                              In the

United States Court of Appeals
               For the Seventh Circuit

No. 07-3693

D AVID P. L EIBOWITZ, Trustee
for the benefit of creditors in
Goldblatt’s Bargain Stores, Inc.,
                                                               Plaintiff,
                                  v.

G REAT A MERICAN G ROUP, INC.,
                                               Defendant-Appellant,
                                 and

L AS ALLE B ANK, N.A.,
                                                 Defendant-Appellee.


             Appeal from the United States District Court
        for the Northern District of Illinois, Eastern Division.
                No. 04 C 3025—David H. Coar, Judge.



   A RGUED S EPTEMBER 18, 2008—D ECIDED M ARCH 18, 2009




  Before E ASTERBROOK, Chief Judge, and SYKES and T INDER,
Circuit Judges.
  E ASTERBROOK, Chief Judge. Goldblatt’s Bargain Stores
operated six outlets in the Chicago area. All were closed
2                                             No. 07-3693

as part of Goldblatt’s bankruptcy. In January 2003 Great
American Group agreed to buy the inventory at two of
these stores for approximately 45% of what Goldblatt’s had
spent for the merchandise. Great American Group paid
approximately 75% of the agreed amount before taking
possession. Later Washington Inventory Service was to
determine the value of the inventory. If it was worth at
least as much as Goldblatt’s had represented, then Great
American Group was to pay the remaining 25% of the
price; if it was worth less, then the final price would
depend on Washington Inventory Service’s appraisal,
and Great American Group might be entitled to a refund.
Because LaSalle Bank, Goldblatt’s principal creditor, had
a security interest in the inventory, the transaction was
contingent on LaSalle’s approval, which was given.
  Before the transaction closed, Great American Group
learned that Goldblatt’s had moved some inventory
from the four operating stores to the two that were to be
liquidated. Goldblatt’s had paid its suppliers some
$450,000 for these goods. Great American Group did not
tell LaSalle Bank about this transfer. Washington
Inventory Service concluded that the inventory on hand
when Great American Group took over these two stores
was worth at least as much as Goldblatt’s had represented.
Great American Group paid the rest of the price, and it
made a profit on the sale of the stores’ contents to the
public.
  In February 2003 Goldblatt’s decided to close the four
remaining stores. Again Great American Group purchased
the inventory at a price based on Goldblatt’s estimate,
No. 07-3693                                                 3

subject to a settling up after Washington Inventory
Service appraised the inventory. Again LaSalle Bank
consented and promised to indemnify Great American
Group if Goldblatt’s could not make good on any obliga-
tion. After Great American Group had paid, however,
Washington Inventory Service concluded that the inven-
tory was worth at least $2 million less than Goldblatt’s
had estimated. This finding entitled Great American
Group to a refund of approximately $1 million. The bank-
ruptcy estate could not pay, having turned the money
over to LaSalle Bank. And LaSalle, though required by the
contract to pay, refused to do so. It insisted that Great
American Group had committed fraud by failing to
reveal the transfer of inventory from the four February-
closure stores to the two January-closure stores.
   Bankruptcy Judge Wedoff held a trial and concluded
that Great American Group had a duty to reveal the
transfer of inventory. He reached this conclusion under
Illinois law (which the parties agree is applicable), as
summarized by this court:
   An omission can of course be actionable as a fraud.
   But not every failure by a seller (or borrower, or
   employee, etc.) to disclose information to the
   buyer (or lender, or employer, etc.) that would
   cause the latter to reassess the deal is actionable. A
   general duty of disclosure would turn every bar-
   gaining relationship into a fiduciary one. There
   would no longer be such a thing as arm’s-length
   bargaining, and enterprise and commerce would
   be impeded. The seller who deals at arm’s length
4                                                No. 07-3693

    is entitled to “take advantage” of the buyer at
    least to the extent of exploiting information and
    expertise that the seller expended substantial
    resources of time or money on obtaining—other-
    wise what incentive would there be to incur
    such costs? But when the seller has without sub-
    stantial investment on his part come upon material
    information which the buyer would find either
    impossible or very costly to discover himself, then
    the seller must disclose it—for example, must
    disclose that the house he is trying to sell is in-
    fested with termites. The distinction between the
    two classes of case is illustrated by Lenzi v. Morkin,
    103 Ill. 2d 290, 469 N.E.2d 178, 82 Ill. Dec. 644
    (1984), where the failure to disclose an assessor’s
    valuation was held not to be actionable, since the
    valuation was a matter of public record and there-
    fore ascertainable by the buyer at reasonable cost.
FDIC v. W.R. Grace & Co., 877 F.2d 614, 619 (7th Cir. 1989)
(emphasis in original; most citations omitted with-
out indication). See also Anthony T. Kronman, Mistake,
Disclosure, Information, and the Law of Contracts, 7 J. Legal
Studies 1 (1978). The bankruptcy judge concluded that
Great American Group had learned the information
without making any extra effort or investment, and that
LaSalle Bank could not have discovered the facts without
costly inquiry. So disclosure was required, and silence
was a fraud. But the judge also concluded that LaSalle
Bank would not have acted any differently had it known
of the transfer: It still would have approved Goldblatt’s
decision to sell its remaining inventory to Great American
No. 07-3693                                              5

Group. Finally, the judge concluded, LaSalle Bank had not
shown any loss from the fact that the inventory was in the
first group of two stores rather than the second group
of four stores. The court entered a judgment of approxi-
mately $1.09 million in Great American Group’s favor.
  On appeal under 28 U.S.C. §158, the district court
reversed. It agreed with the bankruptcy court that Great
American Group owed the Bank a duty of disclosure and
committed fraud by remaining silent. It rejected Great
American Group’s argument that the transfer was not
material because it represented less than 10% of the
inventory at the second group of four stores. But the
district court, unlike the bankruptcy court, thought
that fraud vitiated the contract and thus excused
LaSalle Bank from any obligation to perform. 2007 U.S.
Dist. L EXIS 75633 (N.D. Ill. Oct. 10, 2007).
  The district court complicated the case by stating that
the “matter is remanded to the Bankruptcy court for
further proceedings consistent with the terms of this
opinion and order.” A remand from a district court to a
bankruptcy court is canonically not appealable, because
it does not finally resolve the dispute. See, e.g., In re
Comdisco, Inc., 538 F.3d 647 (7th Cir. 2008). Appeal must
wait for the events on remand, which will tie up loose
ends. But, as far as we can tell, nothing has actually been
remanded in this case. The bankruptcy judge entered a
money judgment, which the district judge reversed; there
is nothing more for the bankruptcy judge to do. The
“remand” in the district judge’s opinion seems to have
been an inapt entry from a word processor’s store of
6                                               No. 07-3693

standard phrases. This dispute is over; the decision is
final, and we have jurisdiction.
  There is a second jurisdictional issue. LaSalle Bank
contends that, even though we may have appellate juris-
diction, the bankruptcy court lacked subject-matter juris-
diction because the dispute was not related to the bank-
ruptcy. See 28 U.S.C. §157(a). Yet the sales were
authorized by a bankruptcy court; the principal obligor,
Goldblatt’s, is a debtor in bankruptcy; the reason why
Great American Group sought to recover from the Bank
was that the Trustee for Goldblatt’s had distributed the
proceeds of the sale before Washington Inventory
Service completed its valuation. Another option would
have been for the bankruptcy court to enter a judgment
against the estate in bankruptcy and insist that the
Trustee attempt to recover that amount from the Bank.
How much money is available for other creditors
depends on the disposition of this proceeding, which is
an integral part of Goldblatt’s bankruptcy. Jurisdiction
under §157(a) cannot reasonably be doubted.
   The district judge approached this dispute as if LaSalle
Bank wanted rescission. A victim of fraud is entitled to
set aside the contract and have everyone’s interests re-
stored to the state preceding the fraud. See Eisenberg v.
Goldstein, 29 Ill. 2d 617, 195 N.E.2d 184 (1963); Restatement
(Second) of Contracts §§ 470–511. But the Bank does not
want rescission; it does not want the inventory back, so
it can be sold through a different liquidator; the Bank
certainly does not want to restore the payment it
received for the inventory. What it wants instead—what
No. 07-3693                                               7

the district court gave it—is a right to keep all of the
bargain’s benefits while avoiding the detriments. That
sort of outcome is not a “remedy” of any kind. The
fraud could not have cost the Bank more than $200,000
(the original price of the transferred inventory,
multiplied by the fraction of that price available in a
liquidation sale) and likely cost it much less (since Great
American Group bought the transferred inventory as
part of the transaction for the first two stores). It is
possible that the formulas used to determine what Great
American Group paid for the first set of two stores differed
from those for the second set of four stores, and these
differences might have caused the shift of inventory to
matter. But if there was any difference, LaSalle Bank has
not tried to show it.
  A legal remedy, whether rescission or damages, does
not follow automatically from the existence of a false
statement or material omission. There must be reliance,
which is often called transaction causation, and
injury, which is often called loss causation. See Dura
Pharmaceuticals, Inc. v. Broudo, 544 U.S. 336 (2005). (Dura
Pharmaceuticals was decided under federal securities
law, but Illinois and most other states also follow this
approach. See, e.g., Oliveira v. Amoco Oil Co., 201 Ill. 2d
134, 776 N.E.2d 151 (2002); Restatement (Second) of Torts
§§ 525, 546, 548A.) The bankruptcy judge found that
LaSalle Bank had not demonstrated either transaction
causation or loss causation. It tried to show reliance by
contending that it would have insisted that Goldblatt’s
use a different liquidator had it known that Great Ameri-
can Group had failed to reveal a material fact. The bank-
8                                                No. 07-3693

ruptcy judge did not believe this, however, remarking
that the evidence did not establish that any other firm
would have offered the Bank better terms—and the
Bank’s obligations to its own investors demanded that
it take the best deal available. LaSalle Bank did not even try
to establish loss causation: It did not contend that the
omission had anything to do with the sum that Great
American Group wanted to recover, or that the move-
ment of inventory among stores reduced the aggregate
price received from the two sales to Great American
Group.
  The Bank would have had a better chance to show loss
causation if Great American Group had not purchased
the inventory from the second set of four stores, for then
it could have gained on the first two stores without
losing on the latter four. Yet the Bank does not seek to
increase the compensation it received from the sale of
the first two stores’ inventory. Great American Group
went ahead with the purchase of the second four
stores’ inventory despite knowing of the transfer. There’s
no reason why LaSalle Bank should be entitled to keep
more than the contract specifies for this second transaction.
   LaSalle Bank relies heavily on Chicago Park District
v. Chicago & North Western Transportation Co., 240 Ill. App.
3d 839, 607 N.E.2d 1300 (1st Dist. 1992), but in that opin-
ion the court found that both reliance and injury had
been established; in this case the bankruptcy court found
after a trial that neither had been established. The bank-
ruptcy court’s findings are not clearly erroneous, so
its decision must stand.
No. 07-3693                                            9

  The judgment of the district court is reversed, and the
case is remanded for reinstatement of the bankruptcy
court’s judgment.




                         3-18-09
