Federal Appeals Court Sides with KMK Client in Food-Packing Feud

The Seventh Circuit Court of Appeals last month upheld a $51,000 award to a Kohner Mann & Kailas client represented by Zach Whitney,  rejecting the plaintiff’s argument that its claims should be reinstated because it was forced into a contract by economic duress. 

Just weeks after hearing oral argument in the matter, a panel of appellate judges in Chicago ruled in favor of KMK’s client, a Wisconsin-based food manufacturer and packaging company, upholding the damages award and dealing a final blow to contract claims from the plaintiff.

The dispute arose from a so-called “co-packing agreement” under which KMK’s client manufactured kosher food products for a California-based company. KMK’s client closed down one of its plants, requiring the parties to negotiate on fulfilling remaining orders and removing the plaintiff’s equipment from the defendant’s facility. Those negotiations resulted in a “transition agreement” under which the plaintiff granted a broad release to KMK’s client. The deal eventually soured, with the plaintiff filing suit over the pricing terms of the deal and KMK’s client countersuing for $51,000 of product that it delivered but the plaintiff refused to pay for. 

On February 27, the Seventh Circuit held that the plaintiff could have sued for an injunction rather than sign the release in the transition agreement, undermining the plaintiff’s economic duress defense and barring its claims. The decision in favor of KMK’s client involved thorny issues of Wisconsin law, including the economic duress doctrine, which Whitney  briefed before two federal courts before ultimately prevailing.