05-1488 In the Matter of: Kmart Corp.Appeal from the United States District Court for the Northern

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“When opposing assumption in the bankruptcy court, Capital One argued that Kmart is in default because it is no longer a ‘mass merchandise retailer.’ A series of ‘whereas’ clauses precedes the contract’s main text. One paragraph reads: ‘WHEREAS, Kmart owns and operates a chain of discount retail stores and is a mass merchandise retailer’. (The next clause reads: ‘WHEREAS, Capital One is engaged in the business of issuing, managing and servicing VISA and MasterCard branded credit card accounts’.) When the contract was signed in May 2000, Kmart had about 2,200 stores; by February 2003 it was down to 1,514, and Capital One thinks that this meant that it was no longer the sort of ‘mass’ retailer that would make a good partner even though it was still one of the ten largest retail chains in the nation.

“Such ‘WHEREAS’ language divorced from the contract’s substantive clauses implies that this document was drafted by someone who used a form book printed on parchment before the Linotype machine was invented. It does not, however, show that Kmart’s scale is a promise, as opposed to a description. It would have been easy to state in one of the contract’s substantive clauses that failure to operate at least 2,000 outlets entitled Capital One to walk away. Section 10.2 of the contract contains a long list of representations and warranties that Kmart makes to Capital One; the number of stores that Kmart will operate is not on that list. Nor does the contract otherwise imply that being a ‘mass merchandise retailer’ (whatever that might mean) is a condition that Kmart must satisfy for the contract’s fiveyear duration. The ‘WHEREAS’ clause reads as an identifier — this contract is between Capital One and Kmart the national chain, rather than Kmart the mom-and-pop store in Barrow, Alaska, that has flown beneath the trademark radar. Cf. Atlantic Mutual Insurance Co. v. Metron Engineering & Construction Co., 83 F.3d 897, 899 (7th Cir. 1996); Walker v. Tucker, 70 Ill. 527 (1873).”

Affirmed.

District of Illinois, Pallmeyer, J., Easterbrook, J.