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Sanchelima International, Inc. v. Walker Stainless Equipment Co., LLC.

United States Court of Appeals, Seventh Circuit

April 10, 2019

Sanchelima International, Inc., et al., Plaintiffs-Appellees,
v.
Walker Stainless Equipment Co., LLC, et al., Defendants-Appellants.

          Argued December 4, 2018

          Appeal from the United States District Court for the Western District of Wisconsin. No. 16-cv-644-jdp - James D. Peterson, Chief Judge.

          Before Bauer, Kanne, and Brennan, Circuit Judges.

          BRENNAN, CIRCUIT JUDGE

         Decades ago, the Wisconsin Supreme Court interpreted two limited remedy provisions of the Uniform Commercial Code in Murray v. Holiday Rambler, Inc., 265 N.W.2d 513 (Wis. 1978). Wisconsin courts, and this court, have faithfully applied Murray since. But several other states have interpreted the same UCC provisions differently. On this basis alone, appellants ask us to overturn Murray, or at the least to certify the question to the Wisconsin Supreme Court. We cannot overturn established state precedent simply because it may be out of step with modern trends. A Japanese proverb may teach that "the nail that sticks out gets ham- mered down." But federal courts wield no such hammer when it comes to issues of state law. Murray remains the binding interpretation under Wisconsin law until and unless the Wisconsin Supreme Court decides to overturn it.

         I.

         This case comes to us in diversity. The defendants, Walker Stainless Equipment Co., LLC and its affiliates, manufacture dairy silos. The plaintiffs, Sanchelima International, Inc. and its affiliate, sell dairy silos in Latin America.[1] In 2013, after decades of doing business together, the parties entered into a distribution agreement providing that Sanchelima would serve as Walker's exclusive distributor of dairy silos in thirteen Latin American countries. Walker agreed not to sell silos directly to third parties in those thirteen countries.

         The contract contained a limited remedies provision and a damages disclaimer. Section X(F) of the distribution agreement reads:

Manufacturer Liability Limitations. To the ex- tent a … claim … arises out of any purchase order … or otherwise aris[es] out of this agreement, [Walker's] aggregate total liability for any and all such claims shall be capped at, and [Walker] shall have no liability to Sanchelima … in excess of, the amount(s) paid by [Sanchelima] to [Walker] under such purchase order, subject to section X(G). Except for the foregoing liabilities, [Walker] … shall have no liability to [Sanchelima] for any claim … arising out of or in connection with this agreement, the products, [Walker] trademarks, documentation, or any business activity of [Sanchelima].
Section X(G) of the distribution agreement reads:
Liability Exclusions. No [Walker-affiliated company] shall be liable to any [Sanchelima-affiliated company] for any special, indirect, inci- dental or consequential losses or damages including, without limitation, any lost profits or punitive damages, arising out of or in connection with this agreement, the products, documentation, [Walker] trademarks or any business activity of [Sanchelima].

(emphasis added). We refer to sections X(F) and X(G) collectively as the limited remedies provision. The contract's choice of law provision selected Wisconsin law.

         After the agreement was signed, Sanchelima started to market Walker products in Mexico. Sanchelima hired sales representatives for its Mexico office and attended Mexican trade shows. Walker assigned a representative to work with Sanchelima in Mexico, but otherwise took no affirmative steps to market its products in the thirteen countries covered by the distribution agreement.

         Walker's lack of marketing did not prevent it from making significant direct sales in Latin America, cutting out Sanchelima as the distribution middle man. In 2014, Walker sold over $600, 000 worth of dairy silos, for distribution to a factory in Monterrey, Mexico. A few days later, Walker sold a silo to a Nicaraguan company for over $66, 000. In 2015, Walker sold silos to a Nestlé plant in Mexico for ...


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