Thursday, September 6, 2018
Here at the beginning of the semester, I've just been going over determining whether the UCC or common law applies to contract claims, and here's a recent case out of the Seventh Circuit, Heiman v. Bimbo Foods Bakeries Distribution Co., No. 17-3366, that illustrates why that question can be important.
The case involves some pretty eyebrow-raising allegations, as, according to the complaint, the defendant began "fabricating" breaches of the contract between the parties, so that it could terminate the contract based on these allegedly faked breaches. Pretty dramatic stuff, but the case falls apart on a statute of limitations issue. The UCC statute of limitations is four years; the relevant common law statute of limitations was ten years. All parties agreed that the cause of action accrued in 2011, so the statute of limitations would have already run if the UCC applied; not so if the common law statute of limitations was applied.
The court looked at the primary purpose of the agreement. The agreement at issue was a distribution agreement, and the court noted that jurisdictions overwhelmingly interpret distributorship agreements to be about the sale of goods. While the agreement certainly also covered "a significant amount of services," those serves were all "incidental to the larger purpose of the contract, which [was] to sell goods to consumers." Therefore, the contract was governed by the UCC and barred as untimely.
There was also a tortious interference claim that likewise failed because the complaint admitted that the plaintiff was aware of the possibility of its tortious interference claim in 2011, and so therefore this claim was also untimely under the relevant statute of limitations. The court also added that a party cannot tortiously interfere with its own contract, so the claim failed on the merits as well.