171 F.3d 1106 (7th Cir. 1999), 98-1986, In re Modern Dairy of Champaign

Docket Nº:98-1986, 98-2713.
Citation:171 F.3d 1106
Party Name:In re: MODERN DAIRY OF CHAMPAIGN, INC., Debtor. Steve Miller, as Trustee in Bankruptcy for the Estate of Modern Dairy of Champaign, Inc., Plaintiff-Appellant, v. McLean County Unit District No. 5 and Champaign Community Schools District No. 4, Defendants-Appellees.
Case Date:March 24, 1999
Court:United States Courts of Appeals, Court of Appeals for the Seventh Circuit
 
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Page 1106

171 F.3d 1106 (7th Cir. 1999)

In re: MODERN DAIRY OF CHAMPAIGN, INC., Debtor.

Steve Miller, as Trustee in Bankruptcy for the Estate of

Modern Dairy of Champaign, Inc., Plaintiff-Appellant,

v.

McLean County Unit District No. 5 and Champaign Community

Schools District No. 4, Defendants-Appellees.

Nos. 98-1986, 98-2713.

United States Court of Appeals, Seventh Circuit

March 24, 1999

Submitted Feb. 18, 1999.

Page 1107

Steven L. Blakely (submitted), Acton & Snyder, Danville, IL, for Steve Miller.

James D. Green (submitted), Flynn, Palmer & Tague, Champaign, IL, for Champaign Community Schools District No. 4.

Julian E. Cannell (submitted), Kavanagh, Scully, Sudow, White & Frederick, Peoria, IL, for McClean County Unit District No. 5.

Before POSNER, Chief Judge, and EASTERBROOK and KANNE, Circuit Judges.

POSNER, Chief Judge.

Modern Dairy of Champaign, Inc. went into bankruptcy and the trustee brought adversary actions to recover payment for deliveries of milk that the dairy had made to two school districts, McLean and Champaign. The districts conceded nonpayment but sought to offset, against the payments due, damages that they claimed to have sustained when the dairy had stopped delivering milk to them. They argued that their contracts with the dairy were requirements contracts, by which they mean not only that they agreed to buy all their requirements of milk from the dairy, which is the usual meaning of the term, e.g., Canteen Corp. v. Former Foods, Inc., 238 Ill.App.3d 167, 179 Ill.Dec. 342, 606 N.E.2d 174, 183 (1992); Zayre Corp. v. S.M. & R. Co., 882 F.2d 1145, 1154-55 (7th Cir.1989) (applying Illinois law); Orchard Group, Inc. v. Konica Medical Corp., 135 F.3d 421, 429-30 (6th Cir.1998); Mid-South Packers, Inc. v. Shoney's, Inc., 761 F.2d 1117, 1120-21 (5th Cir.1985) (per curiam), but also that, in exchange for this commitment, the dairy agreed to supply all those requirements. The bankruptcy judge agreed with the school districts and granted summary judgment for them, and the district judges affirmed. The trustee appeals, arguing that these were not requirements contracts and therefore that the dairy was under no obligation to continue supplying milk to the districts. If this is right, there was no breach of contract by the dairy, and the school districts are not entitled to claim damages as an offset to their own breach. The issue is governed by the common law of Illinois.

Page 1108

The contracts do not expressly obligate the dairy to supply the districts with their requirements for milk. But such an obligation can be implicit as well as express, Essco Geometric v. Harvard Industries, 46 F.3d 718, 728-29 (8th Cir.1995); O.N. Jonas Co. v. Badische Corp., 706 F.2d 1161, 1164-65 (11th Cir.1983) (per curiam); R.L. Kimsey Cotton Co. v. Ferguson, 233 Ga. 962, 214 S.E.2d 360, 362-63 (1975), and the inference would be compelling if the...

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