In the

United States Court of Appeals

For the Seventh Circuit ____________

Nos. 05-3656, 05-3735

MORAN FOODS, INC.,

Plaintiff-Appellant/

Cross-Appellee,

v.

MID-ATLANTIC MARKET DEVELOPMENT

COMPANY, LLC, et al.,

Defendants-Appellees/

Cross-Appellants.

____________

Appeals from the United States District Court

for the Northern District of Indiana, South Bend Division.

No. 00 C 227—Robert L. Miller, Jr., Chief Judge.

____________

ARGUED NOVEMBER 9, 2006—DECIDED FEBRUARY 5, 2007

____________

Before BAUER, POSNER, and FLAUM, Circuit Judges.

POSNER, Circuit Judge. This is a complicated diversity

suit with a federal-law counterclaim. We shall simplify

ruthlessly. Moran Foods franchises grocery stores under

the name “Save-A-Lot” and sells the stores many of the

groceries they need. Mid-Atlantic (and an affiliate that

we’ll ignore) was one of the franchisees. Mid-Atlantic’s

stores faltered, and eventually defaulted, leaving it owing
2 Nos. 05-3656, 05-3735

Moran a considerable amount of money for groceries

bought but not paid for. Mid-Atlantic later declared

bankruptcy. Roger Camp, the owner of Mid-Atlantic, and

his wife, Susan Camp, had guaranteed the company’s debts

to Moran. (The various contracts recite that they are

governed by Missouri law.) When they refused to honor

their guaranties, Moran brought this suit for breach of

contract against the two Camps plus Mid-Atlantic. MidAtlantic and Susan Camp counterclaimed. Mid-Atlantic

claimed that Moran had violated a provision of their

contract that required Moran to furnish certain accounting services to Mid-Atlantic. Susan Camp claimed that

Moran had violated the Equal Credit Opportunity Act,

which so far as relates to this case forbids “any creditor

to discriminate against any applicant, with respect to any

aspect of a credit transaction . . . on the basis of . . . marital

status.” 15 U.S.C. § 1691(a)(1).

The district judge granted summary judgment to Moran

on its breach of contract claim and awarded it damages

of $3,006,314 ($1.3 million for the unpaid groceries and

the rest for interest at the 22 percent annual rate specified

in the contract). The counterclaims were then tried to a

jury, which awarded Mid-Atlantic the identical $3,006,314

on its breach of contract claim and (as corrected by the

district judge) Susan Camp $21,428.57. Since the award to

Mid-Atlantic canceled the debts on which Moran had

based its suit, and with it Susan Camp’s guaranty of that

indebtedness, her damages were limited to guaranties of

three debts that Moran might still try to collect because

their collection was not yet barred by the judgment in this

case or by the statute of limitations. The defendants’ crossappeal challenges the grant of summary judgment to

Moran on its breach of contract claim and also asks that
Nos. 05-3656, 05-3735 3

Susan Camp be awarded the attorney’s fees that she

incurred in litigating her claim under the Equal Credit

Opportunity Act, plus additional relief under the Act.

Mid-Atlantic’s argument that it did not break its contract with Moran, and its argument that Moran’s breach

entitled Mid-Atlantic to damages exactly equal in amount

to the damages that the district judge awarded Moran

for Mid-Atlantic’s breach, come to the same thing. Essentially Mid-Atlantic is arguing that had it not been for

Moran’s breach (which by the way is conceded), it would

not have run up any debt to Moran. Moran’s breach

consisted of its unexcused failure to furnish Mid-Atlantic

with profit and loss statements for the franchised stores

for the last three quarters of 1998. For a fee of $45 a week,

Moran had agreed to monitor the financial condition of

each of the stores and advise Mid-Atlantic every quarter of

their condition. In the last three quarters of 1998 that

condition was bad. Mid-Atlantic contends that had it

been advised of the parlous state of its stores it would

have taken steps to mitigate its losses by changing management or product mix, selling the stores or simply

closing them, and as a result it either would have had

greater revenues or would have stopped buying groceries from Moran altogether and either way it would

have avoided incurring the $1.3 million debt for unpaid

groceries and thus the interest on that debt as well.

The problem with this argument is that Mid-Atlantic

failed to present any evidence that would have enabled the

jury to quantify the loss the company incurred as a result

of Moran’s failure to provide the three quarterly financial

reports. Not that such evidence couldn’t have been presented; it just wasn’t. It is plausible that had Roger Camp

realized how badly the stores were doing, he would
4 Nos. 05-3656, 05-3735

have taken steps to cut his losses, and the steps might

have been effective—and maybe it was too late to take

them nine months later, when he at last discovered the

extent of the losses. We are not much impressed by

Moran’s argument that Camp’s opening several additional Save-A-Lot stores after he learned the true condition of the existing ones severs any possible causal connection between Moran’s breach and Mid-Atlantic’s

running up a large debt to Moran. The new stores may

have been in better locations and therefore could reasonably have been expected to do better than the existing

stores—in fact they did do better, though not by enough

to offset the losses on the existing stores, losses that

eventually drove Mid-Atlantic under. But all this is speculation. For Mid-Atlantic to be entitled to damages for

Moran’s breach, it had to present evidence from which

a reasonable jury could estimate with reasonable objectivity the loss that the breach inflicted.

Mid-Atlantic should have proceeded in two steps. The

first would have been to present evidence of when the

missing quarterly reports, if received, would have induced Mid-Atlantic to take actions designed to minimize

the losses that the reports revealed. It is not obvious that

the first report, showing bad results for the first quarter

of 1998, would have precipitated drastic action; but it

might have. (The reactions of other Moran franchisees

who receive bad news about their financial performance

in one quarter would have been helpful evidence on this

question.) Suppose the first report would have caused MidAtlantic to take action. If so, the second step in proving

damages would then have been for Mid-Atlantic to present evidence of the costs and benefits of the most effective action that it could have taken, such as altering
Nos. 05-3656, 05-3735 5

management or product mix or selling or closing the

stores. Each of those efforts at mitigation of loss would

have cost something; and then the question would be

how quickly a given effort would have produced a reduction in the stores’ costs and how great the reduction

would have been. Conceivably the early warning provided by the quarterly reports, had Mid-Atlantic received them, would have enabled it to cut its losses so

rapidly and deeply that rather than trying and failing

to recoup by opening additional stores, it would have kept

current with its obligations to Moran. But there is no

evidence to firm up such a conjecture.

In any event it is doubtful that such evidence would

have justified damages measured by the debt that MidAtlantic incurred to Moran as a result of the failure of the

stores. There is a “for want of a nail the kingdom was lost”

flavor to Mid-Atlantic’s theory of damages. The company’s

ultimate demise is not plausibly attributable solely to a

nine-month delay in the receipt of quarterly profit and

loss statements. And only the first statement was delayed nine months; the other two were delayed six and

three months respectively. Roger Camp was an experienced operator of grocery stores and surely knew that

his Save-A-Lot stores were not doing well, even if he

didn’t know the details. Knowing that the stores were

losing money, he was irresponsible in allowing months

to pass without wondering where the quarterly reports

were. His lassitude undermines his contention that time

was of the essence in avoiding a mounting debt to Moran.

It is hard to believe that for $45 a week Mid-Atlantic had

bought an insurance policy, with no cap, against its business losses, however careless the insured was in letting

them mount up. Of course there was no formal insurance
6 Nos. 05-3656, 05-3735

policy, but because liability for breach of contract is a

form of strict liability, a promisor is in effect a guarantor

of performance even if he is unable and not merely unwilling to perform his contractual obligations. Zapata Hermanos

Sucesores, S.A. v. Hearthside Baking Co., 313 F.3d 385, 389-

90 (7th Cir. 2002); United States v. Blankenship, 382 F.3d

1110, 1133-34 (11th Cir. 2004); see Oliver Wendell Holmes,

“The Path of the Law,” 10 Harv. L. Rev. 457, 462 (1897). This

gives an insurance dimension to many contracts. Winniczek

v. Nagelberg, 394 F.3d 505, 508-09 (7th Cir. 2005).

Generally—to continue with the insurance analogy

(contract as insurance)—the lower the insurance premium

the narrower the coverage of the policy. Of course there

are some very one-sided contracts, but one thing that a

court can look at in determining the scope of any contract, when that scope is unclear from the contractual

language, is whether it seems commensurate with the

consideration paid by the party seeking to enforce the

contract. Rhone-Poulenc Inc. v. International Ins. Co., 71 F.3d

1299, 1303 (7th Cir. 1995); In re Kazmierczak, 24 F.3d 1020,

1022 (7th Cir. 1994).

Also helpful in interpreting insurance contracts, including noninsurance contracts that have an insurance

dimension, is the notion of “moral hazard.” That is the

tendency to carelessness if you’re fully insured (or, worse,

overinsured). Phelps Dodge Corp. v. Schumacher Electric

Corp., 415 F.3d 665, 668 (7th Cir. 2005); Federal Ins. Co. v.

Hartford Steam Boiler Inspection & Ins. Co., 415 F.3d 487, 498-

99 (6th Cir. 2005). It’s why an insurer will not insure your

house against fire for more than it’s worth, and why an

insured has a duty to mitigate his losses, though it is a

“duty” not in the sense of giving rise to damages for

its breach but only in the sense of being a precondi-
Nos. 05-3656, 05-3735 7

tion to the insured’s being able to recover all his losses

from the insurance company.

The duty may be stated explicitly in the contract, as in

Witcher Construction Co. v. Saint Paul Fire & Marine Ins. Co.,

550 N.W.2d 1, 7-8 (Minn. App. 1996), or may be imposed

by the court as a “common law duty,” 12 Couch on Insurance

§ 178:10 (3d ed. 2005), though in the latter case it is more

precisely described as a duty that courts read into every

contract. It is the duty laid on one party to a contract not

to take advantage of the other during the performance

stage should circumstances deliver the latter into the

power of the former, as often happens when the performance of the parties is not simultaneous. Parties can be

expected to agree to such a duty—the duty of “good faith”

in contractual performance, e.g., Original Great American

Chocolate Chip Cookie Co. v. River Valley Cookies, Ltd., 970

F.2d 273, 280 (7th Cir. 1992)—explicitly if they think of it.

The expectation is firm enough to justify the courts in

trying to save the parties the bother by imputing the

duty in every contract, thus economizing on the costs of

negotiating and drafting contracts without infringing

freedom of contract.

The duty to mitigate damages is such a duty. It forbids

the victim of a breach of contract, which might well be

involuntary, to allow his damages to balloon (when he

could easily prevent that from happening), as he might be

tempted to do in order to force a lucrative settlement. The

duty to mitigate damages is of course a general contractual

duty, Restatement (Second) of Contracts § 350 (1981), not

anything special to insurance, illustrating our earlier point

about the insurance function of contracts that are not

explicit contracts of insurance.

Thus, either Mid-Atlantic’s losses were an unforeseeable (to Moran) consequence of delay in delivery of the
8 Nos. 05-3656, 05-3735

quarterly statements, or Mid-Atlantic failed to mitigate its

losses as required by contract law, or both. So its claim of

damages fails, Turner v. Shalberg, 70 S.W.3d 653, 659 (Mo.

App. 2002); Birdsong v. Bydalek, 953 S.W.2d 103, 116-17 (Mo.

App. 1997); Mansfield v. Trailways, Inc., 732 S.W.2d 547, 552-

53 (Mo. App. 1987); American Surety Co. v. Franciscus, 127

F.2d 810, 815 (8th Cir. 1942) (Missouri law); USA Group

Loan Services, Inc. v. Riley, 82 F.3d 708, 712 (7th Cir. 1996);

Restatement (Second) of Contracts, supra, §§ 350(1), 351(1)

and comments a and b, and we turn to the issue of

Moran’s liability to Susan Camp under the Equal Credit

Opportunity Act.

Mid-Atlantic argues that we have no jurisdiction to

consider Moran’s challenge to the judgment for Camp,

because Moran did not mention that judgment in its

notice of appeal, as required by Fed. R. App. P. 3(c) (the

notice of appeal must “designate the judgment, order or

part thereof appealed from”). Moran’s notice of appeal

just mentioned the order turning down its motion for

judgment as a matter of law (or alternatively for a new

trial), and that motion was limited to its dispute with MidAtlantic. But the district judge had earlier indicated his

unwillingness to question the validity of the regulation of

the Federal Reserve Board on which, as we are shortly

to see, Susan Camp’s claim is based. In effect Moran has

treated that indication as an interlocutory order, which an

appeal from the final order in the case, turning down

Moran’s motions directed at Mid-Atlantic, would bring up

to the court of appeals. E.g., Kunik v. Racine County, 106

F.3d 168, 172 (7th Cir. 1997). An indication is not an

order, but it is close enough, as there is no suggestion of

prejudice to Mid-Atlantic, and “inept” attempts to comply

with Rule 3(c) are accepted as long as the appellee is not
Nos. 05-3656, 05-3735 9

harmed. Foman v. Davis, 371 U.S. 178, 180-82 (1962);

AlliedSignal, Inc. v. B.F. Goodrich Co., 183 F.3d 568, 571-72

(7th Cir. 1999); Cardoza v. Commodity Futures Trading

Commission, 768 F.2d 1542, 1546-47 (7th Cir. 1985). So on to

the merits.

At first blush, the Equal Credit Opportunity Act has no

relevance to this case. So far as the prohibition against

discrimination on the basis of marriage is concerned

(the Act prohibits discrimination on grounds of race, sex,

age, etc., as well), it is apparent that what the Act was

intended to do was to forbid a creditor to deny credit to a

woman on the basis of a belief that she would not be a

good credit risk because she would be distracted by

child care or some other stereotypically female responsibility. Midkiff v. Adams County Regional Water District, 409

F.3d 758, 771 (6th Cir. 2005); Anderson v. United Finance Co.,

666 F.2d 1274, 1277 (9th Cir. 1982). Susan Camp was not

an applicant for credit, and neither received credit nor

was denied it. Instead she guaranteed her husband’s

debt and by doing so enabled his company to buy groceries from Moran on credit.

The Federal Reserve Board, however, has defined

“applicant” for credit (the term in the statute) to include

a guarantor. 12 C.F.R. §§ 202.2(e), 202.7(d). We doubt

that the statute can be stretched far enough to allow

this interpretation. (Anderson v. United Finance Co., supra,

666 F.2d at 1276-77, assumes the validity of the regulation,

but without discussion of the point.) It is true that courts

defer to administrative interpretations of statutes when a

statute is ambiguous, Ford Motor Credit Co. v. Milhollin,

444 U.S. 555, 559-60 (1980), and that this precept applies to

the Federal Reserve Board’s interpretation of ambiguous

provisions of the Equal Credit Opportunity Act. Diaz v.
10 Nos. 05-3656, 05-3735

Virginia Housing Development Authority, 117 F. Supp. 2d

500, 506-07 (E.D. Va. 2000); see 15 U.S.C. § 1691b(a)(1). But

there is nothing ambiguous about “applicant” and no

way to confuse an applicant with a guarantor. What is

more, to interpret “applicant” as embracing “guarantor”

opens vistas of liability that the Congress that enacted the

Act would have been unlikely to accept. If a person is

denied credit, or given credit but charged a higher interest rate, on some basis forbidden by the Act, the damages will usually be modest. One can imagine cases

where for want of credit from a particular lender a tremendous business opportunity was lost, but such cases—

another example of appeal to the want-of-a-nail adage—are

rare and difficult to prove. Damages in other cases will

be limited to the cost of the higher interest, or the inconvenience of arranging alternative credit or getting one’s

credit restored, or embarrassment at being thought not

creditworthy, or emotional distress at being thought a

deadbeat or at feeling oneself a victim of discrimination.

See, e.g., Philbin v. Trans Union Corp., 101 F.3d 957, 963 n. 3

(3d Cir. 1996) Casella v. Equifax Credit Information Services,

56 F.3d 469, 474-75 (2d Cir. 1995); Guimond v. Trans Union

Credit Information Co., 45 F.3d 1329, 1333 (9th Cir. 1995);

Stevenson v. TRW, Inc., 987 F.2d 288, 296-97 (5th Cir. 1993);

Pinner v. Schmidt, 805 F.2d 1258, 1265 (5th Cir. 1986). It is

otherwise if a guaranty is found to be unlawful. For then,

as Susan Camp (not content with the modest damages

that she obtained in the district court) contends in the

cross-appeal, the guaranty would be unenforceable and

the creditor might lose the entire debt.

But even if the Federal Reserve Board’s interpretation

is authorized, Susan Camp must lose because she failed

to prove discrimination. All that the evidence shows on

that score is that when Moran looked at the list of assets
Nos. 05-3656, 05-3735 11

submitted by Roger Camp, who had agreed to guarantee

repayment of any debts that Mid-Atlantic incurred to

Moran, it noticed that several residences were included

and so it naturally and correctly assumed that Mrs. Camp

had an interest in those assets. The residences of a married

couple are usually owned either jointly or by the spouse

other than the one who included them in the list of assets

that he submitted to obtain credit. Often spouses don’t

know the precise allocation of property between them

because it has been made by their lawyer in order

to minimize estate tax or to make it harder for creditors

to seize property in the event of a default. In fact some

$2.5 million of the $8.2 million in assets listed on Mr.

Camp’s credit application were actually owned by Mrs.

Camp. It was therefore sound commercial practice unrelated to any stereotypical view of a wife’s role for Moran

to require that she guarantee the debt along with her

husband. As far as appears, had they been unmarried but

living together whether as boyfriend and girlfriend or as

siblings, or father and daughter, or just roommates, as

soon as Moran learned that Roger Camp was living

with someone it would have realized that one or more

of the residences on Camp’s list of assets might be owned

with someone else or maybe owned entirely by someone else. And so it would have insisted on the guaranty.

If so, there was no discrimination on the basis of marital

status. Crestar Bank v. Driggs, No. 93-1036, 1993 WL 198187,

at *1 (4th Cir. June 11, 1993) (per curiam) (“the evidence

supports the defendant’s contention that Kimberlee

Driggs was asked to assume liability on the note because

the loan officers believed she was a principal in the

transaction”); cf. McKenzie v. U.S. Home Corp., 704 F.2d 778,

779 (5th Cir. 1983); 12 C.F.R. § 202.7(d)(4). And as far as the

record reveals, it is so.
12 Nos. 05-3656, 05-3735

We conclude that Mid-Atlantic failed to prove any

amount of damages to offset against the debt that it

owed Moran, and that Moran infringed no right that

Susan Camp has under the Equal Credit Opportunity

Act. The judgment of the district court is therefore

reversed and the case remanded with instructions to

enter a final judgment for Moran on all claims.

REVERSED AND REMANDED, WITH DIRECTIONS.

A true Copy:

Teste:

 _____________________________

Clerk of the United States Court of 

Appeals for the Seventh Circuit 

USCA-02-C-0072—2-5-07