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Oxxford Clothes XX, Inc. v. Expeditors International of Washington

September 30, 1997




Appeal from the United States District Court for the Northern District of Illinois, Eastern Division.

No. 94 C 7734 Ronald A. Guzman, Magistrate Judge.

Before Posner, Chief Judge, and Manion and Kanne, Circuit Judges.

Posner, Chief Judge.

Argued September 3, 1997

Decided September 30, 1997

This diversity suit, brought (and dismissed) in federal district court, has a curious history. It begins with Oxxford Clothes, Inc., a manufacturer of expensive suits for men. The suits are made out of imported fabrics. For many years Oxxford had used Expeditors International of Washington, Inc. to clear these imports through customs pursuant to a contract in which Oxxford granted Expeditors a lien in the fabrics when they were in Expeditors' possession, so that Expeditors (which is the defendant in this suit) could be assured of collecting its charges for the customs-clearing service.

Oxxford's principal creditor was Heller Financial, Inc. On December 3, 1994, Heller made a contract with Oxxford in which it was agreed that Heller would foreclose its liens and transfer the assets of Oxxford obtained by the foreclosure to Tom James Company, a large clothing manufacturer, which in turn would transfer the assets to a newly created subsidiary of that company. After a name change, the subsidiary is now known as "Oxxford Clothes XX, Inc."; we'll call it "XX" to distinguish it from its predecessor. On December 9, XX notified Expeditors that it had bought Oxxford's assets. At the time, Oxxford owed Expeditors $97,000, representing the unpaid balance of charges for customs-clearing services. On December 12, XX notified Expeditors that there were no assets out of which to satisfy its predecessor's debt to Expeditors.

Expeditors was, no doubt, miffed. With reckless audacity XX then put its head in the lion's mouth by asking Expeditors to clear customs for it, even though its predecessor had repudiated the $97,000 debt. XX's lawyer explained at argument that it wanted to give Expeditors a chance to recoup some of the losses that Expeditors had incurred as a result of the repudiation!

As soon as a significant quantity of imported fabrics came into Expeditors' possession, which happened between December 14 and December 18, Expeditors told XX that it would not deliver them until XX paid it $97,000. Expeditors claimed to have possessory liens in the fabrics arising out of Oxxford's debt for that amount. XX was indignant. It believed it owed nothing to Expeditors other than the modest charges for Expeditors' services in clearing customs for the newly imported fabrics (the fabrics owned by XX rather than by its predecessor), because XX had not assumed Oxxford's debts. It brought this suit to obtain the release of the fabrics. It asked the court for a temporary restraining order (and later a preliminary injunction), which was denied after a brief hearing in which Expeditors' lawyer claimed without amplification that his client did have valid liens in the new shipments.

By now it was December 30. XX claims, and for purposes of this appeal we accept the claim (although skeptical), that without the shipments of fabrics that Expeditors had impounded XX would be unable to supply suits to its major retailer customers and as a result its business would be destroyed. It therefore knuckled under to what it regarded as Expeditors' extortionate demand and on January 3, 1995, negotiated a consent decree whereby Expeditors agreed to release the fabrics and transfer its so-called liens to XX in exchange for $75,000, which XX quickly paid.

Three weeks later, XX, pursuant to an amended complaint that it filed with leave of court, asked the district court to order Expeditors to return the $75,000. The ground was that Expeditors had failed to deliver the liens as promised because it had no liens. Expeditors was happy to give up its "liens"; the alleged fraud is that it had no liens. Expeditors denied fraud and asked the court to enforce the provision of the consent agreement in which XX had agreed, upon performance of the other terms of the agreement, to dismiss its suit. The court sided with Expeditors and ordered the suit dismissed with prejudice, precipitating this appeal.

XX's original suit was a suit to replevy the fabrics. The claim was that Expeditors lacked a legal justification for refusing to release XX's property to it. The claim became moot when, pursuant to the consent agreement, Expeditors released the fabrics to XX. The amended complaint touched off in effect a new suit, one claiming that Expeditors had obtained the $75,000 settlement from XX by fraud and duress. One count of the amended complaint seeks $75,000 in compensatory damages for the fraud and $5 million in punitive damages. The other seeks to rescind the consent agreement on grounds of fraud, duress, and absence of consideration.

XX doesn't really want rescission. That would imply putting the parties back where they were when the consent agreement was signed--which would require XX to return the fabrics to Expeditors. What XX must have meant to do in the second count was seek to rescind its purchase of the liens on the ground that, the liens having been worth exactly nothing, the contract of sale is unenforceable for want of consideration. So, giving XX the benefit of the doubt, we have three theories of liability to consider: fraud, duress, and rescission.

A fourth candidate, but one that XX does not nominate, is mistake of law. Lawyers Title Ins. Corp. v. Dearborn Title Corp., 118 F.3d 1157, 1163-65 (7th Cir. 1997). XX paid $75,000 to Expeditors in the mistaken belief that the latter had a lien; it was a mistake of law because all the facts were known. XX was right not to advance such a theory, because where the mistake is the court's, the remedy is to appeal, not to mount a collateral attack on the judgment founded on the mistake. A motion under Fed. R. Civ. P. 60(b) asking the district court to set aside its judgment will not be allowed to do service for an appeal. Parke-Chapley Construction Co. v. Cherrington, 865 F.2d 907, 915 (7th Cir. 1989); McKnight v. United States Steel Corp., 726 F.2d 333, 337 (7th Cir. 1984); Bank of California, N.A. v. Arthur Andersen & Co., 709 F.2d 1174, 1177-78 (7th Cir. 1983) (on pet. for reh.). It is even clearer that an independent suit is not a proper substitute for an appeal. Any mistake of law that is the premise of a preliminary injunction can be corrected by ...

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