826 F.2d 725 (7th Cir. 1987), 86-2798, Chicago Florsheim Shoe Store Co. v. Cluett, Peabody & Co., Inc.

Docket Nº:86-2798.
Citation:826 F.2d 725
Party Name:The CHICAGO FLORSHEIM SHOE STORE COMPANY, Plaintiff-Appellant, v. CLUETT, PEABODY & CO., INC., Defendant-Appellee.
Case Date:August 18, 1987
Court:United States Courts of Appeals, Court of Appeals for the Seventh Circuit

Page 725

826 F.2d 725 (7th Cir. 1987)



CLUETT, PEABODY & CO., INC., Defendant-Appellee.

No. 86-2798.

United States Court of Appeals, Seventh Circuit

August 18, 1987

Argued April 10, 1987.

As Amended .

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

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

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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

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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,...

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