Chicago Florsheim Shoe Store Co. v. Cluett, Peabody & Co., Inc., 86-2798

• Citation: 826 F.2d 725
• Decision Date: 18 August 1987
• Docket Number: No. 86-2798,86-2798
• Parties: , 8 Fed.R.Serv.3d 1001 The CHICAGO FLORSHEIM SHOE STORE COMPANY, Plaintiff-Appellant, v. CLUETT, PEABODY & CO., INC., Defendant-Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (7th Circuit)

Page 725

826 F.2d 725

56 USLW 2175, 8 Fed.R.Serv.3d 1001

The CHICAGO FLORSHEIM SHOE STORE COMPANY, Plaintiff-Appellant, v. CLUETT, PEABODY & CO., INC., Defendant-Appellee.

No. 86-2798.

United States Court of Appeals Seventh Circuit.

Argued April 10, 1987.

Decided Aug. 18, 1987.

As Amended Aug. 18, 1987.

James K. Pendleton, St. Louis, Mo., for plaintiff-appellant.

Jack Hassid, Cluett Peabody & Co., New York City, for defendant-appellee.

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

BAUER, Chief Judge.

Florsheim Shoe Company brings this appeal contending that Cluett, Peabody & Co., Inc. is liable for losses resulting from Lytton's Corporation's breach of a long standing concession agreement with Florsheim. Since 1958, Florsheim and Lytton's participated in a concession agreement whereby Florsheim sold its shoes at Lytton's retail stores. The agreement required that Lytton's remit the sales proceeds generated by Florsheim's shoes less its low cut. Apparently the joint venture worked well, as the parties extended the agreement several times with only minor alterations, continuously through March 31, 1984. Beginning in 1961, Cluett began to purchase Lytton's outstanding stock and later acquired Lytton's in its entirety by January, 1975. The concession arrangement continued apace after Cluett acquired Lytton's. On February 3, 1983, however, Cluett slipped out of the shoe business ¹ and sold Lytton's to LHLC Corporation pursuant to a leverage buy out agreement ("l.b.o.") involving General Electric Credit Corporation.

Essentially, the l.b.o. was accomplished by pledging Lytton's assets as security for an $11.4 million loan from General Electric. That money was then paid to Cluett as consideration for the sale of Lytton's to LHLC. Florsheim was made aware of the l.b.o. almost contemporaneously with the transaction through local and national press coverage. However, Florsheim continued to transact business with Lytton's pursuant to the existing concession agreement without ever securing Lytton's promise of continued performance by seeking assurances available under the U.C.C. See U.C.C. Sec. 2-609 (1977).

Subsequently, Lytton's breached the concession agreement by failing to remit payment to Florsheim for sales made during March, 1984. On March 30, 1984, Lytton's filed a voluntary petition for reorganization under Chapter XI of the United States Bankruptcy Code. Florsheim has filed a claim in the bankruptcy proceedings and is also a member of Lytton's creditors committee which is pursuing issues relevant to a fraudulent conveyance claim regarding Cluett's l.b.o. transaction.

Florsheim commenced this action on August 7, 1984. Its complaint alleged that Lytton's was a mere instrumentality or the alter ego of Cluett at the time of the l.b.o. transaction and thereby charged Cluett with responsibility for breach of the concession agreement. Judge Mills subsequently granted Cluett's motion for summary judgment pursuant to FED.R.CIV.P. 56(c), which Florsheim now appeals.

The Discovery Proceedings

Florsheim contests the disposition of its claim on a motion for summary judgment, alleging that it was not afforded adequate discovery to oppose the motion. Three months after filing suit, in November, 1984, Florsheim initiated its discovery proceedings by requesting the production of certain documents to which Cluett responded on January 22, 1985. Although Florsheim contends that Cluett refused to produce such documentation, Florsheim's own appellate brief and appendix indicate that as early as March 16, 1983, its credit department received an accountant's report detailing Lytton's capital structure at the time of the l.b.o. Moreover, despite the fact that in response to Cluett's subsequent interrogatories, Florsheim had identified at least four individuals having knowledge of the facts underlying its alter ego theory, it failed to schedule or take any depositions and did not serve any interrogatories upon Cluett or Lytton's throughout the course of this entire litigation.

However, Florsheim explains that it was unable to engage in adequate discovery because of the constant harassment engendered by Cluett's consecutive motions for summary judgment. The short answer to Florsheim's self-professed dilemma is contained in FED.R.CIV.P. 56(f), which provides that:

When Affidavits are Unavailable. Should it appear from the affidavits of a party opposing the motion that he cannot for reasons stated present by affidavit facts essential to justify his opposition, the court may refuse the application for judgment or may order a continuance to permit affidavits to be obtained or depositions to be taken or discovery to be had or may make such order as is just.

While Florsheim requested the production of documents establishing Lytton's capitalization at the time of the l.b.o. and otherwise opposed Cluett's motion by arguing the merits of its piercing claim, it failed to submit a Rule 56(f) affidavit in order to secure the additional discovery it now claims was vital to its case. See Federal Deposit Insurance Corp. v. Meyer, 781 F.2d 1260, 1268 (7th Cir.1986) (party opposing motion for summary judgment must file a Rule 56(f) affidavit if without knowledge to respond to the motion). Hence, because Florsheim failed to move for a continuance to obtain discovery under Rule 56(f), we cannot conclude that the district court abused its discretion in proceeding to rule on Cluett's motion for summary judgment. See Vachet v. Central Newspaper, Inc., 816 F.2d 313, 317 (7th Cir.1987) (where nonmoving party fails to request a continuance pursuant to Rule 56(f) it is not error for a district court to rule on motion for summary judgment).

Moreover, despite Florsheim's assertions to the contrary, it does not appear that it was prevented from pursuing adequate discovery. Unlike Egger v. Phillips, 669 F.2d 497 (7th Cir.1982), cited by Florsheim, the district court never stayed the discovery proceedings here. Thus, during the five months prior to Cluett's initial motion for summary judgment Florsheim was free to conduct discovery. Florsheim also had sufficient time to pursue discovery during the twenty-one months which passed after the denial of Cluett's first motion and the trial court's final disposition of the case on October 1, 1986. As early as November 13, 1984, Florsheim acknowledged the identities of several individuals with specific information relating to its claim, yet Florsheim failed to depose a single person in support of its opposition to Cluett's motion.

Finally, Florsheim contends that Cluett's refusal to produce documents establishing Lytton's capitalization at the time of the l.b.o. in February, 1983, prevented its response to Cluett's motion for summary judgment. Florsheim cites our opinion in Cedillo v. Int'l Assn. of Bridge & Structural Iron Workers, Local Union No. 1, 603 F.2d 7 (7th Cir.1979), where this court reversed the granting of a motion for summary judgment because we found that the nonmoving party was effectively denied the statistical data needed to establish a claim of disparate impact. However, despite Florsheim's repeated requests to...