## Facts

- Hennepin Paper Company and Fort Wayne Corrugated Paper Company entered a written supply contract (effective July 1, 1941) for .009 corrugating material.
- Hennepin alleged that, before and at contracting, Fort Wayne represented it needed at least 600 tons per month (possibly 800) for one year and induced Hennepin to refit its plant and forego other business.
- In a first federal action for breach of contract, Hennepin sought damages, claiming the written contract was modified (contemporaneously and later) to require minimum monthly purchases (600 tons, later 800 tons).
- The district court in the first action excluded alleged contemporaneous oral terms as parol evidence varying the writing and entered judgment for Fort Wayne.
- After losing, Hennepin filed a second federal action seeking equitable reformation of the same written contract to include the alleged minimum purchase obligation.
- Fort Wayne moved for summary judgment in the second action on res judicata grounds, arguing reformation could have been pursued in the first action; the district court granted the motion.

## Issues

1. Whether a final judgment in a prior contract action bars a later suit to reform the same contract when the grounds for reformation existed and were available during the first action.
2. Whether the availability of equitable relief in the first forum requires a party to pursue reformation in the initial litigation rather than in a separate later action.

## Decision

- The Seventh Circuit affirmed summary judgment for Fort Wayne.
- The court held the second action was barred by res judicata because it arose from the same contract dispute and sought, in substance, the same result as the first action.
- Because the federal district court had authority to grant equitable relief, Hennepin could have sought reformation in the first action; claim-splitting was not permitted.

## Legal Principles

- Claim preclusion bars a later action arising from the same transaction as an earlier action that ended in a final judgment on the merits, even if the later action seeks a different remedy.
- When the initial court has jurisdiction to grant both legal and equitable relief, a party must present available equitable theories (including reformation) in the first action.
- A party may not relitigate a contract dispute by reframing an unsuccessful attempt to prove additional terms (e.g., through parol evidence) as a later reformation claim.
- A later reformation action may be permissible only where the first tribunal lacked power to grant the equitable remedy.

## Conclusion

The court treated Hennepin’s reformation suit as an impermissible second effort to obtain a minimum-quantity term after an adverse final judgment in a prior contract action, and held the claim precluded because reformation could have been sought in the first case before a court able to award both legal and equitable relief.


Hennepin Paper Co. v. Fort Wayne Corrugated Paper Co., 153 F.2d 822 (7th Cir. 1946)