In the

United States Court of Appeals

For the Seventh Circuit ____________

Nos. 02-1541, 02-2156

MOR-COR PACKAGING PRODUCTS, INC.,

Plaintiff-CounterdefendantAppellee/Cross-Appellant,

v.

INNOVATIVE PACKAGING CORP.,

Defendant-CounterplaintiffAppellant/Cross-Appellee,

v.

MARTIN FIELD,

Counterdefendant-Appellee/

Cross-Appellant.

____________

Appeals from the United States District Court

for the Northern District of Illinois, Eastern Division.

No. 99 C 3855—Wayne R. Andersen, Judge.

____________

ARGUED FEBRUARY 25, 2003—DECIDED MAY 1, 2003

____________

Before POSNER, COFFEY, and WILLIAMS, Circuit Judges.

POSNER, Circuit Judge. The defendant in this diversity suit

for breach of contract, IPC, appeals from a judgment in

favor of the plaintiff, Mor-Cor, for some $300,000, rendered
2 Nos. 02-1541, 02-2156

after a bench trial. IPC had counterclaimed, charging that

not it but Mor-Cor had broken the contract but naming

Martin Field as an additional counterdefendant on the

theory that Mor-Cor is Field’s alter ego—which it is. The

counterclaim was essentially the mirror image of the

complaint, and so in ruling for the plaintiff the judge

dismissed the counterclaim.

Mor-Cor cross-appeals from the judge’s declining to

award sanctions for IPC’s refusal, which Mor-Cor contends

was unjustified, to admit a fact. We take that up later and

begin with IPC’s appeal. Wisconsin law governs, but we

have had difficulty finding pertinent Wisconsin cases.

IPC manufactures corrugated sheets used to make boxes.

It appointed Mor-Cor (that is, Martin Field, and from here

on we shall treat him rather than his company as the

contracting party) to be IPC’s exclusive agent for the sale

of its corrugated sheets to a number of small box companies in the greater Chicago area listed in an attachment

to the contract. The contract imposed the usual obligations

on sales agent Field, such as that he use his best efforts to

sell IPC’s product, an obligation anyway implicit in an

exclusive dealing contract. E.g., Wood v. Duff-Gordon, 118

N.E. 214 (N.Y. 1917) (Cardozo, J.); Market Street Associates

Limited Partnership v. Frey, 941 F.3d 588, 596 (7th Cir. 1991).

The contract authorized termination “by a party if the

other party fails to perform any of its obligation[s] herein

and such failure is not remedied by the other party within

thirty (30) days of the other party’s receipt of a written

notice describing such failure.” There are other grounds

for termination in the contract that do not require giving

the defaulting party an opportunity for cure, such as Field’s

committing fraud or becoming incapacitated, but none

of them is applicable to this case.

Although the contract was for three years, it was by its

terms renewable indefinitely, and IPC argues that this made
Nos. 02-1541, 02-2156 3

it terminable at will. What is true is that if a contract does

not specify a term or any grounds for termination, a court

may interpret it to be terminable at will rather than as

subjecting each party to perpetual durance at the option of

the other. Irola & CIA, S.A. v. Kimberly-Clark Corp., No. 01-

16203, 2003 WL 1643612, at *3-5 (11th Cir. Mar. 31, 2003);

Nicholas Laboratories Ltd. v. Almay, Inc., 900 F.2d 19, 21-22 (2d

Cir. 1990) (per curiam); cf. Ferraro v. Koelsch, 368 N.W.2d 666,

671-74 (Wis. 1985). Grounds for termination were specified

in this contract; and even if they had not been, when the

duration of a contract is indefinite only by virtue of a right

of unlimited renewal a party cannot terminate the contract

without cause before the expiration of the initial term.

Armstrong Business Services, Inc. v. H & R Block, 96 S.W.3d

867, 877 (Mo. App. 2002); Preferred Physicians Mutual

Management Group, Inc. v. Preferred Physicians Mutual Risk

Retention Group, Inc., 961 S.W.2d 100 (Mo. App. 1998); A.G.

Nikas v. W.F. Hindley Beverage Distributors, Inc., 108 S.E.2d

98, 101-02 (Ga. App. 1959).

The contract went into effect in 1997. Two years later

Field became interested in acquiring a local box maker

named Jet Age Container. Jet Age was not a customer of

IPC but it was a competitor of most of IPC’s Chicago-area

customers. By the end of June 1999, Field had an agreement in principle to acquire Jet Age, and while he intended the acquisition to provide an income for his two

sons and intended to retain only a 1 percent interest in

the business, he had the acquiring corporation that he

created make him manager for life with complete authority over all aspects of the business. The following month

he offered the position of plant manager of Jet Age to

an employee of one of IPC’s Chicago-area customers for

which Field was IPC’s exclusive sales agent.

Field had not told IPC about his designs on Jet Age, but

the irate owner of the box company to whose employee
4 Nos. 02-1541, 02-2156

Field had offered the job of plant manager phoned the

president of IPC to complain. The owner was angry not

only about losing his employee but also about having to

compete with his supplier. Jet Age was a competitor of

his; Field as IPC’s exclusive sales agent was his supplier;

and Jet Age and Field were, for all practical purposes, one

and the same—or rather would be when and if Field’s

purchase of Jet Age was consummated.

It was consummated in September but by then Field was

no longer IPC’s agent. IPC had terminated him the previous

month, immediately upon learning from the box company

of Field’s plans to buy Jet Age, without giving him an

opportunity to cure; and this suit followed.

The contract as we said required Field to use his best

efforts to sell IPC’s corrugated sheets, and the central

question in the case is whether he could fulfill this obligation at the same time that he was managing a company that

competed with his customers. The parties treat this as a

question of fact, Potti v. Duramed Pharmaceuticals, Inc., 938

F.2d 641, 645 (6th Cir. 1991); Davidson & Jones Development

Co. v. Elmore Development Co., 921 F.2d 1343, 1350-51 (6th

Cir. 1991); cf. In re Abbott Laboratories Derivative Shareholders,

No. 01-1952, 2003 WL 1572015, at *12 (7th Cir. Mar. 28,

2003), involving as it does the application of a standard,

“best efforts,” to the particular circumstances of the case,

American Federal Group, Ltd. v. Rothenberg, 136 F.3d 897, 905-

06 (2d Cir. 1998); Polyglycoat Corp. v. C.P.C. Distributors, Inc.,

534 F. Supp. 200, 203 (S.D.N.Y. 1982), rather than as a

question that might be answerable by referring to a rule

on conflicts of interest. Ordinarily the trial judge’s answer

to a question of fact would come to us fortified by the

clearly-erroneous rule. But the district judge’s method of

deciding the case disentitles his ruling to the usual deference.
Nos. 02-1541, 02-2156 5

At the conclusion of the bench trial, he convened the

lawyers and told them that “we are here to announce or

discuss or hear, maybe, some additional argument with

respect to the decision of the Court.” What followed was

a colloquy occupying almost 75 pages of transcript in

which the lawyers and the judge exchanged their impressions of the various issues. On whether Field’s proposed

acquisition of Jet Age had violated the best-efforts clause,

the judge said two things: (1) “I am not convinced that the

parties would have had a productive relationship beyond

the three-year term [of the contract]. It had already begun

to deteriorate and the plaintiff had already begun to

hedge his bets by initiating discussions to acquire a company which was going to take substantial amount of effort

on his part, even if it wouldn’t have eaten up all his efforts.

We will never know if it would have undermined his

salesmanship so much that he wouldn’t have sold anything.

But I think that your [Field’s]—your son and son-in-law

probably would have required enough oversight at the

beginning so that your sales [for IPC] wouldn’t have been

at the level that IPC demanded it. But, once again, this is

a we will never know.” (2) “[B]y terminating the agreement

immediately, IPC, I think, undermined the 30-day [cure]

period in a way that could well have been meaningful.

[Field] might not have gone through with the deal with

Jet Age or they might have tailored Jet Age’s business or

purchases by Jet Age in such a way that IPC would have

found it satisfactory. We will never know. So I think it was

improper for IPC to terminate the agreement instantly

based on the belief, reasonable though it was, that Mr.

Field was going to acquire and operate a competitor of—of

some of IPC’s customers.”

The judge asked the parties to agree on a set of findings

of fact and conclusions of law that would reflect the colloquy from which we have been quoting. They did so. But
6 Nos. 02-1541, 02-2156

so far as the proposed acquisition of Jet Age was concerned,

the findings of fact stated only that IPC had failed to give

Field an opportunity to cure, while the conclusions of law

stated that the court “does not conclude based upon the

evidence presented that Mr. Field’s proposed acquisition

of Jet-Age [sic] constituted a breach.” The judge adopted the

findings and conclusions.

All that is clear from this confusing mélange is that the

judge thought that IPC had violated the cure provision.

Whether or not he was correct about that, a more important

question, the answer to which we cannot dig out of the

district judge’s oral statements or terse written decision, is

whether Field’s proposed acquisition of Jet Age was a

breach of his contract with IPC, because if it was, then

Field has failed to prove substantial damages and almost

certainly was overcompensated. (IPC’s appeal does not

challenge the computation of damages as such, but this

is provided that we affirm the district judge’s ruling on

liability.) There is no evidence either that Field would have

abandoned the acquisition in order to cure such a breach,

or, as the district judge conjectured, that there were any

conditions on the acquisition that Field would have accepted that would have enabled him to acquire and manage Jet Age yet continue to comply with the best-efforts

clause in his contract with IPC. So far as appears, then, had

IPC given Field 30 days to cure, the consequence would

have been that when the 30 days were up the contract

with IPC would have lawfully terminated; and in that

event Field’s only damages would have been whatever

loss he sustained during the 30 days after he was terminated. There were 17 months left of the initial three-year

term of the contract, and the bulk of the damages award

to Field—some $277,000—represented an estimate of his

lost profits for that period. (He did not seek damages

based on the hypothesis that he would have exercised his
Nos. 02-1541, 02-2156 7

right to renew the contract at the end of that period.) If

he was deprived of just one month’s profits by IPC’s

breach, the award for lost profits would plummet to $16,000.

The conclusion in the judge’s written decision that the

proposed acquisition of Jet Age had not been proved to

be a breach of contract on Field’s part is at war with the

language that we quoted earlier from part (1) of the

judge’s oral remarks. And it is not as if the conclusion

were well supported by the evidence. While it is true that

large suppliers of corrugated sheets, such as Stone Container, are also integrated forward into the manufacture

of boxes from the sheets, so that they both supply and

compete with other box companies, it does not follow that

the pygmy local box companies on Field’s customer list

would be comfortable buying from a local competitor.

Stone is unlikely to jeopardize a substantial business of

selling corrugated sheets by using its integrated position to

squeeze its competitor-customers, but Mr. Field for all one

knows would use information that he obtains from his

customers to compete more effectively against them with

his newly acquired box company. If this is what the customers believe, he will be unable to use his best efforts to

sell IPC’s product; try as he might, his customers will tend

to shun him. So at least IPC might reasonably believe

and, so believing, legitimately declare him in violation of

his best-efforts obligation. Remember that the contract is

an exclusive one, so that IPC cannot bypass Field and

appoint another agent to take up the slack while Field

builds his box company at IPC’s expense. Its exclusive

feature is amplified by Field’s right of indefinite renewal.

A further complication not helpful to Field is that the

contract provides that customers will be dropped from his

list who fail to buy at least 10 percent of their corrugatedsheet requirements from IPC. Field cannot determine the

percentage they buy unless they are forthcoming with him.
8 Nos. 02-1541, 02-2156

They may well clam up once they realize that a competitor

is inquiring about their purchasing decisions regarding a

key input into their product. The mode of compensating

Field suggests that IPC and he did not contemplate that he

would be going into competition with his customers.

Field points us to cases that hold, sensibly enough, that

merely planning to engage in a transaction that if consummated would create a conflict of interest justifying

termination is not itself a breach of contract. E.g., Southwest

Forest Industries, Inc. v. Sharfstein, 482 F.2d 915, 927-28

(7th Cir. 1972); Midwest Janitorial Supply Corp. v. Greenwood,

629 N.W.2d 371, 375 (Iowa 2001); Jet Courier Service, Inc.

v. Mulei, 771 P.2d 486, 493 (Colo. 1989); see also Restatement (Second) of Agency § 393 comment e (1958). A person

contemplating the lawful termination of an existing contractual relationship should be permitted to make future

plans in order to smooth his transition from the existing relationship to a new one. But as the cases just cited

(and the Restatement) make clear, Field forfeited this safe

harbor by soliciting the plant manager of one of his principal’s customers, thereby harming the principal, which

confidential planning would not have done.

We are not, however, in a position to resolve definitively

the question whether the proposed acquisition of Jet Age

was incompatible with Field’s duty of using his best efforts

to sell IPC’s product. The evidence is in dispute, and the

district judge’s opinion, as we have noted, is both internally inconsistent and inconsistent with his oral findings.

Further proceedings will be necessary in the district court.

We turn last to the cross-appeal. In July 1999, the month

before firing Field, IPC sent him a letter notifying him that

he was in breach of various provisions of the contract

and announcing that he would be terminated for those
Nos. 02-1541, 02-2156 9

breaches. There was no mention of the proposed acquisition

of Jet Age; although it was in the works, IPC had not yet

learned about it. In pretrial discovery, Field asked IPC to

admit that it didn’t consider the breaches listed in the

July letter to be material breaches, that is, actual grounds

for IPC’s terminating him. IPC refused to admit this. Yet

at trial its president testified that actually he would not

have terminated Field had it not been for the later-discovered proposed acquisition of Jet Age; the July letter,

he said, was intended merely as a “wake up” call to Field.

Field argues that the president’s testimony shows that

the refusal to admit that the breaches listed in the July letter

had not been material was sanctionable. Fed. R. Civ. P.

37(c)(2). It does not show that. There is a difference between

believing that your contract partner has committed a

material breach and wanting to terminate your contract

with him because of it. Many, we suspect most, material

breaches are forgiven, either in the hope that they will be

cured or because self-help (as through termination) or legal

remedies would cost the victim of the breach more than

they were worth.

Circuit Rule 36 shall apply on remand.

AFFIRMED IN PART, REVERSED IN PART,

AND REMANDED.

A true Copy:

Teste:

 _____________________________

Clerk of the United States Court of 

Appeals for the Seventh Circuit 

USCA-02-C-0072—5-1-03