Tortious Interference – Breach of Contract

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7^th Circuit Court of Appeals

Case Name: John Heiman, et al. v. Bimbo Food Bakeries Distribution Co.,

Case No.: 17-3366

Officials: WOOD, Chief Judge, and FLAUM and EASTERBROOK, Circuit Judges.

Focus: Tortious Interference – Breach of Contract

From 2000 to 2011, John Heiman, first individually and later through his company, JTE, Inc., distributed products for Bimbo Foods Bakeries Distribution Company throughout suburban Chicago. Bimbo Foods (pronounced “Beembo”) sells baked goods under a number of familiar brand names, such as Brownberry. The distribution agreement between JTE and Bimbo Foods had no fixed duration, but it could be terminated in the event of a non-curable or untimely cured breach by one of the parties. The agreement specified that New York law would govern all claims and disputes. Although the partnership between Bimbo and JTE proceeded swimmingly for a number of years, it met a calamitous end.

According to JTE’s complaint, which we must accept as true for purposes of this appeal, Bimbo Foods began fabricating curable breaches in the spring of 2008 as part of a scheme to force JTE out as its distributor. Bimbo Foods employees filed false reports of poor customer service and out-of-stock products at stores in JTE’s distribution area. Even more egregiously, Bimbo employees would sometimes remove JTE delivered products from grocery store shelves, photograph the empty shelves as “proof” of a breach, and then return the products to their initial location. On one occasion, in 2008, a distributor caught a Bimbo Foods manager in the act of fabricating a photograph and reported him. Bimbo assured JTE that this misconduct would never happen again. Nevertheless, unbeknownst to JTE, Bimbo Foods continued these scurrilous tactics. Its goal was to force JTE to forfeit its distribution rights so that Bimbo Foods could install a new distributor that would take a smaller slice of the proceeds: 18 percent as compared to JTE’s 22 percent. When JTE refused to sell its distribution rights in January 2011, Bimbo Foods breached the distribution agreement and unilaterally terminated JTE’s agreement, citing the fabricated breaches as cause. Several months later, in September and October 2011, Bimbo Foods forced JTE to sell its rights to new distributors.

Despite the long run-up to its loss of the contract, JTE tells us that it did not learn about Bimbo Foods’s scheme to fabricate breaches until late 2013 or early 2014. When Heiman and JTE finally did sue Bimbo Foods in the Northern District of Illinois on May 30, 2017, they alleged two claims: breach of contract and tortious interference. The district court never reached the substance of those claims, however, because Heiman and JTE ran into two procedural problems. First, in a decision that Heiman does not contest on appeal, the district court ruled that Heiman could not sue Bimbo Foods individually because he was not party to the distribution agreement and thus was not a “real party in interest,” as required by Federal Rule of Civil Procedure 17. Only JTE, the court said, could advance breach-of-contract and tortious-interference claims based on the distribution agreement. We refer from this point onward only to JTE, in keeping with this ruling. Second, the district court found that both claims were stale under the applicable statutes of limitations and consequently dismissed JTE’s suit under Federal Rule of Civil Procedure 12(b)(6). On appeal, JTE contends that the district court applied the wrong statute of limitations for the breach-of-contract claim and failed to give it the benefit of the discovery rule for the tortious-interference claim.

Affirmed

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Attorney Derek A. Hawkins is the managing partner at Hawkins Law Offices LLC, where he heads up the firm’s startup law practice. He specializes in business formation, corporate governance, intellectual property protection, private equity and venture capital funding and mergers & acquisitions. Check out the website at www.hawkins-lawoffices.com or contact them at 262-737-8825.