Monetti, S.P.A. v. Anchor Hocking Corp., 90-2570

• Decision Date: 01 May 1991
• Docket Number: No. 90-2570,90-2570
• Citation: 931 F.2d 1178
• Parties: 14 UCC Rep.Serv.2d 706 MONETTI, S.P.A., and Melform U.S.A., Inc., Plaintiffs-Appellants, v. ANCHOR HOCKING CORPORATION, Defendant-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 1178

931 F.2d 1178

14 UCC Rep.Serv.2d 706

MONETTI, S.P.A., and Melform U.S.A., Inc., Plaintiffs-Appellants, v. ANCHOR HOCKING CORPORATION, Defendant-Appellee.

No. 90-2570.

United States Court of Appeals Seventh Circuit.

Argued Feb. 14, 1991.

Decided May 1, 1991.

Jonathan G. Bunge, Stephen L. Agin, Kevin Tottis, Jill E. Evans, Keck, Mahin & Cate, Chicago, Ill., for plaintiffs-appellants.

John A. Relias, Jeannine M. Pisoni, Jennifer A. Murphy, Vedder, Price, Kaufman & Kammholz, Chicago, Ill., for defendant-appellee.

Before WOOD, Jr. and POSNER, Circuit Judges, and FAIRCHILD, Senior Circuit Judge.

POSNER, Circuit Judge.

This is a diversity suit for breach of contract; the parties agree that Illinois law governs the substantive issues. The district judge dismissed the suit, on the defendant's motion for summary judgment, as barred by the statute of frauds, and also refused to allow the plaintiffs to amend their complaint to add a claim of promissory estoppel. The appeal, which challenges both rulings, presents difficult and important questions concerning both the general Illinois statute of frauds, Ill.Rev.Stat. ch. 59, p 1, and the statute of frauds in the Uniform Commercial Code, UCC Sec. 2-201, adopted by Illinois in Ill.Rev.Stat. ch. 26, p 2-201.

The plaintiffs are Monetti, an Italian firm that makes decorative plastic trays and related products for the food service industry, and a wholly owned subsidiary, Melform U.S.A., which Monetti set up in 1981 to market its products in the U.S. In 1984, Monetti began negotiations with a father-and-son team, the Schneiders, importers of food service products, to grant the Schneiders the exclusive right to distribute Monetti's products in the United States and in connection with this grant to turn over to them Melform's tangible and intangible assets. While these negotiations were proceeding, the Schneiders sold their importing firm to Anchor Hocking, the defendant, and their firm became a division of Anchor Hocking, though--at first--the Schneiders remained in charge. In the fall of 1984, the younger Schneider, who was handling the negotiations with Monetti for his father and himself, sent Monetti a telex requesting preparation of an agreement "formalizing our [i.e., Anchor Hocking's] exclusive for the United States." In response, Monetti terminated all of Melform's distributors and informed all of Melform's customers that Anchor would become the exclusive U.S. distributor of Monetti products on December 31, 1984.

On December 18, the parties met, apparently for the purpose of making a final agreement. Monetti--which incidentally was not represented by counsel at the meeting--submitted a draft the principal provisions of which were that Anchor Hocking would be the exclusive distributor of Monetti products in the U.S., the contract would last for ten years, and during each of these years Anchor Hocking would make specified minimum purchases of Monetti products, adding up to $27 million over the entire period. No one from Anchor Hocking signed this or any other draft of the agreement. However, the record contains a memo, apparently prepared for use at the December 18 meeting, entitled "Topics of Discussion With Monetti." The memo's first heading is "Exclusive Agreement--Attachment # 1"--a reference to an attached draft which is identical to the Monetti draft except for two additional, minor paragraphs added in handwriting. Under the heading appears the notation "Agree" beside each of the principal paragraphs of the agreement, with one exception: beside the first paragraph, the provision for exclusivity, the notation is "We want Canada" (i.e., exclusive distribution rights in Canada as well as in the U.S.). On the bottom of the left-hand side of the last page appears the legend "SS/mh"--indicating that the younger Schneider (Steve Schneider) had dictated the memo to a secretary.

Shortly after the December 18 meeting, Monetti--which had already, remember, terminated Melform's distributors and informed Melform's customers that Anchor Hocking would be the exclusive distributor of Monetti products in the United States as of the last day of 1984--turned over to Anchor Hocking all of Melform's inventory, records, and other physical assets, together with Melform's trade secrets and know-how.

Several months later, in May 1985, Anchor Hocking abruptly fired the Schneiders. Concerned about the possible implications of this demarche for its relationship with Anchor Hocking, Monetti requested a meeting between the parties, and it was held on May 19. Reviewing the events up to and including that meeting, a memo dated June 12, 1985, from Raymond Davis, marketing director of Anchor Hocking's food services division, to the law department of Anchor Hocking, states that "In the middle to latter part of 1984 Irwin Schneider and his company were negotiating an agreement with [Monetti and Melform] to obtain exclusive distribution rights on Melform's plastic tray product line in the United States"; "later, this distribution agreement was expanded to also include Canada, the Caribbean and Central and South America"; there had been many meetings between the parties, including the meeting of May 19 (at which Davis had been present); "Exhibit A (attached) represents the summary agreement that was reached in the meeting. You will notice that I have added some handwritten changes which I believe represents more clearly our current position regarding the agreement.... Now that we have had our 'New Management' [i.e., the management team that had replaced the Schneiders] meeting with Monetti, both parties would like to have a written and signed agreement to guide this new relationship." Exhibit A to the Davis memo is identical to Attachment # 1 to Steve Schneider's memo, except that it contains the handwritten changes to which the Davis memo refers. Shortly after this memo was written, the parties' relationship began to deteriorate, and eventually Monetti sued for breach of contract.

Illinois' general statute of frauds forbids a suit upon an agreement that is not to be performed within a year "unless the promise or agreement upon which such action shall be brought, or some memorandum or note thereof, shall be in writing, and signed by the party to be charged therewith, or some other person thereunto by him lawfully authorized." The statute of frauds in Article 2 of the Uniform Commercial Code makes a contract for the sale of goods worth at least $500 unenforceable "unless there is some writing sufficient to indicate that a contract for sale has been made between the parties and signed by the party against whom enforcement is sought or by his authorized agent or broker." The differences between these formulations are subtle but important. The Illinois statute requires that the writing "express the substance of the contract with reasonable certainty." Frazer v. Howe, 106 Ill. 564, 574 (1883); see also Holsz v. Stephen, 362 Ill. 527, 532, 200 N.E. 601, 603 (1936); Mariani v. School Directors, 154 Ill.App.3d 404, 407, 107 Ill.Dec. 90, 92, 506 N.E.2d 981, 983 (1987). The UCC statute of frauds does not require that the writing contain the terms of the contract. Ill.Code Comment 1 to UCC Sec. 2-201. In fact it requires no more than written corroboration of the alleged oral contract. Even if there is no such signed document, the contract may still be valid "with respect to goods ... which have been received and accepted." Sec. 2-201(3)(c). This provision may appear to narrow the statute of frauds still further, but if anything it curtails a traditional exception, and one applicable to Illinois' general statute: the exception for partial performance, on which see, for example, Payne v. Mill Race Inn, 152 Ill.App.3d 269, 277-78, 105 Ill.Dec. 324, 330-331, 504 N.E.2d 193, 199-200 (1987); Grundy County National Bank v. Westfall, 13 Ill.App.3d 839, 845, 301 N.E.2d 28, 32 (1973). The Uniform Commercial Code does not treat partial delivery by the party seeking to enforce an oral contract as a partial performance of the entire contract, allowing him to enforce the contract with respect to the undelivered goods.

Let us postpone the question of partial performance for a moment and focus on whether there was a signed document of the sort that the statutes of frauds require. The judge, over Monetti's objection, refused to admit oral evidence on this question. He was right to refuse. The use of oral evidence to get round the requirement of a writing would be bootstrapping, would sap the statute of frauds of most of its force, and is therefore forbidden. Western Metals Co. v. Hartman Co., 303 Ill. 479, 485, 135 N.E. 744, 746 (1922); R.S. Bennett & Co. v. Economy Mechanical Industries, Inc., 606 F.2d 182, 186 n. 4 (7th Cir.1979); Bazak International Corp. v. Mast Industries, Inc., 73 N.Y.2d 113, 117-18, 538 N.Y.S.2d 503, 505, 535 N.E.2d 633, 635 (1989). The Hip Pocket, Inc. v. Levi Strauss & Co., 144 Ga.App. 792, 793, 242 S.E.2d 305, 306 (1978), is contra, but does not discuss the question and is, we think, wrong; while Impossible Electronic Techniques, Inc. v. Wackenhut Protective Systems, Inc., 669 F.2d 1026, 1034 (5th Cir.1982), on which Monetti also relies, is distinguishable from our case because there the writing was first held to satisfy the statute of frauds and only then was oral evidence admitted to clear up a detail, albeit a vital one--the identity of one of the parties!

Although we have cited cases from different jurisdictions, the question whether oral evidence is admissible to show that an ambiguous document satisfies the requirements of the statute of frauds is ultimately one of state law. So far as we have been able to discover, the question is uniformly assumed to be substantive rather than procedural for purposes of determining, in accordance with the Erie doctrine, whether state or federal law applies, though direct authority on the question is sparse. Lehman v. Dow, Jones & Co., ...