Full opinion text
OPINION ROSEN, District Judge. I. INTRODUCTION Plaintiff/Appellant Wallace Hardware Company, Inc. (“Wallace Hardware”) appeals from various District Court rulings in favor of Defendant/Appellee/Cross-Ap-pellant Bill Abrams and his brother, Defendant/Appellee L.D. (“Lonnie”) Abrams. Most significantly, Wallace Hardware contends that the District Court erred by refusing to enforce a Tennessee choice of law provision in a guaranty purportedly executed by the parties. The lower court instead elected to apply Kentucky law, thereby rendering the guaranty invalid and unenforceable, and then awarded summary judgment in favor of the Abrams brothers on Wallace Hardware’s breach-of-guaranty claim. For his part, Defendant/Cross-Appellant Bill Abrams appeals the District Court’s order permitting Wallace Hardware to file an amended complaint asserting claims in addition to this breach-of-guaranty claim. In its amended complaint, Wallace Hardware augmented its breach-of-guaranty claim by asserting a breach-of-eon-tract claim and two claims of fraud. The District Court ultimately entered summary judgment in favor of the Abrams brothers on two of these three claims, and Wallace Hardware also challenges these rulings on appeal. Finally, in the event we reinstate one or more of its claims, Wallace Hardware argues that the District Court erroneously decided certain matters bearing upon the issue of damages. For the reasons stated below, we hold that the parties are bound by their choice of Tennessee law in the guaranty agreement, and we therefore reverse the award of summary judgment to the Abrams brothers on the breach-of-guaranty claim. As to the remaining issues, we generally affirm the decision of the District Court, with the exception of certain rulings relating to damages. II. FACTUAL AND PROCEDURAL BACKGROUND A. The Parties Plaintiff/Appellant Wallace Hardware Company is a Tennessee corporation that provides wholesale hardware goods and services to retail hardware stores. In the summer of 1991, Wallace Hardware entered into an agreement to supply hardware inventory to Tri-County Home Center, Inc. (“Tri-County”), a newly opening hardware store located in Corbin, Kentucky. Tri-County was incorporated by Defendant/Appellee Lonnie Abrams, who served as Tri-County’s president. Defendant/Appellee/Cross-Appellant Bill Abrams provided financing for Tri-County, and assisted in operating the business. B. The Tri-County Operating Agreement, Security Agreement, and Guaranty In connection with Wallace Hardware’s sale of hardware inventory to Tri-County, these two corporate entities executed a “New Account Application and Operating Agreement” dated August 9, 1991. Under this Agreement, Wallace Hardware extended a line of credit to enable Tri-County to purchase hardware goods and services. Both Lonnie and Bill Abrams signed the Agreement on behalf of TriCounty. Through their signatures, the Abrams brothers “agree[d] to be jointly, severally, and individually responsible for the payment of any and all goods and services furnished by Wallace Hardware Company, Inc. to our firm or to us individually.” (J.A. at 52.) To secure this line of credit, Tri-County executed an August 9, 1991 “Security Agreement,” granting Wallace Hardware a security interest in “[a]ny and all inventory purchased by [Tri-County] from Wallace or otherwise [financed by Wallace.” (J.A. at 58.) Lonnie Abrams signed this security agreement on behalf of Tri-County as its president. The agreement’s definitional section referred to Tennessee’s enactment of the Uniform Commercial Code (“UCC”) as the source for resolving any questions as to the meaning of terms. Finally, the security agreement provided that “the validity, interpretation, construction and enforcement of this Security Agreement, the obligations of [Tri-County] and the rights of Wallace hereunder, and any question which may arise concerning this Security Agreement or the transactions contemplated hereby, shall be governed in all respects by the law (including laws, statutes and case law) of the State of Tennessee.” (J.A. at 59.) In addition to this security agreement, Wallace Hardware also sought personal guaranties from both of the Abrams, in which they agreed to accept individual liability for Tri-County’s indebtedness to Wallace Hardware. Accordingly, on August 21, 1991, Wallace Hardware tendered a “Guaranty Agreement” for signature by both Lonnie and Bill Abrams. Although both brothers’ signatures appear on this Guaranty, Bill Abrams denies that he signed this document, and he has proffered the opinion of a handwriting expert that his purported signature is a forgery. For his part, Lonnie Abrams admits that he signed the Guaranty. Under the terms of the Guaranty Agreement, the Abrams brothers “unconditionally guarantee^] and promised] to pay to Wallace ... any and all indebtedness” owed by Tri-County to Wallace Hardware. (J.A. at 61.) The guarantors’ liability was “unlimited,” “continuing,” and encompassed “any indebtedness” incurred by Tri-County, including “that arising under successive transactions which shall either continue the indebtedness or from time to time renew it after it has been satisfied.” (Id.) The obligations assumed by the guarantors were “independent” of Tri-County’s obligations, and were not affected “by resort on the part of Wallace to any other security or remedy for the collection of said indebtedness.” (Id.) Moreover, the guarantors “waived] any defense arising by reason of any disability or other defense of [Tri-County] or by reason of the cessation from any cause whatsoever of the liability of [Tri-County] for the indebtedness.” (Id.) Finally, by its terms, the Guaranty Agreement was to be “governed by and construed in accordance with the laws of the State of Tennessee.” (Id.) C. Tri-County’s Limited Operations Under Its Agreement with Wallace Hardware Shortly after the above agreements were executed, Wallace Hardware began to ship merchandise to Tri-County’s retail store in Corbin, Kentucky, and also assisted in setting up the store, displaying goods on the shelves, and establishing retail pricing for each item. The store opened in September of 1991, but soon began to lose money. On November 21, 1991, a fire broke out at a warehouse at which TriCounty kept surplus inventory, resulting in almost $200,000 in property damage. In December of 1991, Tri-County ceased operations. At the time, its outstanding balance under its account with Wallace Hardware stood at over $900,000. D. Procedural Background Since Tri-County’s hardware store closed in December of 1991, the parties have engaged in lengthy legal proceedings in three different forums. First, on December 17, 1991, Tri-County brought a breach-of-contract suit against Wallace Hardware in Kentucky state court. In turn, Wallace Hardware commenced a state court action against Tri-County just two days later, also alleging breach of contract. The parties resolved these suits shortly thereafter, through a stipulated order of voluntary dismissal without prejudice entered by the Kentucky court on December 20,1991. Pursuant to this state court order, Wallace Hardware was authorized to repossess the inventory it had sold to Tri-County under the parties’ Operating Agreement. This order further provided that “Wallace shall thereby immediately allow to TriCounty a credit for all such inventory received at the prices at which it was invoiced by Wallace to Tri-County, and TriCounty shall, likewise, thereupon immediately receive satisfaction or partial satisfaction, as the case may be, of any debt or claim which may hereafter be determined to exist by Tri-County to and in favor of Wallace.” (J.A. at 415 (emphasis in original).) By its terms, the order did not “[ajffect either partfy’s] right to assert any claims for damages or otherwise not specifically addressed herein,” and neither party was deemed to have “waive[d] any of its rights or causes of action in any manner whatsoever against the other as a result of Tri-County’s willingness to release inventory and as a result of Wallace’s desire to receive and retain the inventory.” (J.A. at 416.) Before Wallace Hardware could commence repossession of the inventory, however, it first had to correct an earlier mistake in its effort to perfect its security interest in this inventory. When Wallace Hardware and Tri-County executed the Operating Agreement in August of 1991, Lonnie Abrams signed a UCC-1 form on behalf of Tri-County, confirming Wallace Hardware’s security interest in the inventory to be supplied under the Operating Agreement. Wallace Hardware then filed this UCC-1 form in Whitley County, Kentucky on August 15, 1991. Because TriCounty’s store was located in Laurel County, this initial filing was ineffective to perfect Wallace Hardware’s security interest. Accordingly, Wallace Hardware refiled the UCC-1 in Laurel County on December 19, 1991, thereby perfecting its security interest. On December 23 and 24, 1991, Wallace Hardware repossessed Tri-County’s inventory, and gave TriCounty a credit in the amount of $784,269, leaving a balance of $145,546. Just under 90 days later, on March 13, 1992, Tri-County’s unsecured creditors commenced an involuntary Chapter 7 proceeding in the U.S. Bankruptcy Court for the Eastern' District of Kentucky. On June 25, 1992, Tri-County itself brought a voluntary Chapter 7 proceeding in the Bankruptcy Court. As part of these proceedings, the bankruptcy trustee sought to restore to the estate the inventory repossessed by Wallace Hardware, under the theory that this repossession was an avoidable preferential transfer to a creditor within 90 days before the date the involuntary bankruptcy petition was filed. The trustee and Wallace Hardware ultimately resolved this matter, through an agreement approved by the Bankruptcy Court on December 8, 1993. Because the inventory repossessed from Tri-County had been commingled with other goods and resold, Wallace Hardware was not required under the settlement agreement to return this inventory to the bankruptcy estate. Instead, Wallace Hardware paid $128,000 to the trustee, “in full and complete settlement, accord and satisfaction of any and all claims the Trustee has, had or may have against Wallace,” and the trustee’s claims against Wallace Hardware were dismissed with prejudice. (J.A. at 310.) Under the settlement agreement, Wallace Hardware preserved its claim against the bankruptcy estate as an unsecured creditor, with the exception that it agreed not to seek “distribution from the Trustee of any share, dividend or payment based upon or relating to the [$128,000] Settlement Sum.” (J.A. at 311-12.) Wallace Hardware then brought the present suit against Lonnie and Bill Abrams in the U.S. District Court for the Eastern District of Kentucky. In its initial complaint, filed on July 12, 1994, Wallace Hardware asserted a single breach-of-guaranty claim, alleging that the Abrams brothers were liable for the indebtedness then owed by Tri-County to Wallace — in the amount of $720,106.38, according to the complaint — minus any disbursements subsequently received by Wallace from TriCounty’s bankruptcy estate. Nearly two years later, on March 1, 1996, Wallace Hardware filed a motion seeking leave to file an amended complaint. In this proposed pleading, Wallace Hardware sought to supplement its breach-of-guaranty claim with (1) a breach-of-contract claim, based on the August 9, 1991 Operating Agreement signed by both Lonnie and Bill Abrams; (2) a claim of negligent and/or intentional misrepresentation, arising from the Abrams’ alleged assurances as to their credit history, solvency, and experience that induced Wallace Hardware to extend credit to TriCounty; and (3) a fraud claim, relating to the Abrams’ alleged false statements as to the structure and operation of Tri-County, their alleged conversion and destruction of goods obtained by Tri-County, and their failure to list Wallace Hardware as a beneficiary on fire insurance policies. Also on March 1, 1996, the Abrams brothers filed a motion seeking the application of Kentucky law to the breach-of-guaranty claim, and a motion seeking summary judgment in their favor on this claim. In a Memorandum Opinion and Order issued on August 23, 1996, U.S. District Judge Jennifer B. Coffman granted each of these motions in substantial part. Wallace Hardware was permitted to file an amended complaint, with the exception of the proposed claim of negligent misrepresentation, which the District Court held was not a recognized theory of recovery under Kentucky law. Next, the lower court ruled that Kentucky law should govern the breach-of-guaranty claim, notwithstanding the Tennessee choice-of-law provision in the Guaranty itself. Upon surveying Kentucky choice-of-law rules, and concluding that they call for the application of Kentucky law whenever that state’s interests predominate over all others, the District Court found that “Kentucky clearly has the greater interest in the present case.” (J.A. at 197.) Finally, given its choice of Kentucky law, the Court readily concluded that the Guaranty was invalid and unenforceable, as Wallace Hardware conceded that the Guaranty failed to comport with the requirements imposed by a Kentucky statute governing the form of guaranties, Ky.Rev.Stat. Ann. § 371.065(1). Next, on May 6, 1997, Bill Abrams filed a motion seeking leave to amend his answer to assert that Wallace Hardware’s alleged breach of its contract with TriCounty served to defeat its effort to collect from the Abrams brothers, as guarantors, any amounts allegedly owed under that contract. As noted in this motion, Lonnie Abrams previously had asserted this same defense in his answer to the initial complaint. On May 21, 1997, Wallace Hardware filed a response in opposition to Bill Abrams’ motion, as well as a separate motion asking that this defense be stricken from Lonnie Abrams’ answer. The next day, Wallace Hardware filed a motion requesting that the District Court reconsider its earlier choice-of-law ruling in light of a recent decision by the Kentucky Supreme Court in Prezocki v. Bullock Garages, Inc., 938 S.W.2d 888 (Ky.1997). Finally, in late August and early September of 1997, the parties filed cross-motions for summary judgment on various counts of the first amended complaint. On December 19, 1997, the District Court issued a Memorandum Opinion and Order addressing the issues in these various motions. First, the Court permitted Bill Abrams to amend his answer, and declined to strike any defenses from Lonnie Abrams’ answer. Next, the lower court found no basis, in the Prezocki decision or otherwise, for reversing its earlier ruling applying Kentucky law to the breach-of-guaranty claim. The Court then awarded summary judgment to the Abrams brothers on Wallace Hardware’s breach-of-contract claim, finding that the Operating Agreement suffered from the same defects under Kentucky law as did the Guaranty. Finally, the District Court found that one of Wallace Hardware’s two claims of fraud was subject to dismissal as lacking the necessary allegations of inducement or reliance, but that issues of fact precluded an award of summary judgment to either side on the remaining fraud claim. In a subsequent Memorandum Opinion and Order issued on December 22, 1997, the District Court addressed two outstanding issues of damages. First, the Court found that issues of fact remained as to whether Wallace Hardware could collect the 20-percent restocking fee included as an element of its claimed damages. Next, the Court ruled that the doctrine of accord and satisfaction precluded Wallace Hardware from recovering the $128,000 settlement amount it paid to the bankruptcy trustee following its December, 1991 repossession of Tri-County’s inventory. In light of these rulings, only one claim of fraud remained to be resolved. The parties settled this claim and, on February 23, 1998, stipulated orders were entered reflecting the final disposition of all proceedings in the lower court. These appeals followed. III. THE PARTIES’ ARGUMENTS ON APPEAL In its appeal, Wallace Hardware has identified four purported defects in the District Court’s rulings. First and foremost, Wallace Hardware contends that the court below erred by invalidating the Tennessee choice-of-law provision in the Guaranty, and instead electing to apply Kentucky law to determine the parties’ obligations under that document. As a result of this choice-of-law determination, the Court concluded that the Guaranty was unenforceable, and it awarded summary judgment to the Abrams brothers on the breach-of-guaranty claim. Next, Wallace Hardware challenges the District Court’s decision to permit Bill Abrams to amend his answer to assert the so-called “corporate defenses” of TriCounty, as well as the decision not to strike similar defenses asserted in the answer filed by Lonnie Abrams. Third, Wallace Hardware argues that the District Court erred in dismissing one of its fraud claims for failure to allege all of the requisite elements in support of that claim. Finally, Wallace Hardware contends that the court below erred in ruling that the recoverability of the 20-percent “restocking fee” turned upon whether Tri-County or the Abrams brothers were provided with a copy of Wallace Hardware’s internal policy calling for the imposition of this fee. In his cross-appeal, Bill Abrams has raised one additional issue. Specifically, he asserts that the District Court erred in permitting Wallace Hardware to amend its complaint over a year and a half after the initial complaint was filed. Abrams contends that this was undue delay, and that he was prejudiced by the lower court’s ruling. IV. ANALYSIS A. The Guaranty’s Choice-of Law Provision Is Enforceable. Although additional theories of liability are asserted in the amended complaint, it is clear that Wallace Hardware’s chief basis for recovery in this case rests upon the August 21, 1991 Guaranty Agreement, in which the Abrams brothers purportedly agreed to repay the indebtedness owed by Tri-County to Wallace Hardware. By its express terms, this Guaranty provides that it is to be “governed by and construed in accordance with the laws of the State of Tennessee.” (J.A. at 61.) The District Court, however, concluded that Kentucky courts would not honor this choice-of-law provision, where the parties and the underlying transaction bore a stronger relationship to Kentucky than to Tennessee. Wallace Hardware argues that the Guaranty’s choice-of-law provision should be enforced, and that Tennessee law should govern its breach-of-guaranty claim. For the reasons discussed below, we agree. 1. Section 187 of the Restatement (Second) of Conflict of Laws Governs the Enforceability of the Guaranty’s Choice-of-Law Provision. This case was brought under the District Court’s diversity jurisdiction. Consequently, as the lower court correctly observed, the choice-of-law rules of the forum state, Kentucky, govern the determination whether to enforce the Guaranty’s selection of Tennessee law. See Klaxon Co. v. Stentor Elec. Mfg. Co., 818 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941); Banek Inc. v. Yogurt Ventures U.S.A., Inc., 6 F.3d 857, 361 (6th Cir.1993). The District Court resolved this issue as a matter of law, and we review this ruling de novo. See MacDonald v. General Motors Corp., 110 F.3d 337, 341 (6th Cir.1997). In electing not to give effect to the Guaranty’s choice-of-law provision, and to instead apply Kentucky law, the District Court began its analysis with the observation that “Kentucky courts are egocentric concerning choice of law questions.” (8/23/96 Op. at 4, J.A. at 196 (citing Paine v. La Quinta Motor Inns, Inc., 736 S.W.2d 355, 357 (Ky.Ct.App.1987)).) On at least two occasions, we likewise have noted this provincial tendency in Kentucky choice-of-law rules. See Adam v. J.B. Hunt Transp., Inc., 130 F.3d 219, 230-31 (6th Cir.1997); Harris Corp. v. Comair, Inc., 712 F.2d 1069, 1071 (6th Cir.1983). Indeed, in Harris Corp., we construed a then-recent Kentucky Supreme Court decision as indicating that “Kentucky law will apply to a contract issue if there are sufficient contacts and no overwhelming interests to the contrary, even if the parties have voluntarily agreed to apply the law of a different state.” Harris Corp., 712 F.2d at 1071 (citing Breeding v. Massachusetts Indem. and Life Ins. Co., 633 S.W.2d 717 (Ky.1982)). With this starting premise, the District Court turned specifically to the 1982 decision in Breeding, supra, which still stands as the most recent occasion on which Kentucky’s highest court addressed a contractual choice-of-law provision. In that case, the plaintiff administratrix of the estate of Danny Breeding sought to collect under an accidental death policy taken out by Mr. Breeding, a Kentucky resident, when he rented a car from a Budget Renb-A-Car agency in Louisville. Mr. Breeding died while this insurance policy was in effect, and was legally intoxicated at the time of his death. The defendant insurer contended that the plaintiffs claim was excluded under policy language denying coverage for losses caused directly or indirectly by intoxicants. In response, the plaintiff argued that this exclusion was unenforceable, due to the insurer’s failure to comply with a provision in Kentucky’s insurance code requiring that policyholders be provided with a certificate of insurance setting forth the terms of coverage, as well as a provision in the policy itself calling for similar disclosures. Because Mr. Breeding had not been given such a certificate of insurance, the plaintiff argued that the defendant insurer could not escape liability by appealing to a policy exclusion that was never disclosed to the insured. In Breeding, the policy at issue included a choice-of-law clause providing that its terms were governed by “the laws of the state of delivery of the policy,” 633 S.W.2d at 719, and the master policy was delivered to Budget at its corporate offices in Delaware. Under Delaware law, in contrast to Kentucky law, the insurer was not required to furnish a certificate of insurance to each policyholder. Thus, in order to determine whether any policy exclusions applied, the Kentucky Supreme Court first had to decide whether the case before it was governed by Kentucky or Delaware law. The Court ruled that the insurance policy in question was controlled by Kentucky law, and that the defendant insurer was estopped from asserting the policy exclusion for losses attributable to intoxicants. In so holding, the Court first observed that it had previously abrogated the rigid lex loci contractus approach to determining the governing law in a contract dispute, and had instead adopted the “most significant relationship” test set forth at § 188 of the Restatement (Second) of Conflict of Laws. 633 S.W.2d at 719 (citing Lewis v. American Family Ins. Group, 555 S.W.2d 579, 581-82 (Ky.1977)). The Court then applied this § 188 test, comparing the respective interests of Kentucky and Delaware under the facts of the case before it: It is patently obvious that Kentucky has the greater interest in and the most significant relationship to this transaction and the parties. The insurance was purchased in Kentucky by a Kentucky resident from a Kentucky corporation [i.e., the local Budget rental car franchise]. The claim was initiated by a Kentucky resident, and the claim arose from an accidental death in Kentucky. On the other hand, Delaware has no significant relationship to the transaction and the parties. The [insurer] merely delivered the master insurance policy to the Delaware corporate office of Budget Rent-A-Car of America, a nationwide corporation having franchises among the fifty states. This one act of delivery, the only contact involving Delaware, does not establish a significant relationship, but merely one that is tenuous at best. 633 S.W.2d at 719. Notably, the Breeding Court did not apply, nor even mention, § 187 of the Restatement, which specifically addresses contractual choice-of-law provisions. At a minimum, then, Breeding indicates that the Kentucky courts will not automatically honor a choice-of-law provision, to the exclusion of all other considerations. Rather, despite a choice-of-law clause in the accidental death policy, the Breeding Court weighed the relative interests of Kentucky and Delaware in deciding which law to apply. Further, in making this determination, the Court gave virtually no weight to the choice-of-law provision. In the present case, the District Court fully adopted Breeding’s analysis, and concluded that “Kentucky clearly has the greater interest.” (8/23/96 Op. at 5,. J.A. at 197.) The lower court observed that the Abrams brothers are Kentucky residents, Tri-County’s store was located in Kentucky, and the Guaranty itself was executed in Kentucky. The sole contact with Tennessee, in the District Court’s view, was Wallace Hardware’s status as a Tennessee corporation. Conspicuously absent from this calculus was any discussion of the weight to be given to the parties’ own choice of Tennessee law to govern their agreement. Presumably, the court below read Breeding as requiring a wholly interest-based inquiry, without regard for the choice of law set forth in the parties’ contract. We find this was error. Specifically, we do not believe that Breeding can be construed as broadly precluding parties from making a reasonable and binding choice as to the law that will govern their contractual relationship. In reaching this conclusion, we begin by noting the significant distinctions between Breeding and the present case. In Breeding, the accidental death policy and its choice-of-law clause were not the subject of any negotiations, arms-length or otherwise. Indeed, Mr. Breeding was never even given a copy of the policy, and he had no knowledge of its terms. The Court found that this failure to apprise Mr. Breeding of the policy’s exclusions violated a Kentucky statute, the policy itself, and the “fundamental policy of this commonwealth.” Breeding, 633 S.W.2d at 718-20. Further, even if the policy had been provided to Mr. Breeding, he would have learned only that it was to be governed by “the laws of the state of delivery of the policy.” 633 S.W.2d at 719. He would not have been specifically informed that Delaware law would apply, nor would this have been apparent from the policy language. Here, by contrast, the Abrams brothers were represented by counsel in their dealings with Wallace Hardware, and they insisted that their attorney review the Guaranty before they would consider signing it. The one-page Guaranty provided, in plain language, that it was to be “governed by and construed in accordance with the laws of the State of Tennessee.” (J.A. at 61.) There is nothing in the record before us that might suggest that the Abrams brothers were unaware of this provision, or that they lacked a full opportunity to consider its ramifications. Moreover, while the District Court pointed to a “disparity in bargaining power” as one justification for its ruling, (12/19/97 Op. at 6, J.A. at 561), we find no evidentiary basis for this conclusion. Rather, this case apparently involves a fairly typical arms-length business transaction among parties of relatively equal bargaining power. Wallace Hardware’s mere insistence on personal guaranties as additional security for its extension of credit to Tri-County does not amount to the sort of overreaching or oppressive conduct that might allow a party to evade its contractual obligations. See Zeitz v. Foley, 264 S.W.2d 267, 268 (Ky.1954) (“[Contracts voluntarily made between competent persons are not to be set aside lightly.”); Carboline Co. v. Oxmoor Ctr., 40 U.C.C. Rep. Serv. (Callaghan) 1728, 1985 WL 185466 (Ky.Ct.App.1985) (finding, in a sale of goods case governed by the UCC, that “in the sophisticated commercial setting of this transaction the provision of the parties’ agreement excluding liability for consequential damages was not unconscionable”); Prudential Resources Corp. v. Plunkett, 583 S.W.2d 97, 100 (Ky.Ct.App.1979) (enforcing a forum selection clause and finding no overreaching conduct, where the parties dealt with each other “at arms length” in executing a “sophisticated drilling contract”); see also Forsythe v. BancBoston Mortgage Corp., 135 F.3d 1069, 1074 (6th Cir.1997) (observing that in the Kentucky case law, “[t]he doctrine of unconscionability is only used in rare instances, such as when a party abuses its right to contract freely”); L.K. Comstock & Co. v. Becon Constr. Co., 932 F.Supp. 948, 972-73 (E.D.Ky.1994) (“Kentucky courts frequently have upheld parties’ bargains, even if one-sided, examining all the circumstances surrounding the transaction and the relative bargaining positions of the parties,” and the “exceptional cases” deviating from this general rule have “involved one-sided, oppressive and unfairly surprising contracts, and not ... the consequences per se of uneven bargaining power or even a simple old-fashioned bad bargain.” (Internal quotations and citation omitted)). The Abrams brothers were free to negotiate changes to the Guaranty Agreement, or, failing that, to enter into a relationship with another supplier. Further, the parties’ choice of Tennessee law is not so inherently suspect as to support an inference of unfair advantage. Given these crucial differences, we decline to read Breeding as dictating that no weight be given to the Guaranty’s choice-of-law provision. Neither have we located any other Kentucky case suggesting that it is appropriate, in all circumstances, to displace the parties’ express contractual agreement as to the governing law. To be sure, in Harris Corp., supra, 712 F.2d at 1071, and again in Adam, supra, 130 F.3d at 230-31, we noted the tendency of Kentucky courts to apply their own law, even when a contractual provision might state otherwise. However, the state court decisions on which we relied, as well as Harris Corp. and Adam themselves, all arose from personal injuries suffered either within Kentucky or by Kentucky residents. See Adam, 130 F.3d at 221 (auto accident in Kentucky); Harris Corp., 712 F.2d at 1070 (plane crash in Kentucky); Grant v. Bill Walker Pontiac-GMC, Inc., 523 F.2d 1301, 1303 (6th Cir.1975) (auto accident in Kentucky); Breeding, 633 S.W.2d at 718 (accidental drowning in Kentucky); Foster v. Leggett, 484 S.W.2d 827, 829 (Ky.1972) (auto accident in Ohio, but deceased passenger was Kentucky resident and fatal trip began and was to have ended there); Arnett v. Thompson, 433 S.W.2d 109, 113 (Ky.1968) (auto accident in Kentucky); Wessling v. Paris, 417 S.W.2d 259, 260 (Ky.1967) (auto accident in Indiana, but both driver and passenger were Kentucky residents and trip began there). Most of these cases did not feature choice-of-law provisions — Harris Corp. and Adam, for example, did not — and none involved the alleged breach of a standard commercial contract. In contrast, two of the cases cited by the parties and the District Court did involve commercial contracts. First, in Paine v. La Quinta Motor Inns, Inc., 736 S.W.2d 355 (Ky.Ct.App.1987), the Kentucky Court of Appeals addressed a contract for the sale of land in Kentucky, which provided that Texas law would govern. The plaintiff sellers, a group of joint venturers, were Kentucky residents, while the defendant buyer, La Quinta, was a Texas corporation that wished to build a motel on the property. Five years after the sale was completed, the plaintiffs advised La Quinta that they planned to sell an adjacent parcel of property to another buyer for purposes of constructing a competing motel. When La Quinta responded that this would breach the parties’ agreement, the plaintiffs brought suit, seeking a declaration that enforcement of the agreement was barred by a Texas four-year statute of limitations. Citing Breeding and Harris Corp., the Court of Appeals conducted an interest-based analysis, and held that Kentucky’s fifteen-year statute of limitations governed: In the instant case, the property at the heart of the controversy is located in Kentucky, the sellers are in Kentucky, the buyers are in Kentucky by virtue of the franchisee, and the contract was apparently executed at least partially in Kentucky. The only contacts Texas has are the location of the parent corporation and the source of the contract. Our own citizens would have a cause of action in these circumstances, and our statute evinces a public policy that the legislature deems fifteen years to be an appropriate statute of limitations for written contracts. We see no reason to circumscribe this policy vis-a-vis a foreign corporation having the enumerated contacts with this forum. Paine, 736 S.W.2d at 357. Again, as in Breeding, the Court gave no weight to the parties’ express agreement as to the governing law. Next, in Tractor & Farm Supply, Inc. v. Ford New Holland, Inc., 898 F.Supp. 1198 (W.D.Ky.1995), the federal District Court considered a farm implement franchise agreement providing that Michigan law would apply. The plaintiff franchisee, a Kentucky corporation, claimed that the defendant terminated the franchise agreement without good cause, in violation of an alleged oral agreement that the relationship would continue absent the plaintiffs poor performance, and in violation of Michigan’s Franchise Investment Law. The defendant, a Delaware corporation that dealt with the plaintiff primarily through its Michigan branch office, argued that Kentucky law should apply. Upon reviewing the decisions in Breeding and Paine, the Court found both were distinguishable. First, the Court observed that Breeding “involved a relatively nonspecific designation of the applicable substantive law,” and that the defendant insurer could not “claim that it would be deprived of clearly ascertained and bargained-for rights if the forum state’s law were applied, since the company conducted business and delivered policies in Kentucky.” 898 F.Supp. at 1202. The Court further noted that the policy in Breeding was a “contract of adhesion, and a decision to apply its choice of law provision would have resulted in a substantial injustice to the insured.” 898 F.Supp. at 1202. As for Paine, the Court observed that it involved a choice among two states’ statutes of limitations, so that “the court’s decision in Paine was well in keeping with the tradition to apply the procedural law of the forum state, regardless of the choice of law decision regarding substantive issues.” 898 F.Supp. at 1203. Having surveyed and distinguished these prior decisions, the Court turned to the case before it, and elected to enforce the franchise agreement’s choice-of-law clause: The Court is confronted with conflicting choices, each having a certain appeal. Nevertheless, the decision is a clear one. Although the Sixth Circuit stated in Harris Corp., supra, that “Kentucky applies its own law unless there are overwhelming interests to the contrary,” a more fundamental goal of contract law is to uphold clearly ascertained and negotiated contract rights. To permit a drafter of the choice of law provision to challenge its legality is unpalatable to say the least. If any ambiguities in a contract are to be construed strictly against the drafter, the Court does not consider binding Defendant by its own provision to be much of a logical leap. Moreover, given that Defendant had substantial contacts with Michigan at the time of the contract’s creation, which renders the choice of Michigan law highly reasonable, Plaintiff should be entitled to rely on the signed agreement. Finally, public policy in Kentucky favors parties’ freedom to contract for substantive rights. Consequently, the Court will uphold the choice of law provision and will interpret the contract in accordance with Michigan law. 898 F.Supp. at 1203 (citations omitted). As is plain from the foregoing recitation, the case law does not provide a definitive answer to the question before us. The cases that are factually most similar to this one, Paine and Tractor & Farm Supply, reach contrary results. If Paine, a Kentucky Court of Appeals decision, were squarely on point, we would be obliged to follow it unless “convinced by other persuasive data that the highest court of the state would decide otherwise.” Ziebart Int’l Corp. v. CNA Ins. Cos., 78 F.3d 245, 250-51 (6th Cir.1996) (internal quotations and citations omitted). But, as noted in Tractor & Fann Supply, Paine implicated an issue not presented here: the distinction between substantive and procedural law. See Tractor & Farm Supply, 898 F.Supp. at 1203; see also Cole v. Mileti, 133 F.3d 433, 437 (6th Cir.1998) (“[Cjontractual choice-of-law clauses incorporate only substantive law, not procedural provisions such as statutes of limitations.”). And, more importantly, neither Paine nor any other state court decision expressly informs us whether the Kentucky courts would be willing to apply § 187 of the Restatement in a proper case. Turning to Tractor & Farm Supply, we note first that we need not defer to this federal District Court explication of an issue of Kentucky law. See Salve Regina College v. Russell, 499 U.S. 225, 238-39, 111 S.Ct. 1217, 1224-25, 113 L.Ed.2d 190 (1991). In any event, that case also is distinguishable from this one, as it featured a contracting party’s attempt to nullify a choice-of-law clause inserted in the contract at its own insistence. To be sure, Tractor & Farm Supply directly weighs in on the question before us, employing a § 187 analysis to uphold a choice-of-law clause. Yet, that case serves as dubious authority on this point, since the Court applied § 187 only after first stating that Breeding had done so. See Tractor & Farm Supply, 898 F.Supp. at 1202. In fact, as we observed earlier, Breeding applied § 188 of the Restatement, and did not even mention § 187. In short, we find no clear signposts in the prior decisional law. Nevertheless, we conclude that, in a standard commercial breach-of-contract case such as we have here, the Kentucky courts would choose to adopt § 187 of the Restatement as their analytical framework for addressing a contractual choice-of-law clause. Initially, we note that Breeding itself lends considerable support to this conclusion. While the Kentucky Supreme Court did not cite § 187 in that decision, its analysis precisely tracked the language of that provision. First, just as § 187 calls for rejection of a choice-of-law clause where “the chosen state has no substantial relationship to the parties or the transaction,” Breeding found that the chosen state in that case, Delaware, had “no significant relationship to the transaction and the parties.” Breeding, 633 S.W.2d at 719. Next, just as § 187 asks whether “application of the law of the chosen state would be contrary to a fundamental policy of a state which has a materially greater interest,” Breeding held that the application of Delaware law would violate a “fundamental policy” of Kentucky to see that insureds are given notice of limitations to their insurance coverage. 633 S.W.2d at 720. Thus, we view Breeding as employing a § 187 analysis, albeit only implicitly. We also find ourselves in agreement with a portion of the District Court’s reasoning in Tractor & Farm Supply, a case that, as noted earlier, fairly closely resembles this one. As the Court emphasized in that case, a “fundamental goal of contract law is to uphold clearly ascertained and negotiated contract rights.” 898 F.Supp. at 1203. Kentucky’s express recognition of this principle in the choice-of-law context is evidenced Jpy its adoption of § 1-105 of the Uniform Commercial Code (“UCC”), which gives effect to the contracting parties’ agreement as to the law that “shall govern their rights and duties” in a given UCC transaction. Ky. Rev.Stat. Ann. § 355.1-105(1). Wallace Hardware does not contend on appeal that this UCC provision directly controls the Guaranty at issue. Nonetheless, Wallace Hardware asserts, and we agree, that UCC § 1-105 demonstrates Kentucky’s willingness to allow the parties to a contract to select the law that will govern their relationship, as well as its determination to enforce a reasonable choice of law. Finally, we cannot overlook the general tendency of the Kentucky Supreme Court to look to a variety of other Restatement provisions in resolving choice-of-law and related issues. See, e.g., Beaven v. McAnulty, 980 S.W.2d 284, 288 (Ky.1998) (applying § 84 of the Restatement (Second) of Conflict of Laws); Prezocki, supra, 938 S.W.2d at 889 (applying § 80 of the Restatement); Breeding, 633 S.W.2d at 719 (applying § 188); Lewis, supra, 555 S.W.2d at 581-82 (applying §§ 188 and 193). We see no basis for concluding that § 187 is somehow disfavored by the courts of that state; rather, the more logical conclusion to be drawn from the case law is that the proper occasion has not yet arisen for adopting that provision. Simply stated, we believe we are confronted with such circumstances here. Thus, while we acknowledge that we are writing on something of a blank slate, we find that § 187 of the Restatement sets forth the appropriate standards for determining whether to enforce the Guaranty’s choice of Tennessee law. 2. Under § 187 of the Restatement, the Guaranty’s Choice-of-Law Clause Is Enforceable. As noted above, the District Court did not consider § 187 of the Restatement in making its choice-of-law determination. Instead, it employed a purely interest-based approach and, in so doing, accorded no weight whatsoever to the parties’ written agreement that Tennessee law would govern their contractual relationship. Upon applying § 187 to the facts of this case, and adding the parties’ choice of law to the other factors addressed by the court below, we find that the balance tips decisively in favor of enforcing the Guaranty’s selection of Tennessee law. Under § 187, the parties’ choice of law should be honored unless (1) “the chosen state has no substantial relationship to the parties or the transaction and there is no other reasonable basis for the parties’ choice,” or (2) “application of the law of the chosen state would be contrary to a fundamental policy of a state which has a materially greater interest.” Restatement (Second) of Conflict of Laws § 187. The first prong of this test is easily satisfied here. Wallace Hardware is located in Tennessee, and Tri-County elected to do business with, and purchase goods from, this Tennessee corporation. Further, when Tri-County defaulted on its contractual obligations, the injury was felt by Wallace in Tennessee. This provides a sufficiently reasonable basis for the parties’ choice of Tennessee law. See Johnson v. Ventra Group, Inc., 191 F.3d 732, 739-40 (6th Cir.1999). The second, “fundamental policy” prong of § 187 presents a closer question. The District Court invalidated the Guaranty on the basis of a Kentucky statute providing: No guaranty of an indebtedness which either is not written on, or does not expressly refer to, the instrument or instruments being guaranteed shall be valid or enforceable unless it is in writing signed by the guarantor and contains provisions specifying the amount of the maximum aggregate liability of the guarantor thereunder, and the date on which the guaranty terminates. Ky.Rev.Stat. Ann. § 371.065(1). Wallace Hardware concedes that the Guaranty did not comply with this statute, as it was drawn up separately from the underlying Operating Agreement and Security Agreement between Wallace and Tri-County, it did not expressly refer to those agreements, and it did not specify the maximum liability of the Abrams brothers as guarantors. Tennessee law, however, imposes no comparable restrictions upon the form and content of guaranties. Thus, as the lower court recognized, the choice-of-law determination is truly dispositive of Wallace’s breach-of-guaranty claim. This leads to the question whether Kentucky’s statutory restrictions on guaranties represent a “fundamental policy” of that' state. In arguing that they do not, Wallace Hardware asserts that Kentucky’s interests do not extend to contracts between private parties, and that “Kentucky does not care whether the Abrams must pay or not pay Wallace Hardware” under the Guaranty. (Appellant’s Br. at 27.) We cannot accept this narrow view of Kentucky public policy. Surely, the Kentucky legislature’s enactment of § 371.065 evinces its concern with wholly “private” transactions involving guaranties, and its desire to protect its residents against open-ended and overreaching obligations to repay indebtedness. These are sufficient “state interests” to warrant further inquiry under the “fundamental policy” prong of § 187. Contrary to Wallace Hardware’s assertion, we know of no requirement that a law must touch upon matters of uniquely “public” concern in order to constitute a state’s “fundamental policy.” Cf. Banek, supra, 6 F.3d at 362 (finding that a Michigan statute regulating franchise agreements between private parties “represents Michigan public policy”). Nevertheless, Kentucky’s enactment of § 371.065 is not enough, standing alone, to invalidate the parties’ choice of Tennessee law. “The fact ... that a different result might be achieved if the law of the chosen forum is applied does not suffice to show that the foreign law is repugnant to a fundamental policy of the forum state.” Johnson, 191 F.3d at 740; see also Restatement (Second) of Conflict of Laws § 187 cmt. g. Rather, “it must be shown that there are significant differences in the application of the law of the two states.” Tele-Save Merchandising Co. v. Consumers Distrib. Co., 814 F.2d 1120, 1123 (6th Cir.1987). Further, in Tele-Save, we quoted the Restatement’s commentary that a statute may embody a “fundamental” state policy if it is “designed to protect a person against the oppressive use of superior bargaining power,” and we cited as an example a statute “involving the rights of an individual insured as against an insurance company.” 814 F.2d at 1123 (quoting Restatement (Second) of Conflict of Laws § 187 cmt. g). We then concluded that the statute at issue in that case, the Ohio Business Opportunity Plans Act, did not advance a fundamental state policy, reasoning that the contract in question was not the product of “unequal bargaining strength,” but had been “freely negotiated by aggressive and successful business executives, untainted by the suspicion and misgivings characteristic of adhesion contracts.” 814 F.2d at 1123. In this case, the Abrams brothers point to the bare enactment of § 371.065 as proof of a “fundamental” policy, and they cite no additional authority for this proposition. To be sure, the Kentucky statute on its face reflects a desire to protect against overbroad guaranties of indebtedness made without adequate disclosure, We may presume, then, that the statute is intended to protect against the misuse of superior bargaining power in the context of credit transactions. Yet, as we have already noted, the evidence in this case reveals an arms-length transaction between parties represented by counsel, and not a contract of adhesion dictated by one party. Consequently, while § 371.065 might well vindicate a “fundamental” policy in other instances, we find no basis for concluding that Kentucky has a “fundamental” interest, under the facts of this case, in protecting the Abrams brothers against having to comply with the terms of their arms-length agreement with Wallace Hardware. Indeed, though Wallace Hardware has acknowledged the Guaranty’s failure to comport with the literal terms of § 371.065, we note that the purposes behind that statute were largely served here. Although the Guaranty was neither written on nor expressly refers to the underlying instrument being guaranteed, it does provide that the guarantors’ promise to pay encompassed Tri-County’s “obligation pursuant to a certain note(s), accounts receivable, and/or security agreement executed by [Tri-County] in favor of Wallace on the date hereof.” (J.A. at 61.) Thus, the Abrams brothers could not have been uncertain — and, importantly, they do not claim any uncertainty — as to the indebtedness they were agreeing to repay, particularly since both brothers signed the contemporaneous Operating Agreement and Lonnie Abrams signed the Security Agreement. Moreover, given the short duration of the parties’ relationship, there can be no claim that Wallace Hardware subsequently expanded the scope of the Abrams’ obligations beyond the parties’ contemplation when they executed the Guaranty. Rather, so far as the record reveals, these obligations extended only to the hardware inventory supplied by Wallace in accordance with the Operating Agreement. In short, there was no overreaching here of the sort addressed by the Kentucky statute, either in the terms of the Guaranty itself or in the parties’ subsequent conduct under their agreements. Finally, we should not overlook the fact that § 371.065 represents only one of the policies in play here. As observed in Tractor & Farm Supply, a “fundamental goal of contract law is to uphold clearly ascertained and negotiated contract rights,” and “public policy in Kentucky favors parties’ freedom to contract for substantive rights.” Tractor & Farm Supply, 898 F.Supp. at 1203. Nothing in the record before us suggests that the Abrams brothers lacked knowledge of, or an opportunity to review, the terms of the Guaranty they were being asked to sign, including its choice-of-law provision. They received the benefit of the bargain in this transaction when Wallace Hardware extended credit and provided inventory that allowed them to open their hardware store. We see no reason to deny Wallace Hardware a benefit for which it bargained in this same transaction — namely, the right to apply Tennessee law in construing and enforcing the Guaranty. Accordingly, we reverse the District Court’s application of Kentucky law in resolving Wallace Hardware’s breach-of-guaranty claim, and we reinstate and remand this claim to the lower court for adjudication under Tennessee law. B. The Abrams Brothers Are Entitled to Assert Tri-County’s Breach-of-Contract Defenses in Contesting Wallace Hardware’s Claims. In his answer to Wallace Hardware’s initial complaint, Lonnie Abrams alleged that his purported liability under the Guaranty was reduced or eliminated by virtue of Wallace Hardware’s prior breach of its agreement with Tri-County. More specifically, he alleged in his answer that Wallace Hardware “failed to provide competent assistance in the maintenance of proper inventory levels, failed to provide competent business advice and assistance, failed to provide inventory at a competitive cost, failed to provide competent assistance in the pricing of such inventory, and failed to provide favorable terms of financing and repayment.” (Lonnie Abrams’ Answer at ¶ 17, J.A. at 35.) Likewise, although Bill Abrams’ initial answer lacked these allegations, he subsequently sought and was granted leave to amend his answer to include these so-called “corporate defenses” challenging Tri-County’s underlying indebtedness to Wallace Hardware. As its second issue on appeal, Wallace Hardware contends that the District Court erred by allowing the Abrams brothers to assert these “corporate defenses.” While we do not fully subscribe to the reasoning of the court below, we find no error in its ultimate determination. In arguing that these defenses should be stricken, Wallace Hardware first contends that the Abrams brothers lack “standing” to assert any defenses Tri-County might have put forward to challenge its underlying indebtedness to Wallace Hardware. In addition, Wallace Hardware argues that these defenses belonged exclusively to the bankruptcy estate when the Chapter 7 proceeding was commenced against TriCounty, and that the defenses were waived or released when the bankruptcy trustee entered into a settlement with Wallace Hardware. In support of these two contentions, Wallace Hardware relies principally on our decision in Honigman v. Comerica Bank (In re Van Dresser Corp.), 128 F.3d 945 (6th Cir.1997). Bill Abrams responds, and the District Court held, that the bankruptcy trustee’s settlement with Wallace Hardware cannot bind the Abrams brothers because, under the standard set forth in Becherer v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 43 F.3d 1054, 1069-70 (6th Cir.1995), the trustee and the Abrams were not in privity. (12/19/97 Op. at 4, J.A. at 559.) We believe that both Wallace Hardware’s argument and Bill Abrams’ response largely miss the point, as neither fully addresses the significance of the Abrams’ status as guarantors of Tri-County’s indebtedness. We begin our analysis of this issue by noting some basic principles of the law of guaranties. As guarantors, the Abrams brothers are liable to Wallace Hardware only to the extent that the principal debtor, Tri-County, was liable to Wallace. See Moore, Owen, Thomas & Co. v. Coffey, 992 F.2d 1439, 1449 (6th Cir.1993); Rhode Island Hosp. Trust Nat’l Bank v. Ohio Casualty Ins. Co., 789 F.2d 74, 78-79 (1st Cir.1986). Thus, for example, if Tri-County had brought suit and prevailed on the theories now asserted by the Abrams brothers as affirmative defenses, both Tri-County’s and the Abrams’ liability to Wallace Hardware would have been reduced by the amount of the judgment in that suit. There are circumstances, however, in which a discharge of the principal debtor’s liability does not extinguish the guarantor’s liability. For instance, the terms of the guaranty itself may permit a creditor to compromise a claim against the principal debtor without discharging the guarantor’s liability, and the courts generally will enforce such terms. See, e.g., United States v. Beardslee, 562 F.2d 1016, 1022-24 (6th Cir.1977); Aetna Life Ins. Co. v. Anderson, 848 F.2d 104, 107-08 (8th Cir.1988). The Guaranty in this case so provides, stating that “Guarantor authorizes Wallace, without notice or demand and without affecting Guarantor’s liability hereunder, from time to time to (a) renew, compromise, extend, accelerate or otherwise change the time for payment of, or otherwise change the terms of the indebtedness or any part thereof.” (J.A. at 61.) Also of relevance to this case is “[t]he general rule ... that a discharge in bankruptcy does not affect a guarantor’s liability.” Applewood Chair Co. v. Three Rivers Planning & Dev. Dist. (In re Applewood Chair Co.), 203 F.3d 914, 918 (5th Cir.2000) (citing 11 U.S.C. § 524(e)); see also Coffey, 992 F.2d at 1449. Within these broad confines, we now turn to the specific question before us: whether the Abrams brothers may assert the breach-of-contract defenses that Tri-County could have asserted if sued directly on the underlying indebtedness. “As a general rule, when a creditor sues a guarantor and does not name the principal debtor in the action, the guarantor is not entitled to raise defensively the claims of the principal debtor against the creditor.” First Texas Serv. Corp. v. Roulier, 750 F.Supp. 1056, 1060 (D.Colo.1990); see also Rhode Island Bank, 789 F.2d at 78 n. 4. This general rule, however, extends only so far as necessary to serve its purpose, which is “to protect the claims of the principal, since the guarantor may not be in the best position to assert them.” Roulier, 750 F.Supp. at 1061; see also Continental Group, Inc. v. Justice, 536 F.Supp. 658, 661 (D.Del.1982) (observing that the general rule is “designed to protect the underlying claims of the principal and to minimize litigation among the parties”). Accordingly, the courts have recognized three exceptions to this rule: A guarantor may assert the independent claim of the principal to set-off the creditor’s claim against the guarantor where (1) the surety has taken an assignment of the claim or the principal has consented to the surety’s use of the claim, (2) both principal and surety are joined as defendants, or (3) the principal is insolvent. Continental Group, 536 F.Supp. at 661 (citing Restatement of Security § 133(2)). Plainly, the third of these exceptions applies here, since Tri-County has been placed in bankruptcy. “[I]t is well established that when the principal is insolvent, the guarantor may set-off the principal’s claims against the creditor.” Continental Group, 536 F.Supp. at 661 (citing cases). Of course, this is precisely what the Abrams brothers seek to do through the challenged affirmative defenses. Moreover, the first of these exceptions arguably applies as well, as “[s]everal courts have held that the principal’s consent to the guarantor’s assertion of claims will be presumed when the guarantor controls the principal.” Roulier, 750 F.Supp. at 1061. According to the bankruptcy court, Lonnie Abrams was the “president and sole shareholder of Tri-County.” (J.A. at 2.) Thus, there would appear to be ample basis for permitting the Abrams brothers to assert the “corporate” defenses at issue. In arguing to the contrary, Wallace Hardware ignores the above-cited case law, and attempts instead to invoke decisions and apply “rules” that simply do not extend to the circumstances presented here. First, while it is true, as Wallace Hardware asserts, that a guarantor may not assert the “personal” defenses of the principal debtor, these “personal” defenses encompass such matters as infancy and duress, see Rhode Island Bank, 789 F.2d at 79 n. 6, and not the breach-of-contract defense the Abrams brothers seek to advance here. Next, although a guarantor cannot pursue an affirmative recovery by pointing to the creditor’s breach of its underlying contract with the principal debtor, the guarantor may invoke this same breach-of-contract theory defensively — subject, of course, to the general rule and exceptions set forth above — to achieve a set-off against the amount he otherwise would owe to the creditor. See Continental Group, 536 F.Supp. at 661-62. This distinction between affirmative recoveries and defensive set-offs provides but one of several bases for distinguishing the present matter from the case upon which Wallace Hardware seeks to rely, In re Van Dresser Corp. In that case, Daniel Honigman, a shareholder of the bankrupt Van Dresser Corporation, asserted various state-law tort claims against Comerica Bank, under the theory that the bank had contributed to the downfall of Van Dresser by aiding and abetting the depletion of assets of two of its subsidiaries. As a result of its financial difficulties, Van Dresser defaulted on two loans totaling $1,125,000, and Honigman was forced to repay them as co-signer and guarantor. Honigman argued that he was entitled to recover these personal losses in an individual tort suit against the bank. We disagreed, and substantially affirmed the district court’s dismissal of Honigman’s state-law claims. In so holding, we pointed out that the bankruptcy trustees for Van Dresser and its two subsidiaries had already pursued claims against the bank during the course of the bankruptcy proceedings, that these claims had been settled, and that Honigman, as a creditor, had been given notice of the proposed settlement and had not objected. Thus, Honigman’s separate claims amounted to an attempt to recover twice for the same tortious conduct: [Honigman] has cited no case for the proposition that a corporation and its shareholder can both recover fully for a single tortious action, and we conclude that none exists. The absence of case law on this point is not surprising, in light of the fact that the result for which Honigman argues cannot logically be sustained. The defendants here allegedly took a finite amount of money from [Van Dresser’s subsidiaries].... [T]hey cannot be required to repay the principal amount of $2.7 million more than once. If a thief steals a diamond necklace from a