Betco Corp., Ltd. v. Peacock, No. 17-1133 (7th Cir. 2017)Annotate this Case
Bio‐Systems produced biodegradation products that use bacteria to break down waste. Customers often required certificates of analysis, so Bio‐Systems counted the bacteria in a product before its sale. Betco purchased Bio‐Systems, after visiting Bio‐Systems’s sites, speaking with personnel, and examining financial information. Betco paid Peacock $5 million and placed $500,000 in escrow, to be released two years after closing if Belco had not identified any problems. Peacock continued to run the plant. Betco instructed him to focus on sales and profits. Betco knew before closing that the bacteria yields were inconsistent at the plant; it learned within a year of closing that some products were being shipped with below‐specification bacteria counts. Betco nonetheless released the escrow early in exchange for a discount. Betco subsequently discovered that certificates of analysis were being falsified. Betco sued Peacock. The court dismissed negligent misrepresentation and breach of contract claims as time‐barred by the Agreement, and found that Betco failed to prove violation of the duty of good faith and hadn’t shown any cognizable injury from the alleged violation. The Seventh Circuit affirmed rejection of all of Betco’s claims. When Betco purchased Bio‐Systems, it expected profitability and not to face claims for shipping products with intentionally falsified certificates; it received that. Betco did not expect that it was purchasing flawless processes. Under Wisconsin law, the inquiry is not whether Betco paid the appropriate price but whether Betco received the benefits that it expected.