Knauf Insulation, Inc. v. SOUTHERN BRANDS , INC., and ALBERT and ROSEMARY DOWD

In the
United States Court of Appeals
For the Seventh Circuit
____________________
No. 15‐3157
KNAUF I NSULATION, I NC.,
Plaintiff‐Appellee,
v.
S OUTHERN BRANDS , I NC., and A LBERT and R OSEMARY D OWD,
Defendants‐Appellants.
____________________
Appeal from the United States District Court for the
Southern District of Indiana, Indianapolis Division.
No. 1:12‐cv‐00273‐SEB‐TAB — Sarah Evans Barker, Judge.
____________________
A RGUED A PRIL 14, 2016 — D ECIDED MAY 3, 2016
____________________
Before P OSNER , KANNE , and HAMILTON, Circuit Judges.
P OSNER , Circuit Judge. Knauf Insulation, Inc. (formerly
named Knauf Insulation, GmbH), is the Delaware subsidiary
of a German corporation. Its principal place of business is in
Indiana, where it manufactures fiberglass insulation for sale
to, among other types of customer, distributors of insulation,
such as SBI, as the parties refer to defendant Southern
Brands, Inc. (SBI is, or was, a broker as well as a distributor,
because Knauf often delivered the insulation it sold SBI di‐

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2 No. 15‐3157
rectly to the installers of the insulation, SBI’s customers. But
the parties call SBI a distributor and we’ll stick with that
term.) The other defendants, the Dowds, a married couple,
are SBI’s principals.
For many years SBI was delinquent in paying Knauf for
the insulation it bought. By 2012, when Knauf filed this suit
against both SBI and the Dowds (who in 2003 had signed a
personal guaranty of their company’s debt to Knauf), SBI
owed Knauf more than $3.5 million. Originally filed in an
Indiana state court, the suit was removed to federal district
court, the parties being of diverse citizenship. Indiana law is
agreed to govern the issues presented by the suit. The dis‐
trict judge granted summary judgment in favor of Knauf,
and her final judgment awarded it the money owed by SBI
plus interest on that debt.
The defendants—SBI and the Dowds—have appealed on
multiple grounds. Two pertain to the Dowds’ guaranty, exe‐
cuted in 2003, of SBI’s debts to Knauf. The disputed provi‐
sions of the guaranty state that “the undersigned hereby un‐
conditionally guarantees the full and prompt payment when
due, whether by acceleration or otherwise, and at all times
thereafter, of all obligations of the DEBTOR [i.e., SBI] to the
CREDITOR, howsoever created, arising or evidenced,
whether direct or indirect, absolute or contingent, or now or
hereafter existing, or due or to become due,” and “any action
to enforce this guaranty may be brought in, and the under‐
signed hereby consents and submits to the jurisdiction of,
the courts of the State of Indiana.”
The district court ruled that the Dowds’ guaranty made
them personally liable for all of SBI’s debts to Knauf. The
Dowds disagree, arguing that when they signed the guaran‐

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No. 15‐3157 3
ty they didn’t “intend or contemplate being sued by Knauf
in Indiana on its much larger claims against SBI, arising
more than four years later,” and that despite the forum‐
selection clause “SBI, an out‐of‐state distributor doing busi‐
ness in the southeast, did not have such minimum contacts
with Indiana as would subject it to Indiana’s jurisdiction.”
These arguments have no merit. The guaranty is explicit
that it covers future as well as current obligations, for re‐
member that it embraces “all obligations of the DEBTOR to
the CREDITOR, howsoever created, … whether … now or
hereafter existing, or due or to become due.” Under Indiana
law “a continuing guaranty encompasses all transactions,
including those arising in the future, that are within the con‐
templation of the agreement,” S‐Mart, Inc. v. Sweetwater Cof‐
fee Co., 744 N.E.2d 580, 587 (Ind. App. 2001)—and the
Dowds’ guaranty expressly contemplated liability for future
obligations of unknown magnitude.
As for SBI’s contacts with Indiana, it didn’t have to have
any contacts with that state in order to bind itself by a forum‐
selection clause, which typically requires one of the parties
to the clause to litigate in a jurisdiction with which it has
sparse if any contacts, as otherwise there would be no need
for the clause. See Carnival Cruise Lines, Inc. v. Shute, 499 U.S.
585 (1991); M/S Bremen v. Zapata Off‐Shore Co., 407 U.S. 1
(1972). Anyway SBI did have significant contacts with Indi‐
ana, by virtue of its dealings with Knauf over many years.
See Burger King Corp. v. Rudzewicz, 471 U.S. 462 (1985).
The Dowds further argue that the “disparity in bargain‐
ing power” between Knauf and SBI left them with no choice
but to sign the guaranty, and so was neither “freely negoti‐
ated” nor “just and reasonable,” as Indiana law requires fo‐

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4 No. 15‐3157
rum‐selection clauses to be for them to be enforceable. See,
e.g., Farm Bureau General Ins. Co. of Michigan v. Sloman, 871
N.E.2d 324, 329–33 (Ind. App. 2007). But the claim of “dis‐
parity in bargaining power” rests only on the fact that Knauf
is a much larger company than SBI and apparently no one
besides Knauf would take on SBI as a distributor on terms
SBI could afford, making it dependent on Knauf and there‐
fore compelled to do its bidding. But the size disparity be‐
tween the two firms did not render the guaranties uncon‐
scionable or unenforceable. See id. at 329–30. On the contra‐
ry, the fact that SBI was not a dependable customer was a
compelling reason for Knauf to insist that SBI’s debts to it be
secured by a guaranty. And as long as Knauf has competi‐
tors, which it does, it cannot merely by reason of its size co‐
erce distributors and contractors to pay an exorbitant price
for its insulation, unless insulation is in short supply or
Knauf and its competitors are colluding in violation of the
Sherman Act to lift the price of insulation above the competi‐
tive price—which in fact is charged, but unavailingly, as
we’re about to see.
A class action called Columbus Drywall & Insulation, Inc. v.
Masco Corp. filed in 2004 charged Knauf and other manufac‐
turers of fiberglass insulation with having conspired since
1999 with Masco Corporation, the largest insulation contrac‐
tor and distributor in the United States, to sell residential fi‐
berglass insulation to other contractors at prices significantly
higher than those offered to Masco, thus violating the Sher‐
man Act, 15 U.S.C. § 1, by forcing those contractors to over‐
pay for insulation. See Columbus Drywall & Insulation, Inc. v.
Masco Corp., 258 F.R.D. 545, 549 (N.D. Ga. 2007).

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No. 15‐3157 5
SBI was originally a member of the proposed class (“pro‐
posed” because it was never certified), but in January 2006
the district judge presiding in Columbus Drywall granted the
motion of the named plaintiffs to amend their complaint to
drop from the class all but insulation contractors. SBI, being
a distributor and not a contractor, was therefore out. Two
years later the district court approved a settlement in Colum‐
bus Drywall that resulted in Knauf’s being dismissed from
the case. Five years after that SBI filed a counterclaim in the
present case that accused Knauf of having been guilty of the
price fixing of which it had been accused in Columbus Dry‐
wall—which if true would of course have harmed SBI, as
Knauf supplied SBI with the insulation that SBI resold to its
customers. The settlement in Columbus Drywall had made no
finding of guilt on the part of any of the defendants, includ‐
ing Knauf, but neither had it exonerated the defendants; it
was, after all, just a settlement, not an adjudication.
But 2013 was too late for SBI’s counterclaim. The statute
of limitations governing Sherman Act claims is only four
years, 15 U.S.C. § 15b, though of course it’s tolled (post‐
poned—stops running) once a suit is brought within the lim‐
itations period. American Pipe & Construction Co. v. Utah, 414
U.S. 538, 554–60 (1974); Sawyer v. Atlas Heating & Sheet Metal
Works, Inc., 642 F.3d 560, 561–62 (7th Cir. 2011). Columbus
Drywall was such a suit. But the Supreme Court’s decision in
American Pipe & Construction Co. v. Utah, supra, implies that
when SBI was dropped from the class in 2006 because it was
not a contractor, there was no longer any basis for tolling the
limitations period for its claim against Knauf, and so the
time within which SBI could sue Knauf for violating the
Sherman Act continued ticking. Not until 2013 seven years
after SBI had been dropped from the class, did SBI file its

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6 No. 15‐3157
counterclaim against Knauf in the present case—the proce‐
dural vehicle for its Sherman Act claim.
We could stop here if American Pipe stood for the propo‐
sition that the tolling of a limitations period can never re‐
sume after a claimant is dropped from a class action. But it
does not stand for that proposition, as we can explain by
comparing two types of limitations period that are similar
but not identical—statutes of limitations and statutes of re‐
pose—even though there is no statute of repose applicable to
this case. Statutes of limitations run from the injury or other
wrong giving rise to a suit; statutes of repose run from the
action or transaction that gave rise to the injury. See CTS
Corp. v. Waldburger, 134 S. Ct. 2175, 2182–83 (2014). Thus a
statute of repose might require a suit for a construction inju‐
ry to be brought within ten years after the construction was
complete, even though the injury had arisen in the tenth year
and suit had been brought the following year. Applied to
this case, statute of repose analysis might lead to a conclu‐
sion that the four‐year Sherman Act statute of limitations
began to run not when SBI was injured by Knauf’s violating
the Sherman Act but earlier, when Knauf first agreed with
its competitors to charge supracompetitive prices.
Statutes of limitations are routinely subject to “equitable
tolling,” meaning that a plaintiff can sue after the expiration
of the limitations period (that is what “tolling” a statute of
limitation means) if it had a good reason for its delay in su‐
ing and has suffered a harm greater than the defendant suf‐
fered or is likely to suffer as a result of being sued after the
limitations period expired.
There is as we said no statute of repose in this case. Our
use of the term “statute of repose analysis” is merely intend‐

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No. 15‐3157 7
ed to flag the issue of whether a limitations period that be‐
gins to run (or, as in this case, to re‐run) not when an injury
is inflicted but when some transaction or other event oc‐
curs—which is this case, because the statute of limitations
applicable to SBI’s antitrust counterclaim resumed running
when SBI was dropped from the class—can ever be subject
to equitable tolling. As a result of recent Supreme Court de‐
cisions, we now know that the answer is that it can be. Me‐
nominee Indian Tribe of Wisconsin v. United States, 136 S. Ct.
750, 755 (2016), explains that under the test for equitable toll‐
ing articulated in Holland v. Florida, 560 U.S. 631, 649 (2010),
“a litigant is entitled to equitable tolling of a statute of limi‐
tations only if the litigant establishes two elements: ‘(1) that
he has been pursuing his rights diligently, and (2) that some
extraordinary circumstance stood in his way and prevented
timely filing.’” Thus if elements (1) and (2) are established, a
litigant is entitled to equitable tolling including equitable
class‐action tolling—we know this because Menominee was a
case, like this case and earlier the American Pipe case, in
which the plaintiff was seeking to toll a statute of limitations
that had ceased to be tolled when the plaintiff had fallen out
of the class. See 136 S. Ct. at 754–55. In other words, given
strong equities, a statute of limitations can be tolled even if
the tolling of the plaintiff’s claim had been interrupted when
he ceased to be a member of the class.
To permit equitable tolling in such a case, provided there
is a justification created by an extraordinary event, makes
sense. Suppose the Dowds had been in a serious accident the
day before SBI was dropped from the class, and as a result
they had lapsed into comas, where they remained, uncon‐
scious, for a year. Provided that delaying suit by a year
would not have imposed a serious hardship on Knauf, the

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8 No. 15‐3157
counterplaintiffs (the Dowds and SBI) would have had a
colorable argument for equitable tolling. And likewise in In
re Copper Antitrust Litigation, 436 F.3d 782, 788 (7th Cir. 2006),
although “the plaintiffs could benefit from tolling under
American Pipe … for the federal antitrust class action,” that
wasn’t enough to make their claim timely. The court never‐
theless remanded because there was a possibility that equi‐
table estoppel (a doctrine akin to equitable tolling) could jus‐
tify the plaintiffs’ delay in suing. Id. at 790–91; cf. Cada v.
Baxter Healthcare Corp., 920 F.2d 446, 451 (7th Cir. 1990).
Our court used to think that statutes of repose, and by ex‐
tension statutes of limitations that begin to run or re‐run in‐
dependently of whether there is an injury, as in class‐action
cases such as the present, could not be tolled. We said in
Beard v. J.I. Case Co., 823 F.2d 1095, 1097 n. 1 (7th Cir. 1987),
that “a period of limitation bars an action if the plaintiff does
not file suit within a set period of time from the date on
which the cause of action accrued. In contrast, a period of
repose bars a suit a fixed number of years after an action by
the defendant (such as manufacturing a product), even if
this period ends before the plaintiff suffers any injury.” Or
as we said in Klein v. DePuy, Inc., 506 F.3d 553, 557 (7th Cir.
2007), “a statute of repose … serves as an unyielding and ab‐
solute barrier to a cause of action, regardless of whether that
cause has accrued.” See also McCann v. Hy‐Vee, Inc., 663 F.3d
926, 930–31 (7th Cir. 2011). But these rulings have been su‐
perseded by the Supreme Court’s decision in Menominee.
SBI does not invoke equitable tolling by name, but it ar‐
gues in a similar vein that through no fault of its own it was
in the dark—had no idea that it had been expelled from the
class and that the statute of limitations applicable to its anti‐

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No. 15‐3157 9
trust claim had therefore resumed running. We are not per‐
suaded. The Columbus Drywall suit had been filed in Geor‐
gia, SBI’s home, nine years before SBI filed its counterclaim.
SBI couldn’t have failed to notice the class action suit, in its
own state, against Knauf, its principal supplier and creditor,
or the settlement of the suit in 2008, which contained no
finding that Knauf had committed an antitrust violation.
More importantly SBI should have known of the suit, and
that is what matters—recall the emphasis on diligence in the
Holland case. SBI couldn’t just sit on its fanny for nine years,
making no inquiry into the status of the Columbus Drywall
litigation, and insist that its indolence tolled the statute of
limitations.
Courts “have allowed equitable tolling … where the
complainant has been induced or tricked by his adversary’s
misconduct into allowing the filing deadline to pass. We
have generally been much less forgiving in receiving late fil‐
ings where the claimant failed to exercise due diligence in
preserving his legal rights. … [T]he principles of equitable
tolling described above do not extend to what is at best a
garden variety claim of excusable neglect.” Irwin v. Depart‐
ment of Veterans Affairs, 498 U.S. 89, 96 (1990) (footnotes omit‐
ted). SBI failed to exercise minimal diligence, by either not
learning of, or losing track of, the class action and as a result
not realizing that it had been removed from the class and
that upon that removal the statute of limitations governing
its antitrust claim against Knauf had resumed running.
SBI’s remaining arguments can be dispatched summarily.
One is that SBI hadn’t agreed with Knauf that all the debts
listed in a February 1, 2012, account statement (“an agree‐
ment between the parties that all items of an account and

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10 No. 15‐3157
balance are correct, together with a promise, express or im‐
plied, to pay the balance,” Jackson v. Trancik, 953 N.E.2d 1087,
1091 (Ind. App. 2011)) were correct, or that SBI was actually
required to pay them. Knauf had been sending SBI invoices
and monthly statements for years, and far from there being
any evidence that SBI ever protested we have Mr. Dowd’s
acknowledgment that “Knauf chose to sue rather than con‐
tinue the negotiation efforts, where … I would have disput‐
ed the amount.” Apart from a single charge of $4,372.41 in
January 2012, all of the charges on the final account state‐
ment were months or even years old. The defendants did not
object to the charges until after this lawsuit was filed.
“[F]ailing to object to liability on an account until a suit is
filed constitutes failure to object to the account within a rea‐
sonable time and supports the inference of an agreement
that the account balance is correct.” Auffenberg v. Board of
Trustees of Columbus Regional Hospital, 646 N.E.2d 328, 331
(Ind. App. 1995).
The defendants’ final argument is that Knauf has failed
to explain whether it credited some $1.3 million that SBI
paid it between October 2008 and January 2012 against SBI’s
debts to it. But SBI would surely have noticed had the ac‐
count statements that it admits having received from Knauf
during this period failed to reflect a $1.3 million credit; nor
did SBI plead the $1.3 million or any part of it as a setoff to
Knauf’s claim or present any evidence that it had paid that
amount, beyond a declaration by Mr. Dowd that it “may be
that Knauf has not credited these $1.3 million in payments,”
(emphasis added), which is pure speculation.
And so the judgment of the district court is
AFFIRMED.

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