## Facts

- Foxco Industries, Ltd., a Delaware corporation with its principal place of business in New York, manufactured knitted fabrics for retail fabric stores and the garment industry.
- Fabric World, Inc., an Alabama corporation headquartered in Huntsville, operated a multi-state chain of retail fabric stores.
- Foxco’s sales process was seasonal; it displayed sample lines for upcoming seasons, accepted orders based on samples, and primarily manufactured to fill customer orders rather than for inventory.
- Foxco sold through commission-based representatives for some customers, but large customers such as Fabric World were handled directly by Foxco’s salaried sales manager.
- Foxco shipped fabric goods to Fabric World; disputes arose over Fabric World’s nonpayment for prior deliveries and its cancellation/refusal to accept a later order that Foxco had substantially manufactured.
- Fabric World asserted some delivered goods were defective and that it canceled the later order as prices declined.
- The parties’ contract required “first quality” goods; to explain that term, Foxco offered published standards of the Knitted Textile Association as evidence of trade usage.
- In a diversity action in the Northern District of Alabama, a jury returned a judgment for Foxco for approximately $26,000 for breach and nonpayment.

## Issues

1. Whether Alabama’s foreign-corporation qualification statute barred Foxco’s suit because Foxco was “doing business” in Alabama without qualifying.
2. Whether the district court erred by instructing the jury on seller remedies under both Alabama U.C.C. §§ 2-708 (damages for nonacceptance/repudiation) and 2-709 (action for the price).
3. Whether the trial court erred in admitting Knitted Textile Association standards to establish the meaning of “first quality,” including whether such trade-usage evidence could apply absent Fabric World’s actual knowledge.

## Decision

- The Fifth Circuit affirmed the judgment for Foxco.
- Foxco’s Alabama-related activities were primarily interstate (solicitation of orders and shipment/delivery of goods), so Alabama could not apply its qualification statute to bar the action.
- The damages instructions referencing both U.C.C. §§ 2-708 and 2-709 were permissible because the evidence supported alternative theories, including substantial manufacture and difficulty of reasonable resale.
- The Knitted Textile Association standards were properly admitted as evidence of trade usage to explain “first quality,” and could inform the contract’s meaning even if Fabric World lacked actual knowledge of the standards.

## Legal Principles

- A state may not constitutionally bar a foreign corporation’s suit under a qualification statute when the corporation’s in-state activity is essentially interstate commerce (e.g., solicitation and shipment without a permanent local presence).
- In a seller’s action under the U.C.C., a trial court may instruct on multiple remedial measures (including §§ 2-708 and 2-709) when the evidentiary record could support more than one measure of recovery.
- Under U.C.C. contract interpretation principles, usage of trade may supply or explain the meaning of contractual terms; published industry standards may be admissible to prove trade usage and may be treated as part of the commercial context unless the contract negates them.

## Conclusion

The Fifth Circuit upheld a jury verdict for a fabric manufacturer, holding that Alabama’s foreign-corporation qualification bar could not defeat a claim arising from interstate sales activity, that the jury could be instructed on alternative U.C.C. seller-damages theories supported by the evidence, and that industry association standards were admissible to prove trade usage defining “first quality.”


Foxco Indus., Ltd. v. Fabric World, Inc., 595 F.2d 976 (5th Cir. 1979)