VLM FOOD TRADING INTERNATIONAL, INC., Plaintiff-Appellee/Cross-Appellant,
ILLINOIS TRADING COMPANY, THE OBEE FAMILY PARTNERSHIP, and LAWRENCE N. OBERMAN, Defendants-Appellants/Cross-Appellees, and TRANSPORTATION ALLIANCE BANK, INC., d/b/a TAB BANK, Defendant/Cross-Appellee
Argued, November 7, 2013
Appeals from the United States District Court for the Northern District of Illinois, Eastern Division. No. 12 C 8154 -- Harry D. Leinenweber, Judge.
For Vlm Food Trading International, Inc., Plaintiff - Appellee (13-1799): Michael J. Keaton, Keaton Law Firm, Deerfield, IL.
For Illinois Trading Company, Obee Family Partnership, LAWRENCE N. OBERMAN, individually, Defendants - Appellants (13-1799): George L. Grumley, Grumley Kamin & Rosic, Chicago, IL.
For Vlm Food Trading International, Inc., Plaintiff - Appellant (13-1697): Michael J. Keaton, Keaton Law Firm, Deerfield, IL.
For Transportation Alliance Bank, Inc., Defendant - Appellee (13-1697): John S. Delnero, K& L Gates Llp, Chicago, IL; Lawrence H. Meuers, Meuers Law Firm, P.L., Naples, FL.
Before BAUER, MANION, and SYKES, Circuit Judges.
Sykes, Circuit Judge
VLM Food Trading International, Inc., is a Canadian agricultural supplier. Illinois Trading Company, a reseller of agricultural produce, bought frozen potatoes from VLM but encountered financial difficulty and did not pay for them. VLM sued Illinois Trading, its president, and another entity in a position to control the company (collectively, " Illinois Trading" ) for the outstanding balance--about $184,000--owed on the contract. The complaint alleged four counts, two of which were based on the Perishable Agricultural Commodities Act (" PACA" ), a depression-era law that creates a statutory trust in favor of the seller when a buyer purchases agricultural goods on short-term credit. 7 U.S.C. § 499e(c)(2). To protect the assets of the statutory trust, VLM also moved for a preliminary injunction. See id . § 499e(c)(5).
Illinois Trading had tried to stem its financial troubles by obtaining loans from the Transportation Alliance Bank (" TAB Bank" ), giving the bank a security interest in its assets. By the time VLM brought its lawsuit, TAB Bank had already seized all of Illinois Trading's assets. But the PACA-created trust made VLM's claim superior to the bank's security interest. See Patterson Frozen Foods, Inc. v. Crown Foods Int'l, Inc., 307 F.3d 666, 669 (7th Cir. 2002). VLM amended its complaint to add a fifth claim--against TAB Bank--for seizing and converting PACA trust assets.
Prior to this amendment, however, VLM had moved for a consolidation of the preliminary-injunction hearing with a trial on the merits. The district court granted the motion. Everyone understood that the consolidated injunction and merits hearing pertained only to Counts I through IV--the claims by VLM against Illinois Trading--and not Count V, which pertained to the bank. When the district court issued its opinion, however, it not only resolved Counts I through IV, it also entered judgment for TAB Bank on Count V, holding that VLM failed to present any evidence on that claim. VLM appeals the judgment on Count V, arguing that it had insufficient notice that the court would treat the consolidated preliminary-injunction/merits hearing as a final hearing on that claim.
We agree and reverse with respect to Count V.
The district court also awarded VLM its attorney's fees and interest on the unpaid balance based on contractual provisions in VLM's invoices. Illinois Trading cross-appeals on this issue, arguing that these provisions never became a part of the parties' contract. Complicating this question is a choice-of-law dispute: Illinois Trading argues that the controlling law is the United Nations Convention on Contracts for the International Sale of Goods, April 11, 1980, S. Treaty Doc. No. 98-9 (1983), 1489 U.N.T.S. 3 (" the Convention" ), while VLM argues that Illinois's version of the Uniform Commercial Code controls. The relevant provisions in the Convention are materially different from those of the Uniform Commercial Code. The district court applied Illinois law and found that the invoice provisions regarding attorney's fees and interest became a part of the contract. We hold that the Convention controls and therefore reverse and remand for further proceedings.
VLM filed its complaint against Illinois Trading on October 10, 2012, stating four separate claims for money owed on unpaid invoices. Two of the claims (Counts I and IV) were based on a PACA statutory trust arising from VLM's shipment of potatoes to Illinois Trading. The following day VLM moved for a temporary restraining order and preliminary injunction to protect the trust assets. At the same time, VLM asked the court to consolidate the injunction hearing with a trial on the merits. See Fed.R.Civ.P. 65(a)(2). The court granted a temporary restraining order and scheduled a preliminary-injunction hearing for October 25. On October 22 VLM amended its complaint, adding a fifth claim against TAB Bank for seizing and converting assets subject to a PACA trust (Count V).
Over the next few months, the district court repeatedly postponed the preliminary-injunction hearing at Illinois Trading's request. At some point Illinois Trading's counsel withdrew, so the court again rescheduled the hearing, this time to January 15, 2013. In the same order, the court granted VLM's consolidation request, specifying that the hearing " shall be consolidated with a hearing on the merits as to the [Illinois Trading] ...