LEXIS NEXIS Academic FEDERAL PANTS INC HAROLD FOONBERG Plaintiffs Appellants CrossAppellees v DANIEL STOCKING et al Defendants Appellees Cross Appellants Nos 84 1690 84 1745 UNITED STATES COURT OF APPEALS FOR THE SEVENTH CIRCUIT 762 F 2d 561 1985 U S App LEXIS 27419 41 U C C Rep Serv Callaghan 110 January 14 1985 Argued May 22 1985 Decided PRIOR HISTORY 1 Appeal from the United States District Court for the Eastern District of Wisconsin 82 C1494 Terence T Evans Judge DISPOSITION We also affirm the court s decision to award judgment in favor of D S Enterprises on its breach of contract claim and to order Federal Pants to pay 79 531 20 to D S Enterprises COUNSEL Arthur M Moglowsky Bass Goldstein Moglowsky Milwaukee Wisconsin for Plaintiffs Michael A Bowen Foley Lardner Milwaukee Wisconsin for Defendants JUDGES Cummings Chief Judge Bauer and Flaum Circuit Judges OPINIONBY FLAUM OPINION 562 FLAUM Circuit Judge The plaintiffs Federal Pants Inc and Harold Foonberg brought this diversity action against the defendants Daniel Stocking D S Enterprises and others alleging that the defendants breached an agency 563 agreement engaged in unauthorized competition and misused confidential information The defendants counterclaimed against the plaintiffs alleging breach of contract tortious interference with advantageous economic relations and unlawful restraint of trade The district court granted the defendants motion for summary judgment in part thereby dismissing all of the plaintiffs 2 claims awarding the defendants 79 531 20 on their breach of contract claim and dismissing the defendants remaining two claims For the reasons stated below we affirm I The plaintiffs Federal Pants Inc and its sole stockholder Harold Foonberg collectively referred to as Federal Pants and the defendants D S Enterprises and its partners collectively referred to as D S Enterprises were each engaged in the diversion business when the events leading up to this lawsuit transpired This business involves acquiring well known name brand products from a manufacturer and reselling the merchandise to discount stores and other outlets that have not been designated as authorized dealers by the manufacturer D S Enterprises had obtained the right to buy sports shoes and other athletic apparel from the Nike Corporation Federal Pants however was not an authorized Nike dealer and thus could not purchase goods directly from Nike In May 1982 D S Enterprises placed future delivery orders with Nike in the sum of several hundred thousand dollars or more each month for the period from June 1982 through January 1983 When D S Enterprises found in June 1982 that it could not on 3 its own post the security of 1 million required by Nike to guarantee the future delivery orders it negotiated with Federal Pants to combine resources Federal Pants was to post a 1 million letter of credit for the benefit of The Standard Chartered Bank Limited of Chicago The Standard Chartered Bank would then post a back to back 1 million letter of credit for the benefit of Nike On June 23 1982 Jay Foonberg the brother of and attorney for the president of Federal Pants sent D S Enterprises an agreement stating that Federal Pants was to guarantee up to 1 million in D S Enterprises purchases from Nike while D S Enterprises would resell these purchases to Federal Pants or to persons designated by Federal Pants On behalf of D S Enterprises Daniel Stocking and his wife signed the agreement and returned it to Federal Pants For a period of two months D S Enterprises purchased over 1 million in Nike merchandise and resold it to Federal Pants or to another buyer designated by Federal Pants D S Enterprises never drew on Federal Pants letter of credit but rather paid Nike directly for all of its purchases In late August or early September 1982 Nike discovered that D S 4 Enterprises was reselling Nike merchandise to an unauthorized wholesaler and immediately terminated the future delivery orders contract In September D S Enterprises informed Federal Pants of Nike s decision to terminate the orders and proceeded to sue Nike for breach of a dealership agreement under the Wisconsin Fair Dealership Act In November 1982 Nike began settlement negotiations with D S Enterprises Nike offered to make a one time final sale to D S Enterprises of 8 million worth of shoes that Nike had on hand Nike insisted that D S Enterprises would have to secure the sale with a letter of credit or other security in the amount of the sale plus the amount that D S Enterprises still owed to Nike Nike refused to allow D S Enterprises to rely on Federal Pants 1 million letter of credit required D S Enterprises to post a new letter of credit before the settlement sale and insisted that delivery on the sale begin by the end of November 1982 Throughout November D S Enterprises attempted to find immediate buyers for the Nike merchandise in order to raise the necessary financing Federal Pants contacted D S Enterprises and demanded that the Nike merchandise be sold to 5 it D S Enterprises offered to sell 3 2 million worth of merchandise to Federal Pants if it would 564 put up a letter of credit in that amount Federal Pants did not have enough credit to obtain a letter of credit for 3 2 million D S Enterprises proceeded to sell the Nike merchandise to two buyers who committed to post letters of credit in the requisite amounts before the deadline imposed by Nike At the end of November 1982 Federal Pants proceeded to stop payment on a 79 531 20 check that it had sent to D S Enterprises in payment for goods already received Federal Pants also filed this lawsuit against D S Enterprises In its complaint Federal Pants alleged four causes of action 1 D S Enterprises breach of an agency agreement with Federal Pants under which D S Enterprises was to act as Federal Pants purchasing agent in obtaining Nike goods 2 D S Enterprises breach of an exclusive agency agreement under which D S Enterprises agreed to obtain Nike goods exclusively for Federal Pants 3 D S Enterprises unauthorized use of confidential information and unauthorized competition and 4 D S Enterprises breach of its contract with Federal Pants In its counterclaim 6 to plaintiffs suit D S Enterprises alleged 1 Federal Pants breach of its sales contract with D S Enterprises by stopping payment on the 79 531 20 check that it had issued to D S Enterprises 2 Federal Pants tortious interference with advantageous economic relations between D S Enterprises and its bank
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