATN also develops a separate argument that the relevant 3

sentence establishes a “requirements contract” with NewCo,

under which NewCo would be required to provide ATN all

the products necessary for ATN to fulfill its orders. Although

ATN couches this interpretation as distinct from the interpretation described above, it seems that ATN has merely

reproduced the same interpretation in a different guise. That

is, under ATN’s reading of the relevant sentence, ATN would

be obliged to turn to NewCo for the ordered products, and

NewCo would be obliged to supply ATN with the products

necessary to fulfill its orders. Nonetheless, regardless of

whether this is a separate argument or just a re-packaging of

its original interpretation, ATN is not entitled to relief, as will

be shown below.

phrase “agreed quantities” refers to the only agreement

previously mentioned: namely, the agreement between

the customers and ATN. Under this interpretation, ATN

would be obliged to purchase all the products ordered

by its customers from NewCo, under pain of losing its

exclusive relationship with those customers. However, 3

it is unnecessary for us to resolve this issue, because

regardless of its outcome the contract cannot be enforced.

Even if we were to read paragraph 7 of the Letter of

Intent as ATN posits, we must still affirm the district

court’s grant of summary judgment for the defendants

because the Letter of Intent was terminable at will. Illinois

law generally disfavors perpetual contracts. Jesperson

v. Minn. Mining & Mfg., 700 N.E.2d 1014, 1017 (Ill. 1998).

For this reason, contracts of indefinite duration are generally deemed terminable at will by either party. Id. at
No. 08-2727 7

1016. As the Illinois Supreme Court explains, “Where

parties have failed to agree on a contract’s duration, the

contract is construed as terminable at the will of either

party because they have not agreed otherwise and it

would be inappropriate for a court to step in and substitute its own judgment for the wisdom of the parties.”

Id. at 1017. “Advances in technology, changes in consumer taste and competition mean that once-profitable

businesses perish regularly. Today’s fashion will tomorrow or the next day inevitability fall the way of the

buggy whip, the eight-track tape and the leisure suit.

Men and women of commerce know this intuitively and

achieve the flexibility needed to respond to market demands by entering into agreements terminable at-will.” Id.

However, if an otherwise indefinite contract is terminable upon the occurrence of a specific event, then it is not

considered terminable at will. Id. at 1016. This event

must be “an objective event, the occurrence of which

terminates the contract thereby making it sufficiently

definite in duration.” R.J.N. Corp. v. Connelly Food Prods.,

Inc., 529 N.E.2d 1184, 1187 (Ill. App. Ct. 1988) (quotations

and citations omitted). Thus, we must determine

whether the exclusivity clause was tied to a specific,

objective event that would render the agreement sufficiently definite in duration. If it was, then the defendants

could not terminate the contract without giving rise to

a cause of action for breach.

Illinois courts have considered various contractual

terms to determine whether they establish a specific

event that will prevent a contract from being deemed
8 No. 08-2727

terminable at will. In Jesperson v. Minnesota Mining &

Manufacturing Co., 681 N.E.2d 67 (Ill. App. Ct. 1997), the

Illinois Appellate Court examined whether a contract

was of indeterminate duration and thus terminable at

will. The contract in question permitted one party to

terminate the contract for one of several listed material

breaches, and allowed the other party to terminate upon

30 days’ written notice. Id. at 70-71. The Illinois Appellate

Court stated that “[i]f one of the parties could institute

a termination-triggering event, then the contract should

be considered terminable at will.” Id. at 70. The court

held that, because one of the parties could breach the

contract and thereby provide grounds for termination,

the events permitting termination could not “be considered objective events that would have the effect of

making the agreement sufficiently definite in duration,” id.,

and the contract was deemed terminable at will, id.

The Illinois Supreme Court affirmed for two reasons.

Jesperson, 700 N.E.2d 1014. First, “the language of the

termination provision is permissive and equivocal;

a party ‘may’ terminate for the stated grounds.” Id. at 1016.

The Illinois Supreme Court contrasted this situation to “a

case in which the parties included an exclusive

and specific right to terminate for cause in a contract otherwise of indefinite duration.” Id. Second, the court

noted that “the termination events are themselves instances of material breach, and any contract is terminable

upon the occurrence of a material breach.” Id. The court approvingly cited a Fifth Circuit case for the proposition

that “ ‘[a]n agreement which is otherwise indefinite

in duration and terminable at will cannot be converted
No. 08-2727 9

into an agreement of definite duration by the mere transcription of such universals within the text of the contract”.’

Id. at 1016-17 (quoting Trient Partners I Ltd. v. Blockbuster

Entm’t Corp., 83 F.3d 704, 709 (5th Cir. 1996)).

Under the rationale of both Jesperson cases, the exclusivity clause in paragraph 7 of the Letter of Intent was terminable at the will of either party. The clause stated

that customers would remain exclusive to ATN “for as

long as they continue to purchase the products from

ATN and ATN purchases the products from Newco in

the agreed quantities.” Three events would therefore

end exclusivity: first, the customer stops purchasing from

ATN; second, ATN stops purchasing its customers’

requirements from NewCo; and third, NewCo stops

supplying ATN. Thus, the contract permitted both ATN

and NewCo independently to terminate the contract.

Under the two Jesperson decisions, a contract permitting

one party to terminate based on a material breach by

the other party is deemed terminable at will. 681 N.E.2d

at 70; 700 N.E.2d at 1016-17. In this case, both parties

could end the agreement by non-performance, and

hence these cases require the conclusion that the contract was terminable at will. Because the contract terminates if either party stopped purchasing or supplying

the products, under Illinois law the contract between

ATN and the defendants was terminable at will. See also

Mid-West Energy Consultants, Inc. v. Covenant Home, Inc.,

815 N.E.2d 911, 915 (Ill. App. Ct. 2004) (holding that a

contract that failed to specify duration was terminable

at will); Cress v. Recreation Servs., Inc., 795 N.E.2d 817,

832, 839-40 (Ill. App. Ct. 2003) (holding that an employ-
10 No. 08-2727

ment contract was tied to an objective event and thus

not terminable at will; the contract guaranteed that the

employee’s salary would not be substantially reduced as

long as he remained “capable of performing” his job);

R.J.N., 529 N.E.2d at 1187 (holding that a contract was

terminable at will when it stated that “this agreement will

remain in effect for as long as [one party] serves [the

other’s] customers”).

This outcome is in accord with our decision in

Baldwin Piano, Inc. v. Deutsche Wurlitzer GmbH, 392 F.3d

881 (7th Cir. 2004). In Baldwin, the parties had worked

under a licensing contract for eighteen years before the

licensor filed suit to declare the licensing agreement

unenforceable as a contract of indefinite duration. The

contract stated that “this Agreement shall continue in

force without limit of period but may be cancelled

by the Licensor for material breach.” Id. at 882. Once a

material breach occurred, the licensor was required to

notify the licencee, who then had 90 days to cure the

breach or seek arbitration; should the licensee fail to do

either, the licensor could then terminate the contract. Id.

Baldwin found this contract to be similar to that in

Lichnovsky v. Ziebart International Corp., 324 N.W.2d 732

(Mich. 1982), a case discussed by the Illinois Supreme

Court in Jesperson. Baldwin, 392 F.3d at 884. In Lichnovsky, a

contract was deemed definite and not terminable at will

when one party could terminate upon the other’s breach

only after giving the breaching party the opportunity to

cure within a defined period. 324 N.W.2d at 736-37. The

Illinois Supreme Court in Jesperson had found the contract in Lichnovsky to be different from that in Jesperson.

700 N.E.2d at 1016. This court in Baldwin found that a
No. 08-2727 11

contract permitting termination only after a material

breach and failure to cure within a specified period was

not terminable at will. 392 F.3d at 886. In contrast, the

contract between ATN and McAirlaid requires termination immediately upon either party’s refusal to comply

with the contract. Therefore, the contract was terminable

at will.

ATN argues that the contract was sufficiently definite

because it was terminable based on events other than a

breach, namely when customers no longer purchased the

products from ATN. However, the two cases cited by

ATN—In re Commodity Merchants, Inc., 538 F.2d 1260 (7th

Cir. 1976), and Stein v. Isse Koch & Co., 112 N.E.2d 491 (Ill.

App. Ct. 1953)—involved contracts that were only expressly terminable based on events other than compliance with the contractual terms, see In re First

Commodity Merchs., 538 F.2d at 1262 n.1 (stating that one

party may terminate contract if the other party’s “financial

condition is found to be or becomes unsatisfactory”);

Stein, 112 N.E.2d at 493 (contract would end at termination of the plaintiff’s military service). Conversely, in

this case paragraph 7 of the Letter of Intent permits

either ATN or NewCo to terminate the contract at will by

simply refusing to comply with its terms. Accordingly,

the exclusivity clause in the Letter of Intent makes this

agreement terminable at will.

III.

Because the agreement between ATN and the defendants

was of indefinite duration and not bounded by a specific
12 No. 08-2727

event, it was terminable at will under Illinois law. Therefore, the defendants could cease supplying ATN without

running afoul of the agreement. Accordingly, the district

court’s grant of summary judgment for the defendants

on ATN’s breach of contract claim is AFFIRMED.

2-25-09