651 F.3d 678 (7th Cir. 2011), 10-3762, Schreiber Foods, Inc. v. Lei Wang

Docket Nº:10-3762.
Citation:651 F.3d 678
Opinion Judge:POSNER, Circuit Judge.
Party Name:SCHREIBER FOODS, INC., Plaintiff-Appellant, v. LEI WANG, Defendant-Appellee.
Attorney:T. Wickham Schmidt (argued), Liebmann, Conway, Olejniczak & Jerry, S.C., Green Bay, WI, for Plaintiff-Appellant. Joseph M. Nicks (argued), Godfrey & Kahn, Green Bay, WI, for Defendant-Appellee.
Judge Panel:Before POSNER, KANNE, and HAMILTON, Circuit Judges.
Case Date:July 05, 2011
Court:United States Courts of Appeals, Court of Appeals for the Seventh Circuit

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651 F.3d 678 (7th Cir. 2011)

SCHREIBER FOODS, INC., Plaintiff-Appellant,


LEI WANG, Defendant-Appellee.

No. 10-3762.

United States Court of Appeals, Seventh Circuit.

July 5, 2011

Argued June 8, 2011.

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T. Wickham Schmidt (argued), Liebmann, Conway, Olejniczak & Jerry, S.C., Green Bay, WI, for Plaintiff-Appellant.

Joseph M. Nicks (argued), Godfrey & Kahn, Green Bay, WI, for Defendant-Appellee.

Before POSNER, KANNE, and HAMILTON, Circuit Judges.

POSNER, Circuit Judge.

In a diversity suit that presents issues of Wisconsin common law, Schreiber Foods charges Lei Wang with fraud. The district court granted summary judgment in favor of the defendant on the ground that the suit was barred by Wisconsin's version of the economic-loss doctrine of tort law.

Lei Wang is an American citizen of Chinese descent who owns an automotive-parts supply business in Chicago. A cousin of hers who lives in China, Cade Wang, runs a pair of trading companies, one of which is named Mature Sky. (Originally a defendant along with Lei Wang, Mature Sky was never served, and the district judge dismissed it from the case, without prejudice.) To simplify the opinion we'll pretend that the two trading companies are actually one, and call it Mature Sky.

Mature Sky did business with a large Chinese manufacturer of dairy products called Inner Mongolia Yili Industrial Group (" Yili" ). Cade Wang asked his cousin to help him find a supplier in the United States of dairy product ingredients. Lei Wang went to China and met with executives of Yili to get a better idea of what Yili wanted. Returning to the United States she approached Schreiber, a leading supplier of dairy products and dairy product ingredients, and told Juliet Prescod, the Schreiber Global Sales Associate with whom she dealt, that although she really didn't know anything about the dairy business, Yili was interested in buying ingredients for dairy products in the United States through Mature Sky. She didn't claim to be an agent of Yili, however. Prescod asked Lei Wang to supply her with credit information about Yili. Lei Wang forwarded the request to her cousin, who faxed what appeared to be (and for all we know was) an authentic signed copy of Yili's credit statement.

Shortly afterward Mature Sky ordered a batch of a whey protein concentrate from Schreiber at an agreed price of $42,240. The transaction was a success, though because of delay in transferring money from China Lei Wang paid Schreiber with a check issued by her automotive-parts company; she was reimbursed by Mature Sky.

A few months later Lei Wang negotiated with Prescod the sale by Schreiber to Mature Sky of 200 metric tons of " Demineralized Whey Powder 70%" (D70), an ingredient in infant formula. Schreiber set a price of $603,000. Lei Wang told Prescod that although the price was stiff, Yili was willing to pay it; the unmistakable implication— given the prior course of dealing— was that Mature Sky would be buying the D70 on behalf of Yili. Schreiber claims that this was a misrepresentation; that Yili was

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not committed to buying Schreiber's D70 from Mature Sky.

Although Schreiber had contracted to sell D70 to Mature Sky, it decided to substitute Reduced Minerals Whey Blend (RMW-2) without telling Yili, Mature Sky, or either Wang about the substitution. It claims that RMW-2 is materially identical to D70— yet a previous shipment by Schreiber of RMW-2, to another Chinese company, a deal also handled by Prescod, had failed to clear customs in China; the customs officials had declared that it didn't satisfy the Chinese hygienic standard for whey powder. Schreiber didn't reveal this contretemps to Yili or the others. It did send a sample of RMW-2 to Mature Sky (of course without revealing that it wasn't D70) before the sale of the 200 metric tons was consummated, and Mature Sky accepted it. But the sample had been hand-blended in a laboratory to make it look and taste just like D70, rather than being taken from an RMW-2 production line.

We are disappointed that a company of Schreiber's standing (it has $3 billion in annual revenues) would do what it did: substitute for the product specified in its contract with Mature Sky, without disclosure, an ingredient in infant formula that it knew had previously been refused entry into China on hygienic grounds. In any event the 200 metric tons were shipped, and apparently they made it through Chinese customs. But Yili refused to accept the product, on the ground that " the protein was lower, fat was higher, and ... the flavor is different" from what it had expected. Schreiber was never paid, and refused to accept the return of the product, for which apparently there was no market because it was perishable and had deteriorated.


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