In the

United States Court of Appeals

For the Seventh Circuit ____________

Nos. 05-3242 & 05-3351

BIOMET ORTHOPEDICS, INC.,

Plaintiff-Appellee,

Cross-Appellant,

v.

TACT MEDICAL INSTRUMENTS, INC.,

Defendant-Appellant,

Cross-Appellee.

____________

Appeals from the United States District Court for the

Northern District of Indiana, Hammond Division.

No. 3:01 CV 895 PS—Philip P. Simon, Judge.

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ARGUED JUNE 8, 2006—DECIDED JULY 19, 2006

____________

Before EASTERBROOK, ROVNER, and EVANS, Circuit

Judges.

EASTERBROOK, Circuit Judge. For 12 years TACT Medical

was the exclusive distributor in Japan of medical devices

made by Biomet Orthopedics. At the conclusion of its

distributorship in February 2001, TACT had a choice under

§2.3 of the contract:

[After] this Agreement has been terminated . . .

TACT may at its sole discretion continue distribution of the Products and parts which TACT owns in
2 Nos. 05-3242 & 05-3351

its inventories and/or request BIOMET to repurchase those Products and parts back at the price

equal to that paid by TACT to BIOMET, with the

costs of carriage, insurance, duty and charges

required for such return being borne by

[Biomet] . . . .

TACT asked Biomet to repurchase its inventory, and it

agreed—provided that the goods were delivered to it in

Japan. Biomet did not want to import them a second time,

which would require not only extra customs duties but

also approval from Japanese medical-device regulators.

That process could delay by a year or more Biomet’s ability

to compete in the Japanese market. For strategic or spiteful

reasons, however, TACT refused to deliver to Biomet in

Japan. The entire inventory, worth about $7 million, was

shipped to O’Hare Airport in Chicago— where it sits to this

day in a customs warehouse.

Biomet filed this suit under the diversity jurisdiction,

seeking damages on the theory that, while the distributorship lasted, TACT had failed to use its best efforts to sell

Biomet’s products. TACT filed a counterclaim seeking

payment for the inventory in the warehouse at O’Hare

Airport. A choice-of-law clause in the contract makes

Indiana law controlling on these issues. Answering special

interrogatories, a jury concluded that: (1) TACT had exerted

best efforts and is not liable to Biomet; (2) Biomet was

required by the contract to repurchase the inventory on

TACT’s request; and (3) TACT’s refusal to honor Biomet’s

request to deliver that inventory in Japan, and its shipment

to the United States (effectively excluding Biomet from the

Japanese market for more than a year), was commercially

unreasonable and excused Biomet from the obligation to

repurchase the inventory. In a comprehensive and thoughtful opinion, the district judge denied both sides’ motions

under Fed. R. Civ. P. 50. It also denied Biomet’s request for

attorneys’ fees. Both sides have appealed. TACT contends
Nos. 05-3242 & 05-3351 3

that Biomet must pay for the inventory. Biomet has

abandoned its contention that TACT violated the contract

by failing to employ best efforts to sell more products but

insists that it has a contractual entitlement to recover

attorneys’ fees.

The district judge allowed the jury to decide whether the

word “request” in the passage we have reproduced above

means “require,” and that step is problematic. This contract

has an intrinsic ambiguity: if “request” is read literally then

the whole clause beginning with “and/or request” is pointless, for TACT did not need a contract to “request” Biomet

to do something. Neither side offered any evidence about

the negotiations that led to the use of “request” rather than

“require” or about the customs of the trade; both sides have

staked their all on the contract’s text. Interpreting contractual language is a job for the court when no parol evidence

bears on its meaning. Allen v. Cedar Real Estate Group,

LLP, 236 F.3d 374, 380 (7th Cir. 2001); First Federal

Savings Bank v. Key Markets, Inc., 559 N.E.2d 600, 604

(Ind. 1990).

But no harm was done: the jury understood the contract

exactly as the judge (rightly) did in the post-trial ruling.

Indiana prefers interpretations that avoid making contractual language surplusage. See Walb Construction Co. v.

Chipman, 202 Ind. 434, 442, 175 N.E. 132, 135 (1931);

Whitaker v. Brunner, 814 N.E.2d 288, 294 (Ind. App. 2004);

Robinson v. Century Personnel, Inc., 678 N.E.2d 1268, 1270

(Ind. App. 1997). In context—which is how all language

should be read—§2.3 gives TACT a choice between selling

inventory on hand (even though it has lost its exclusive

right to distribute Biomet’s products and cannot obtain new

items that its customers may require) and making a clean

break from the business.

Having exercised the option to sell the inventory back to

Biomet, TACT had to make a delivery. Biomet wanted

delivery in Japan; TACT did not agree. The Uniform

Commercial Code (applied via the contract’s choice-of-law
4 Nos. 05-3242 & 05-3351

clause) spells out what happens if the parties to a sale do

not specify a place of the delivery. Section 2-308 (enacted in

Indiana as Ind. Code §26-1-2-308) says that “[u]nless

otherwise agreed: (a) [t]he place of delivery of goods is the

seller’s place of business”. Section 2-504 (Ind. Code §26-1-2-

504) adds that, when delivery does not occur by an onpremises exchange under §2-308, then “unless otherwise

agreed [the seller] must (a) [p]ut the goods in the possession

of a carrier and make such a contract for their transportation as may be reasonable”. So if shipment was required,

TACT had to make reasonable provision for delivery; if

shipment was not required, TACT had to make the inventory available at its own place of business in Japan. It did

not do the latter, and what is “reasonable” is a classic jury

question.

This jury determined that shipment to the United States

was not a “reasonable” provision for delivery and excused

Biomet from any obligation to pay. That decision was well

supported by evidence about Biomet’s reasons for wanting

delivery in Japan. Commercial norms point the same way.

A person who orders an automobile to drive in Japan need

not pay if the seller ships it to Chicago; just so with medical

equipment. TACT relies heavily on Beanstalk Group, Inc. v.

AM General Corp., 283 F.3d 856 (7th Cir. 2002), for the

proposition that business dealings (including contracts)

should be read to make business sense. That does far more

to support Biomet’s position than TACT’s.

TACT has never argued that delivery to Chicago was

“reasonable.” Instead it maintains that the parties agreed

to delivery in Chicago, activating the “unless otherwise

agreed” clauses in §2-308 and §2-504. But where is that

agreement to be found? Biomet insisted from the get-go on

delivery in Japan. Section 2.3, which gave TACT a put

option on its inventory, does not say where goods should be

sent. Nor does §1.12, captioned “Return of Products”, which

allows TACT to sell any product back to Biomet at a 20%
Nos. 05-3242 & 05-3351 5

discount (called a “restocking charge”). TACT locates the

“agreement” in the contract’s Exhibit C.5, captioned

“Shipment and Risk of Loss”. This reads:

All goods are sold F.O.B. U.S. airport and/or U.K.

airport in accordance with the prices set forth in

Exhibit B. The method and route of shipment are at

Biomet’s discretion, unless TACT timely supplies

explicit instructions otherwise. Biomet shall tender

delivery of all goods to a carrier for transportation

to TACT’s place of business, but all remaining costs

of transportation and shipment shall be borne by

TACT, and all risks of loss shall pass to TACT when

the goods are made available to the carrier at U.S.

and/or U.K. airport including, without limitation,

all risks of loading, transportation and shipment.

All claims for loss, damage or delay against the

carrier shall be borne by TACT.

TACT maintains that Biomet has agreed to a return to the

goods’ point of origin (an airport in the United States or the

United Kingdom). But this is not at what Exhibit C.5 says.

It governs shipment from Biomet to TACT but not the other

direction. An F.O.B. term is a risk-shifting provision, not a

designation of destination. See Ind. Code §26-1-2-319. (The

proprietors of the UCC deleted §2-319 from the Official

Version in 2003, deeming F.O.B. and F.A.S. terms to be

obsolete; Indiana has not responded to this recommendation, so §2-319 remains in force in that state.) Products are

to be “free on board” the carrier (so Biomet bears the cost

and risk to that point); expense and risk on the remaining

journey are, as the clause adds (redundantly, given the

meaning of F.O.B.), the recipient’s. If, however, we treat

this part of the contract as reversible, then the second

sentence (with the parties switched) supplies the answer:

“The method and route of shipment are at [TACT’s] discretion, unless [Biomet] timely supplies explicit instructions
6 Nos. 05-3242 & 05-3351

otherwise.” Biomet gave TACT timely, explicit instructions

for delivery; TACT wilfully ignored them.

Biomet’s cross-appeal relies on §3.2 of the contract, in

which TACT agrees to pay “costs and attorney’s fees arising

from any breach of this agreement by TACT.” The problem

with Biomet’s argument, as the district judge aptly observed, is that TACT did not break the contract. The

contract called on TACT to use its best efforts to sell

Biomet’s products; the jury found that TACT had done so.

TACT’s failure to deliver the inventory to Biomet in Japan

was not a “breach” of the contract, which gave TACT the

option but not a duty to sell the inventory back to Biomet.

TACT had paid for the goods; once the distributorship (and

the best-efforts obligation) came to a close, TACT was free

to drop the products into the Sea of Japan or the crater

of Fujiyama without violating any duty owed to Biomet.

By shipping the inventory to O’Hare Airport TACT lost

$7 million; it did not also undertake to pay Biomet’s

lawyers. Indiana law uses the American Rule, which

presumptively requires litigants to bear their own legal

expenses. See Shumate v. Lycan, 675 N.E.2d 749, 754-55

(Ind. App. 1997). Because TACT did not violate any contractual duty, there is no basis for departing from that norm.

AFFIRMED
Nos. 05-3242 & 05-3351 7

A true Copy:

Teste: 

 ________________________________

Clerk of the United States Court of

Appeals for the Seventh Circuit 

USCA-02-C-0072—7-19-06