Title: Rainbow Country Rentals and Retail, Inc. v. Ameritech Publishing, Inc.

State: wisconsin

Issuer: Wisconsin Supreme Court

Document:

2005 WI 153 
 
 
SUPREME COURT OF WISCONSIN 
 
 
 
 
 
CASE NO.: 
2004AP239 
COMPLETE TITLE: 
 
 
Rainbow Country Rentals and Retail, Inc.,  
d/b/a Oconomowoc Rental Center,  
          Plaintiff-Appellant, 
     v. 
Ameritech Publishing, Inc., d/b/a  
Ameritech Advertising Services,  
          Defendant-Respondent. 
 
 
 
 
ON CERTIFICATION FROM THE COURT OF APPEALS 
 
 
OPINION FILED: 
November 22, 2005   
SUBMITTED ON BRIEFS: 
        
ORAL ARGUMENT: 
September 7, 2005   
 
 
SOURCE OF APPEAL: 
 
 
COURT: 
Circuit   
 
COUNTY: 
Waukesha   
 
JUDGE: 
Lee S. Dreyfus, Jr.   
 
 
 
JUSTICES: 
 
 
CONCURRED: 
        
 
DISSENTED: 
BRADLEY, J., dissents (opinion filed).   
 
NOT PARTICIPATING: ABRAHAMSON, C.J., did not participate.   
 
 
 
ATTORNEYS: 
 
For the plaintiff-appellant there were briefs (in the court 
of appeals and the supreme court) by Jonathan P. Groth and 
Pitman, Kyle & Sicula, S.C., Milwaukee, and oral argument by 
Jonathan P. Groth. 
 
For the defendant-respondent there were briefs (in the 
court of appeals and the supreme court) by Terry E. Johnson, 
Peter F. Mullaney and Peterson, Johnson & Murray, S.C., 
Milwaukee, and oral argument by Terry E. Johnson. 
 
 
2005 WI 153
NOTICE 
This opinion is subject to further 
editing and modification.  The final 
version will appear in the bound 
volume of the official reports.   
No.  2004AP239  
(L.C. No. 
2002CV63) 
STATE OF WISCONSIN  
 
 
   : 
IN SUPREME COURT 
 
 
Rainbow Country Rentals and Retail, Inc. d/b/a 
Oconomowoc Rental Center, 
 
          Plaintiff-Appellant, 
 
     v. 
 
Ameritech Publishing, Inc. d/b/a Ameritech 
Advertising Services, 
 
          Defendant-Respondent. 
 
 
 
FILED 
 
NOV 22, 2005 
 
Cornelia G. Clark 
Clerk of Supreme Court 
 
 
 
 
 
APPEAL from an order of the Circuit Court for Waukesha 
County, Lee S. Dreyfus, Jr., Judge.  Affirmed.   
 
¶1 
JON 
P. 
WILCOX, 
J.   This 
case 
comes 
to 
us 
on 
certification from the court of appeals.  The appellant, Rainbow 
Country Rentals and Retail, Inc., d/b/a Oconomowoc Rental Center 
(Rainbow), appealed an order of the Circuit Court for Waukesha 
County, Lee S. Dreyfus, Jr., Judge, granting summary judgment to 
Ameritech Publishing, Inc., d/b/a Ameritech Advertising Services 
(API). 
 
No. 
2004AP239   
 
2 
 
I. ISSUE 
¶2 
The court of appeals certified the following question:  
Whether this court’s holding in Discount Fabric House of Racine, 
Inc. v. Wisconsin Telephone Co., 117 Wis. 2d 587, 345 N.W.2d 417 
(1984), that an exculpatory clause in a yellow pages advertising 
contract was unconscionable as against public policy is still 
viable today given the changes that have occurred in the 
telecommunications industry in the two decades since that 
decision.   
¶3 
We conclude that Discount Fabric is still viable 
today.  However, the case presented to us is factually distinct 
from Discount Fabric in two important ways.  First, Ameritech 
does not possess a monopoly as Wisconsin Telephone did when 
Discount Fabric was decided.  Second, when comparing all of the 
circumstances of this case with Discount Fabric, the clause at 
issue is not exculpatory, but rather, a valid and enforceable 
stipulated damages clause.  Therefore, we affirm the circuit 
court’s grant of summary judgment in favor of API. 
II. FACTUAL BACKGROUND AND PROCEDURAL POSTURE 
¶4 
On August 8, 1999, Rainbow contracted with API for the 
listing of its business in the November 1, 1999, edition of the 
Oconomowoc and Waukesha Ameritech Pages Plus Yellow Pages 
telephone directories, in addition to the May 1, 2000, edition 
of the Watertown Ameritech Pages Plus Yellow Pages telephone 
directory.  API subsequently omitted Rainbow's entire listing 
from each of the directories.   
No. 
2004AP239   
 
3 
 
¶5 
On January 7, 2002, Rainbow filed a complaint against 
API in the Circuit Court for Waukesha County alleging breach of 
contract and negligence for business losses resulting from API's 
omission of Rainbow's advertisement in the directories.  As an 
affirmative defense, API contended that if a contract did exist 
between the parties, the contract contained a liquidated damages 
provision limiting the liability of API on the contract.  This 
provision reads as follows: 
8. 
ERRORS IN OR OMISSIONS OF ADVERTISING SOMETIMES 
OCCUR.  ANY ERRORS OR OMISSIONS MUST BE REPORTED TO US 
WITHIN ONE HUNDRED TWENTY (120) DAYS AFTER THE ISSUE 
DATE OF THE DIRECTORY; OTHERWISE, WE WILL HAVE NO 
LIABILITY TO YOU.  IN ORDER TO MAINTAIN OUR PRICING 
SCHEDULES, WE CANNOT AND DO NOT ACCEPT LIABILITY FOR 
LOST PROFITS OR FOR ANY INCIDENTAL OR CONSEQUENTIAL 
DAMAGES ARISING OUT OF ERRORS OR OMISSIONS.  WE ARE 
ALSO NOT RESPONSIBLE FOR ERRORS OR OMISSIONS CAUSED BY 
ACTS OF GOD, GOVERNMENTAL AUTHORITY OR OTHER ACTS 
BEYOND OUR REASONABLE CONTROL.  IF AN ERROR OR 
OMISSION SHOULD OCCUR, UNLESS A GREATER LIMIT TO OUR 
LIABILITY HAS BEEN AGREED TO BY US IN WRITING FOR 
WHICH YOU HAVE AGREED TO PAY ADDITIONAL CHARGES FOR 
OUR TAKING A GREATER RISK OF LOSS, YOU AGREE THAT THE 
FOLLOWING MAXIMUM ADJUSTMENTS TO THE INVOICED AMOUNTS 
WILL APPLY AS A FINAL RESOLUTION: 
a. 
All 
other 
content 
errors 
(other 
than 
those 
specified in this paragraph). . . . 10% 
b. 
Incorrect spelling of a word (other than business 
name). . . . 10% 
c. 
Incorrect 
sequencing 
of 
display 
advertisement. . . . 20% 
d. 
Wrong alternate phone number, e-mail address or 
other identification. . . . 25% 
e. 
Incorrect spelling of a business name. . . . 65% 
f. 
Wrong address. . . . 65% 
No. 
2004AP239   
 
4 
 
g. 
Wrong primary telephone number. . . . 100% 
h. 
Complete 
omission 
of 
an 
advertising 
unit. . . . 100% 
plus 
a 
future 
PAGESPLUS 
advertising credit of like amount 
i. 
Wrong 
color. . . . amount 
invoiced 
for 
the 
requested color 
j. 
No adjustments will be made on advertising units 
(either display or listing) which were free to 
you or for which no charge was made or invoiced. 
UNDER NO CIRCUMSTANCES (1) WILL OUR LIABILITY FOR ANY 
ADVERTISING UNIT EXCEED THE AMOUNT YOU HAVE ACTUALLY 
PAID FOR IT TOGETHER WITH FUTURE PAGESPLUS ADVERTISING 
CREDIT OF LIKE AMOUNT NOR (2) WILL WE HAVE ANY 
OBLIGATION TO RECALL, SUPPLEMENT OR OTHERWISE AMEND 
DIRECTORIES.   
¶6 
Prior to the omissions, Frank Paoletti, an API 
representative, and Kim Gradinjan, one of Rainbow's co-owners, 
signed an Ameritech Customer Receipt.  The document consisted of 
a front and back page.  The front page listed the directories 
that Rainbow's advertisement was to appear in, along with the 
monthly charge for each advertisement.  The back page listed the 
terms of the agreement.  Immediately above the signature line on 
the front page, the contract included the following language: 
I HAVE READ AND UNDERSTAND THE TERMS AND CONDITIONS ON 
THE FACE AND REVERSE SIDE, PARTICULARLY THE PARAGRAPH 
WHICH LIMITS MY REMEDIES AND PUBLISHER'S MAXIMUM 
LIABILITY IN THE EVENT OF ANY ERROR OR OMISSION. 
¶7 
Rainbow does not dispute that the omitted advertising 
was subject to the contract.  Furthermore, Rainbow admitted that 
Gradinjan signed the contract and read the contract prior to 
signing it.   
No. 
2004AP239   
 
5 
 
¶8 
On June 2, 2003, API filed a partial summary judgment 
motion to limit the contract damages to the amount set forth in 
the schedule of potential damages within the contract and to 
dismiss the negligence claim.  In response, Rainbow argued that 
the damage limitation provision was void and unenforceable under 
this court's decision in Discount Fabric, 117 Wis. 2d 587.  
Additionally, Rainbow conceded that the economic loss doctrine 
barred its negligence claim, and it agreed to dismiss that cause 
of action.   
¶9 
In support of its motion, API submitted an affidavit 
from Craig Cerqua, one of API's Wisconsin regional marketing 
managers.  Cerqua made the following pertinent assertions:  (1) 
API's competitors, including USXchange and Yellow Book USA, 
publish their own version of yellow pages telephone directories 
in all of the major directory markets throughout Wisconsin; (2) 
Beginning 
approximately 
20 
years 
ago, 
companies 
such 
as 
Community Directories, Inc. (which was purchased by Sprint in 
the early 1990s and is now known as Yellow Book USA), have 
competed with API in most of the major directory markets 
throughout Wisconsin; (3) Since 1998, USXchange has annually 
published 
the 
"Milwaukee 
One 
Book" 
covering 
the 
greater 
Milwaukee metropolitan area; (4) Consumers in the Waukesha area 
consulted API's competitors 9 percent of the time in 1998, 
compared to 41 percent of the time in 2002; (5) Consumers in the 
Milwaukee area consulted API's competitors four percent of the 
time in 1998, compared to 33 percent of the time in 2002; (6) 
For several years, USXchange has invested substantial sums of 
No. 
2004AP239   
 
6 
 
advertising money in various media outlets; and (7) Yellow pages 
directories 
are 
available 
on 
the 
Internet, 
and 
several 
competitors currently publish such information on the Internet.   
¶10 In response, Rainbow submitted the affidavit of Frank 
Paoletti, API's representative to the transaction.  Paoletti 
made the following assertions: (1) Although other books sold ads 
that were distributed throughout the relevant areas, there was 
no other book that had the depth of distribution comparable to 
that of API's publication; (2) API had no real competitors in 
the market during the relevant time frame; and (3) During the 
negotiations with Rainbow, he was not authorized to change the 
terms of the contract between the parties.   
¶11 On August 4, 2003, the circuit court issued an oral 
decision and order granting API's motion for partial summary 
judgment, which effectively enforced the terms of the contract 
as stated.  The court determined that the circumstances that 
existed when Discount Fabric was decided were significantly 
distinguishable from the circumstances that are present in this 
case.  The court recognized that during the relevant time frame 
in Discount Fabric, Wisconsin Telephone had a monopoly on local 
telephone service; there were no other service options available 
to the plaintiff in Racine in 1978.  In contrast, Rainbow had 
other local telephone service providers and other yellow pages 
providers available to take its business.  Furthermore, the 
court determined that the provisions of API's advertising 
contract were clearly stated on a one-page, two-sided document.  
The court also noted that these kinds of business contracts 
No. 
2004AP239   
 
7 
 
where the parties stipulate to the damages in the event some 
kind of harm occurs have been approved by the courts with great 
regularity.  Thus, under all the circumstances, the court 
determined that API's contract was not unconscionable as against 
public policy.   
¶12 On November 4, 2003, the court entered its written 
order for summary judgment, and on January 28, 2004, Rainbow was 
awarded $5253 (100 percent of the annual cost of the omitted 
ads), together with taxable costs.  Rainbow appealed, and the 
court of appeals certified the aforementioned question to this 
court.   
III. STANDARD OF REVIEW 
¶13 This case comes before us on summary judgment.  "We 
review 
a 
circuit 
court's 
grant 
of 
summary 
judgment 
independently, applying the same methodology as the circuit 
court."  Smaxwell v. Bayard, 2004 WI 101, ¶12, 274 Wis. 2d 278, 
682 N.W.2d 923 (citing Town of Delafield v. Winkelman, 2004 WI 
17, ¶15, 269 Wis. 2d 109, 675 N.W.2d 470).  Pursuant to 
Wis. Stat. § 802.08(2) (2003-04), summary judgment "shall be 
rendered 
if 
the 
pleadings, 
depositions, 
answers 
to 
interrogatories, and admissions on file, together with the 
affidavits, if any, show that there is no genuine issue as to 
any material fact and that the moving party is entitled to a 
judgment as a matter of law."  "We view the summary judgment 
materials in the light most favorable to the nonmoving party." 
Smaxwell, 
274 
Wis. 2d 278, 
¶12 
(citing 
Torgerson 
v. 
Journal/Sentinel, Inc., 210 Wis. 2d 524, 537, 563 N.W.2d 472 
No. 
2004AP239   
 
8 
 
(1997)).  "Summary judgment should not be granted, 'unless the 
facts presented conclusively show that the plaintiff's action 
has no merit and cannot be maintained.'"  Id. (quoting Goelz v. 
City of Milwaukee, 10 Wis. 2d 491, 495, 103 N.W.2d 551 (1960)).  
"Where the material facts are not disputed, the court is 
presented solely with a question of law, subject to de novo 
review."  Id. (citing Winkelman, 269 Wis. 2d 109, ¶16).   
IV. ANALYSIS 
¶14 Rainbow 
challenges 
the 
circuit 
court's 
decision 
regarding 
partial 
summary 
judgment. 
 
Rainbow 
essentially 
contends that Discount Fabric is exactly on point with the facts 
of this case, and therefore, it should control our decision.  We 
do not reach the same conclusion. 
¶15 In Discount Fabric, 117 Wis. 2d  at 589, Wisconsin 
Telephone 
omitted 
the 
plaintiff's 
trade 
name 
from 
its 
advertisement in the 1978 Racine yellow pages after correctly 
printing the same ad for three consecutive years.  The plaintiff 
sued for damages, and the telephone company raised as a defense 
the following clause from the form contract that the telephone 
company used for all of its yellow pages advertising sales:  
"Applicant agrees that the Telephone Company shall not be liable 
for errors or omissions (including total omissions) in directory 
advertising beyond the applicable charges for the item or items 
in which errors or omissions occur for the issue life of the 
directory involved."  Id.   
No. 
2004AP239   
 
9 
 
¶16 The court determined that the above clause made the 
contract exculpatory in nature.1  Id. at 590-91.   
A 
clearer 
example 
of 
a 
take-it-or-leave-it 
transaction is hard to imagine.  The only way Discount 
Fabric House could purchase a display ad in the yellow 
pages was to sign a standard form contract provided by 
the telephone company.  Although there are "yellow 
pages" 
published 
by 
independent 
publishers, 
the 
telephone company's yellow pages is the only one 
distributed to everyone with a telephone.   
Id. at 591.   
¶17 The court noted that Wisconsin Telephone possessed "a 
decisive advantage of bargaining strength."  Id. at 594.  At the 
time of the decision, Wisconsin Telephone was a monopoly subject 
to regulation by the Public Service Commission.  Id. at 593.  
The court recognized that Wisconsin Telephone had "an exclusive 
private advertising business which, if not legally monopolistic, 
is tied to its public utility service of providing telephone 
service."  Id. at 594.  The court went on to state that "[t]here 
is nothing in this record to show that there is any other mode 
of advertising available to Discount Fabric House which reaches 
as many customers, is of a similar nature as the yellow pages, 
and is inexorably tied to the telephone service."  Id.  
Furthermore, the parties 
made two 
important 
stipulations.  
                                                 
1 Despite the wealth of authority from other jurisdictions 
that treated yellow pages advertising "as a matter of private 
contract under which the parties may validly limit their 
liability[,]" the court refused to adopt this rationale.  
Discount Fabric House of Racine, Inc. v. Wisconsin Telephone 
Co., 117 Wis. 2d 587, 592, n.1, 345 N.W.2d 417 (1984) (citing 19 
cases).   
No. 
2004AP239   
 
10 
 
First, "none of the telephone company's employees or agents had 
the authority to alter any of the terms or provisions of the 
standard contract, nor had they ever done so."  Id. at 589.  
Second, "[t]he parties also stipulated that there was never any 
bargaining on either price or terms with any advertiser; each 
subscriber in the Racine directory paid exactly the same for the 
same size listing or advertisement."  Id. at 589-90.  For all of 
these reasons, the court determined that Discount Fabric House 
had a significant disadvantage in bargaining strength.   
¶18 Ultimately, the 
court held 
that 
the 
exculpatory 
contract 
was 
contrary 
to 
public 
policy 
and, 
therefore, 
unconscionable and unenforceable.  Id. at 604.   
This exculpatory clause in this private contract 
is against public policy in that the parties are not 
on equal bargaining terms and the telephone company 
has created a public interest in the publication of 
the yellow pages which requires that the telephone 
company perform its private duty to the ad subscriber 
without negligence or be held for damages.   
Id. at 600.   
¶19 Despite the similarities between Discount Fabric and 
this case, there are important distinctions that lead us to a 
different result in 2005 than we reached in 1984.  First, there 
is no longer a state-approved monopoly.  Second, the clause at 
issue in this case is a stipulated damages clause and not an 
exculpatory clause.   
A. 
¶20 The divestiture of AT&T on January 1, 1984, was a 
watershed moment in the telecommunications industry.  The 
No. 
2004AP239   
 
11 
 
divestiture originated from an antitrust suit filed by the 
United States Department of Justice, which primarily charged 
that "AT&T violated antitrust laws by making it difficult or 
costly for competing long distance carriers to interconnect with 
AT&T's local Bell subsidiaries."  Legislative Council Staff 
Brief 84-11, at 27 (Aug. 29, 1984).  As a result, AT&T was 
required to divest its 22 wholly-owned Bell operating companies, 
including Wisconsin Bell.  Id.  Seven new regional holding 
companies were created out of the AT&T divestiture.  Id. at 28.  
Wisconsin Bell became a wholly-owned subsidiary of the Midwest 
regional holding company, Ameritech.  Id.  Furthermore, on July 
19, 1984, the Public Service Commission (PSC) approved Wisconsin 
Bell's transfer of the publication of its yellow pages to 
Ameritech.  Id. at 42. 
¶21 On April 25, 1986, the Wisconsin Legislature enacted 
Wis. Stat. §§ 196.194 and 196.195, which partially deregulated 
telecommunications services in the state.  1985 Wis. Act 297; 
see also  MCI Telecomms. Corp. v. Pub. Serv. Comm'n of Wis., 164 
Wis. 2d 489, 492, 476 N.W.2d 575 (Ct. App. 1991) (stating that 
the new law "permitted telecommunication utilities to enter into 
individual 
contracts 
with 
individual 
customers"). 
 
The 
Legislative Council recognized that "[t]he telecommunications 
industry currently is in a state of transition.  The industry is 
moving from a system 
of 
a 
single 
monopoly 
provider of 
telecommunications 
services 
in 
an 
area 
to 
a 
system 
of 
competition, with multiple providers of services in an area."  
Legislative Council Information Memorandum 86-11, at 3 (May 7, 
No. 
2004AP239   
 
12 
 
1986).  Furthermore, the Council noted that "it is the 
Legislature's stated intent that the PSC shall, when consistent 
with the protection of ratepayers and with other public interest 
goals established by the Legislature, rely on competition rather 
than regulation to determine the variety, quality and price of 
telecommunications services."  Id. at 4.  See also 1985 Wis. Act 
297, § 1.   
¶22 Congress subsequently passed the Telecommunications 
Act of 1996, Pub. L. No. 104-104, 110 Stat. 56 (codified at 47 
U.S.C. §§ 151-612) into law.  The Act's overarching purpose was 
to "transition the entire industry from regulated monopoly to 
unregulated competition."  Peter W. Huber et al., Federal 
Telecommunications Law § 1.9 (2d ed. 1999); see also Reza 
Dibadj, Competitive Debacle in Local Telephony:  Is the 1996 
Telecommunications Act to Blame?, 81 Wash. U. L.Q. 1, 2 (2003) 
(stating that "the 111-page statute boasted the ambitious goal 
'to promote competition and reduce regulation in order to secure 
lower 
prices 
and 
higher 
quality 
services 
for 
American 
telecommunications consumers . . . .'" (quoting § 502, 110 Stat. 
at 56)).  The core of the Act "focused on breaking the monopoly 
of 
the 
incumbent 
local 
exchange 
carriers 
(ILECs)——more 
specifically, the regional Bell operating companies (RBOCs) 
[such 
as 
Ameritech] 
and 
promoting 
competition 
in 
local 
telephony."  Dibadj, supra, at 2.   
¶23 The passage of these various state and federal laws 
demonstrates that the industry as it existed in 1999 was not the 
same as it was when Discount Fabric arose.  The barriers to 
No. 
2004AP239   
 
13 
 
competition in the telecommunications industry prior to these 
legislative enactments are no longer prevalent.  Indeed, as one 
treatise notes: 
Since divestiture, there has been a steady, 
inexorable rise in competition in all levels of the 
industry.  MCI and Sprint developed into full-fledged 
national carriers to compete with AT&T other, smaller 
carriers built regional networks, and hundreds of 
resellers entered the market, too.  Unexpected though 
it was by the framers of the decree, competition began 
to emerge in local markets, too, particularly in the 
business of providing "exchange access service," i.e., 
the local transport of calls to the nearest "point of 
presence" of a long-distance carrier.   
Huber et al., supra, § 1.9.2.   
¶24 In sum, in 1999, after the divestiture of AT&T, the 
passage of 1985 Wisconsin Act 297, and the passage of the 
Telecommunications Act of 1996, there was not a single telephone 
company with "an exclusive private advertising business" that 
published a directory that was "inexorably tied to the telephone 
service."  Discount Fabric, 117 Wis. 2d at 594.  Indeed, there 
were numerous competitive local, long distance, and to a lesser 
degree, cellular carriers.  Furthermore, as detailed in Craig 
Cerqua's affidavit, there were competitive directory publishers 
competing with API in the relevant markets.  As such, the 
rationale 
behind 
much 
of 
Discount 
Fabric 
is 
simply 
not 
applicable to this case.   
B. 
¶25 As already discussed, this court determined that the 
contract clause at issue in Discount Fabric was exculpatory in 
nature and unenforceable as a matter of public policy.  Although 
No. 
2004AP239   
 
14 
 
the contractual language and the surrounding circumstances of 
the agreement are similar in Discount Fabric and this case, the 
clause at issue here is not an invalid exculpatory clause, but 
rather a valid stipulated damages clause.2   
¶26 In Merten v. Nathan, 108 Wis. 2d 205, 210, 321 
N.W.2d 173 (1982), this court defined exculpatory contracts as 
"contracts which relieve a party from liability for harm caused 
by his or her own negligence."  See also Discount Fabric, 117 
Wis. 2d at 591 (quoting the same language).  The contract 
between 
Rainbow 
and 
API 
does 
not 
meet 
this 
operational 
definition of an exculpatory agreement.  The contract restricts 
Rainbow's recoverable damages, but it does not release API from 
liability.  Under the express terms of the contract, Rainbow is 
entitled to all or a portion of the cost of advertisement 
following an error or omission.  Additionally, because API 
completely omitted Rainbow from its directories, Rainbow is 
                                                 
2 The clause could also rightly be termed a "liquidated 
damages" clause, a "limited liability" clause or a "limitation 
of damages" clause.  We elect to use the term "'stipulated 
damages' to mean the damages specified in the contract" and the 
term "'liquidated damages' to mean reasonable and enforceable 
stipulated damages."  See Kernz v. J.L. French Corp., 2003 WI 
App 140, ¶28, 266 Wis. 2d 124, 667 N.W.2d 751 (citing Wassenaar 
v. Panos, 111 Wis. 2d 518, 521, 331 N.W.2d 357 (1983)).     
No. 
2004AP239   
 
15 
 
entitled to a future PAGESPLUS advertising credit of like 
amount.3   
¶27 Rainbow argues that it had no opportunity to bargain 
because Frank Paoletti, the API salesman who sold Rainbow its 
advertisements, was not authorized to change the terms of the 
contract.  This statement by Paoletti, however, is belied by the 
express terms of the contract.  Under the ninth paragraph of the 
terms and conditions section, the contract states: 
This document is our complete agreement.  It replaces 
and supersedes (and you should not rely upon) any 
prior oral or written representations or agreements.  
IF YOU WISH TO NEGOTIATE ANY ONE OR MORE DIFFERENT 
TERMS THAN THOSE ABOVE, INCLUDING HIGHER LIABILITY 
LIMITS, YOU MAY DO SO.  However, any change to this 
document or to these terms must be in writing, signed 
by both you and us, and dated by both you and us at 
least fourteen (14) weeks prior to the Issue Date of 
the directory. 
(Capitalization in original.)  Thus, it is irrelevant if 
Paoletti was not authorized to change the terms of the contract.  
The contract afforded Rainbow the opportunity to negotiate 
higher stipulated damages than those that are usually offered by 
API.  However, Rainbow decided not to do so, and as API has 
noted, almost none of their customers negotiate to increase the 
                                                 
3 We recognize that under Discount Fabric, returning only 
the contract price or a portion of it does not, by itself, 
alleviate the exculpatory nature of some contract clauses.  
Discount Fabric, 117 Wis. 2d at 591.  Although not the sole 
reason for distinguishing the clauses in these cases, we note 
that in this instance Rainbow was entitled to a free year of 
advertising, worth $5253, under the terms of the contract.  It 
is unclear from the record why Rainbow's judgment does not 
reflect these additional damages.   
No. 
2004AP239   
 
16 
 
amount 
of 
stipulated 
damages 
in 
exchange 
for 
a 
higher 
advertising rate, because no one enters into these contracts 
believing their advertisement is going to be left out of API's 
yellow pages.   
¶28 We next turn to the question of whether the stipulated 
damages clause is a valid and enforceable provision for 
liquidated damages.  "[A] trial court's decision concerning the 
validity or invalidity of a clause involves factual and legal 
determinations, and they will be reviewed as such."  Koenings v. 
Joseph Schlitz Brewing Co., 126 Wis. 2d 349, 358, 377 N.W.2d 593 
(1985) (citing Wassenaar v. Panos, 111 Wis. 2d 518, 525, 331 
N.W.2d 357 (1983)).  "The overall single test of validity is 
whether 
the 
clause 
is 
reasonable 
under 
the 
totality 
of 
circumstances."  
Wassenaar, 
111 Wis. 2d at 
526 
(citations 
omitted); see also Westhaven Assocs., Ltd. v. C.C. of Madison, 
Inc., 2002 WI App 230, ¶17, 257 Wis. 2d 789, 652 N.W.2d 819.  To 
determine reasonableness, we consider:  (1) whether the parties 
intended to provide for damages or for a penalty; (2) whether 
the injury caused by the breach would be difficult or incapable 
of accurate estimation at the time of entering into the 
contract; 
and 
(3) 
whether 
the 
stipulated 
damages 
are 
a 
reasonable 
forecast 
of 
the 
harm 
caused 
by 
the 
breach.  
Wassenaar, 111 Wis. 2d  at 529-30.  "Essentially, we must look 
at both the 'harm anticipated at the time of contract formation 
and the actual harm at the time of breach.'"  Kernz v. J.L. 
French Corp., 2003 WI App 140, ¶30, 266 Wis. 2d 124, 667 
N.W.2d 751 (quoting Wassenaar, 111 Wis. 2d at 532).  "'The 
No. 
2004AP239   
 
17 
 
factors are not meant to be mechanically applied, and courts may 
give some factors greater weight than others.'"  Id. (quoting 
Westhaven, 257 Wis. 2d 789, ¶17); see also Koenings, 126 
Wis. 2d at 361-62.  
¶29 In addition to these factors, we also consider the 
policies underlying the reasonableness test.  In Wassenaar, we 
noted 
the 
many 
reasons 
that 
support 
the 
enforcement 
of 
stipulated damages clauses between private parties:   
The clauses allow the parties to control their 
exposure to risk by setting the payment for breach in 
advance.  They avoid the uncertainty, delay, and 
expense of using the judicial process to determine 
actual damages.  They allow the parties to fashion a 
remedy consistent 
with 
economic 
efficiency 
in 
a 
competitive market, and they enable the parties to 
correct what the parties perceive to be inadequate 
judicial remedies by agreeing upon a formula which may 
include damage elements too uncertain or remote to be 
recovered under rules of damages applied by the 
courts.  In addition to these policies specifically 
relating to stipulated damages clauses, considerations 
of judicial economy and freedom of contract favor 
enforcement of stipulated damages clauses.   
Wassenaar, 111 Wis. 2d at 528. 
¶30 Alternatively, the competing policies that disfavor 
stipulated damages were detailed in Wassenaar as follows: 
Public law, not private law, ordinarily defines the 
remedies of the parties.  Stipulated damages are an 
exception to this rule.  Stipulated damages allow 
private parties to perform the judicial function of 
providing the remedy in breach of contract cases, 
namely, compensation of the nonbreaching party, and 
courts must ensure that the private remedy does not 
stray too far from the legal principle of allowing 
compensatory 
damages. 
 
Stipulated 
damages 
substantially in excess of injury may justify an 
inference 
of 
unfairness 
in 
bargaining 
or 
an 
No. 
2004AP239   
 
18 
 
objectionable in terrorem agreement to deter a party 
from breaching the contract, to secure performance, 
and to punish the breaching party if the deterrent is 
ineffective.   
Id. at 528-29.   
¶31 In this case, we do not give much weight to the first 
factor——did the parties intend to provide for damages or for a 
penalty——as "what the parties intended in fact in creating the 
stipulated damages clause has little relevance to what is 
reasonable in law."  Koenings, 126 Wis. 2d at 362.  However, we 
note that immediately above the signature line, the contract 
referred Rainbow to the paragraph that limited API's "MAXIMUM 
LIABILITY."  Thus, the parties clearly understood the clause at 
issue to be a stipulated damages clause.   
¶32 The second and third factors are "intertwined, and 
both 
use 
a 
combined 
prospective-retrospective 
approach."  
Wassenaar, 111 Wis. 2d at 531.  That is, the reasonableness must 
be judged as of the time of formation and at the time of breach.  
Id. at 532.  Furthermore, "[t]he greater the difficulty of 
ascertaining damages due to breach, the more probable it is that 
the 
stipulated 
damages 
are 
reasonable." 
 
Koenings, 
126 
Wis. 2d at 363 (citing Wassenaar, 111 Wis. 2d at 530-31).   
¶33 In our view, the contract drafted by API attempted to 
strike a fair bargain between the parties in order to keep 
advertising 
rates 
reasonable 
and 
competitive 
with 
other 
telephone directory publishers.  API was merely trying to add 
predictability to its advertising contracts to avoid the 
difficulties inherent in attempting to calculate lost profits 
No. 
2004AP239   
 
19 
 
due to the differing types of potential errors or omissions.  
Furthermore, we conclude that returning the full contract price, 
along with a future advertising credit of like amount, is a 
reasonable 
award 
of 
damages 
in 
light 
of 
the 
completely 
speculative damages that Rainbow may have suffered.  Again, if 
Rainbow wanted to bargain for a higher award of damages in the 
event of API's omission of its advertisement, it could have done 
so under the terms of the contract.   
¶34 As the circuit court noted, courts have approved and 
even encouraged this type of contract with great regularity in a 
number of situations.4  Additionally, API argues that other 
telephone directory publishers in Wisconsin routinely include 
similar 
stipulated 
damages 
clauses 
in 
their 
advertising 
contracts.  API further argues that virtually all other 
jurisdictions permit telephone directory publishers to limit 
their yellow pages liability based on freedom of contract 
principles.  See Pinnacle Computer Servs., Inc. v. Ameritech 
Publ'g, Inc., 642 N.E.2d 1011, 1014, n.1 (Ind. Ct. App. 1994) 
(citing cases that arose before and after the Discount Fabric 
                                                 
4 See, e.g., Kernz, 266 Wis. 2d 124 (employment contract); 
Westhaven Assocs., Ltd. v. C.C. of Madison, Inc., 2002 WI App 
230, 257 Wis. 2d 789, 652 N.W.2d 819 (lease); Pollack v. 
Calimag, 157 Wis. 2d 222, 458 N.W.2d 591 (Ct. App. 1990) 
(business agreement).   
No. 
2004AP239   
 
20 
 
decision)5.  
After 
the 
changes in 
the telecommunications 
industry, there is no reasonable rationale to hold API to a 
different standard than other telephone directory publishers.  
As such, we hold that the stipulated damages clause in the 
Rainbow-API contract is reasonable.   
¶35 Finally, we note that the contrasting nature between 
this case and the exculpatory contract cases we have decided 
since Discount Fabric, further persuades us that the contract 
clause at issue is not exculpatory but a valid, stipulated 
damages clause that is frequently agreed to between two entities 
in a standard business relationship.  As we have frequently 
stated, 
Wisconsin 
case 
law 
does 
not 
favor 
exculpatory 
agreements.  Atkins v. Swimwest Family Fitness Ctr., 2005 WI 4, 
¶12, 277 Wis. 2d 303, 691 N.W.2d 334 (citing Richards v. 
Richards, 181 Wis. 2d 1007, 1015, 513 N.W.2d 118 (1994); Dobratz 
v. Thomson, 161 Wis. 2d 502, 468 N.W.2d 654 (1991)).  Indeed, 
each exculpatory contract that this court has looked at in the 
past 25 years has been held unenforceable.  Alexander T. 
Pendleton, Enforceable Exculpatory Agreements: Do They Still 
                                                 
5 Most jurisdictions have characterized similar yellow pages 
contract 
clauses 
as 
exculpatory 
clauses; 
however, 
other 
jurisdictions have characterized such clauses as limitation of 
damages clauses.  Compare Trimble v. Ameritech Publ'g, Inc., 700 
N.E.2d 1128 (Ind. 1998), with Vasilis v. Bell of Pa., 598 A.2d 
52 (Pa. Super. Ct. 1991).  Regardless, the detailed schedule of 
damages, the provision for a future advertising credit of like 
amount for a complete omission of an advertising unit, and the 
bargaining provision in the Rainbow-API contract convince us 
that the clause at issue is a valid, stipulated damages clause 
and not an exculpatory clause as in Discount Fabric.   
No. 
2004AP239   
 
21 
 
Exist?, 78 Wis. Lawyer 16 (August 2005) (discussing Atkins, 277 
Wis. 2d 303, and citing Yauger v. Skiing Enters., Inc., 206 
Wis. 2d 76, 557 N.W.2d 60 (1996); Richards, 181 Wis. 2d 1007; 
Dobratz, 161 Wis. 2d 502; Arnold v. Shawano County Agric. Soc'y, 
111 Wis. 2d 203, 330 N.W.2d 773 (1983), overruled on other 
grounds by Green Spring Farms v. Kersten, 136 Wis. 2d 304, 401 
N.W.2d 816 (1987); and Merten, 108 Wis. 2d 205).   
¶36 There is a common thread that runs through this line 
of cases that is absent from the circumstances of this case.  In 
each of the above cases, an owner or operator, through a broad, 
all-inclusive release form, attempted to avoid all liability for 
death or serious personal injuries arising from virtually any 
conduct, including intentional or reckless acts, of the owner or 
operator.  There is a fundamental difference between the above 
situation and the current one, which deals with one business 
entity agreeing to limit the maximum financial recovery for a 
potential mistake of the other business entity.   
¶37 This case is more on point with Deminsky v. Arlington 
Plastics Machinery, 2003 WI 15, 259 Wis. 2d 587, 657 N.W.2d 411, 
than with the exculpatory contract line of cases.  In Deminsky, 
we considered whether an indemnification clause in a sales 
contract between a manufacturer and a purchaser of a grinding 
machine was valid and enforceable.  Id., ¶¶1-2.  The clause 
required the product purchaser, Image Plastics, Inc. (Image), to 
indemnify 
the 
manufacturer 
for 
liability 
created 
by 
the 
manufacturer's own negligence or the machine's defects.  Id., 
¶¶22-25.  Image argued that it lacked the proper notice of the 
No. 
2004AP239   
 
22 
 
terms of the agreement, the terms were inconspicuous, and the 
terms were commercially unreasonable.  Id., ¶26.  The contract 
at issue was printed on a double-sided, single-page form.  Id., 
¶29.  Directly above the signature line was a warning that terms 
and conditions, including the separately numbered indemnity 
provision, were on the back of the form.  Id.   
¶38 First, this court determined that the relevant terms 
of the contract were conspicuous under Wis. Stat. § 401.201(10) 
(1995-96),6 and the form provided adequate notice to the 
purchaser.  Id., ¶¶29-30.  The purchaser simply did not read the 
contract carefully.  "Had [Image's agent] read the terms, we 
have no difficulty concluding that he would have ascertained the 
obligations of the contract terms.  Therefore, the form 
fulfilled 
the 
requirement 
to 
communicate 
the 
nature 
and 
significance of the indemnity provision[,]" and the agent's 
                                                 
6 Wisconsin Stat. § 401.201(10) (1995-96) stated: 
(10) "Conspicuous":  A term or clause is conspicuous 
when it is so written that a reasonable person against 
whom it is to operate ought to have noticed it.  A 
printed heading in capitals (as: NON-NEGOTIABLE BILL 
OF LADING) is conspicuous.  Language in the body of a 
form is "conspicuous" if it is in larger or other 
contrasting type or color.  But in a telegram any 
stated term is "conspicuous".  Whether a term or 
clause is "conspicuous" or not is for decision by the 
court.   
There have been no material changes to this statute since this 
time.   
 
No. 
2004AP239   
 
23 
 
decision not to read the contract carefully did not warrant 
subsequent relief from its terms.  Id., ¶30.   
¶39 Second, we rejected the purchaser's argument that the 
sales contract was a contract of adhesion, and therefore 
commercially unreasonable.  Id., ¶31.  "A contract of adhesion 
is generally found under circumstances in which a party has, in 
effect, no choice but to accept the contract offered, often 
where the buyer does not have the opportunity to do comparative 
shopping or the organization offering the contract has little or 
no competition."  Id., ¶31 (citing Katze v. Randolph & Scott 
Mut. Fire Ins. Co., 116 Wis. 2d 206, 212-13, 341 N.W.2d 689 
(1984)).  Applying this rationale, we determined that Image had 
options, even if those other options may not have been as 
desirable. 
Customers make choices such as these every day.  That 
Image did not like the other options available does 
not create a contract of adhesion or make the terms of 
this contract substantively unconscionable.  This is 
not like the Discount Fabric case in which the 
customer had only one viable option for reaching 
people through an ad in the telephone book.   
Id. (citing Discount Fabric, 117 Wis. 2d at 603-04).   
¶40 We concluded with the following: 
There were no elements of an adhesion contract here, 
because Image had choices.  The form and terms 
provided adequate notice to Image of the indemnity 
clause and the indemnity clause and related terms were 
conspicuous.  The parties to this contract were two 
commercial entities with prior dealings.  As such, 
Image has failed to show there is any quantum of 
procedural or substantive unconscionability regarding 
this contract.  We hold that the indemnity clause is 
valid and enforceable.   
No. 
2004AP239   
 
24 
 
Id., ¶32.   
¶41 The reasoning and analysis of Deminsky are persuasive, 
despite the substantive differences between the two clauses.  
Because we concluded in Deminsky that the indemnity clause in 
the sales contract was valid, the manufacturer was essentially 
able to shift all financial responsibility for the injuries its 
machine caused to the plaintiff onto Image because Image 
knowingly and voluntarily agreed to the sales contract.  Thus, 
an apparently innocent purchaser bore the burden of liability 
for the alleged faults of the manufacturer because the two 
business entities had agreed to such terms.  Here, the parties 
contemplated the complete omission of the advertisement (along 
with other lesser errors and omissions), and by its signature 
Rainbow agreed to the stipulated damages outlined in the 
contract.  Despite the complete innocence of Rainbow, the return 
of its purchase price and a subsequent advertising credit were 
all the parties contemplated and agreed to.  Thus, as a matter 
of policy, we see no reason why the result in this case should 
be any different from the result in Deminsky.   
¶42 We should also note that the relevant components of 
the contract in this case are almost identical to the contract 
in Deminsky.  The Rainbow-API contract was a one-page, two-sided 
form.  The front of the form, entitled "Ameritech Customer 
Receipt," listed the monthly charge for placing Rainbow's 
advertisement in the three directories.  Directly above the 
signature line, the form states:  "I HAVE READ AND UNDERSTAND 
THE TERMS 
AND CONDITIONS 
ON THE 
FACE AND 
REVERSE 
SIDE 
No. 
2004AP239   
 
25 
 
PARTICULARLY 
THE 
PARAGRAPH 
WHICH 
LIMITS 
MY 
REMEDIES 
AND 
PUBLISHER'S MAXIMUM LIABILITY IN THE EVENT OF ANY ERROR OR 
OMISSION."  (Emphasis added.)  The back of the form, entitled 
"TERMS GOVERNING YOUR REQUEST FOR ADVERTISING," lists paragraph 
by 
paragraph 
the 
important 
provisions 
of 
the 
agreement, 
including the stipulated damages clause, which also appeared in 
all capital letters.  Furthermore, Rainbow admits that a co-
owner read the document before signing it.  Thus, we have no 
difficulty in concluding that the contract met the notice and 
conspicuousness requirements under Deminsky.   
¶43 Furthermore, like Image, Rainbow had choices.  The 
affidavit of Craig Cerqua demonstrates that Rainbow had other 
advertising options available in the relevant markets besides 
the telephone directory service offered by API.  Rainbow could 
have advertised with Yellow Book USA or USXchange.  Rainbow also 
had the option of advertising on the Internet.  The fact that 
Rainbow preferred the service of API because of its larger 
customer base does not make API's contract substantively 
unconscionable under Deminsky.   
V. CONCLUSION 
¶44 In 
sum, 
under 
the 
revamped 
telecommunications 
industry, the Rainbow-API contract is like any other contract 
entered into between two voluntary and knowledgeable business 
entities in a competitive field.  The rationale behind Discount 
Fabric is simply inapplicable to the situation presented by this 
case.   
No. 
2004AP239   
 
26 
 
¶45 Although we conclude that Discount Fabric is still 
viable, the case presented before us is factually distinct in 
two important ways.  First, Ameritech does not possess a 
monopoly as Wisconsin Telephone did when Discount Fabric was 
decided.  Second, when comparing all of the circumstances of 
this case with Discount Fabric, the clause at issue is not 
exculpatory, but rather, a valid and enforceable stipulated 
damages clause.  Therefore, we affirm the circuit court’s grant 
of summary judgment in favor of API. 
By the Court.—The decision of the circuit court is 
affirmed. 
¶46 SHIRLEY S. ABRAHAMSON, C.J., did not participate. 
No.  2004AP239.awb 
 
1 
 
¶47 ANN WALSH BRADLEY, J.   (dissenting).  I agree with 
the majority 
that 
our jurisprudence 
regarding 
exculpatory 
clauses remains as vibrant as ever.  See majority op., ¶35.  
Such clauses have been, are, and will continue to be looked upon 
with disfavor.7 
¶48 I also agree with the majority that Discount Fabric 
House 
of 
Racine, 
Inc. 
v. 
Wisconsin 
Telephone 
Co., 
117 
Wis. 2d 587, 345 N.W.2d 417 (1984), is still good law.  See 
majority op., ¶¶3, 45.  I part ways with the majority, however, 
in its application of that law to the record in this case.  The 
majority obfuscates the focus of the summary judgment inquiry by 
engaging in generalizations as to time and location rather than 
focusing on the specific times and locations relevant here. 
¶49 As 
the 
majority 
recognizes, 
it 
is 
clear 
that 
"Wisconsin case law does not favor exculpatory agreements."  
Majority 
op., 
¶35. 
 
"Indeed," 
says 
the 
majority, 
"each 
exculpatory contract that this court has looked at in the past 
25 years has been held unenforceable."  Id. (citing Alexander T. 
Pendleton, Enforceable Exculpatory Agreements:  Do They Still 
Exist?, 78 Wis. Lawyer 16, (August 2005)).8   
                                                 
7 See, e.g., Atkins v. Swimwest Family Fitness Ctr., 2005 WI 
4, ¶12, 277 Wis. 2d 303, 691 N.W.2d 334; Merten v. Nathan, 108 
Wis. 2d 205, 210-11, 321 N.W.2d 173 (1982). 
8 The cases to which the article refers are Atkins, 277 
Wis. 2d 303; Yauger v. Skiing Enterprises, Inc., 206 Wis. 2d 76, 
557 N.W.2d 60 (1996); Richards v. Richards, 181 Wis. 2d 1007, 
513 N.W.2d 118 (1994); Dobratz v. Thomson, 161 Wis. 2d 502, 468 
N.W.2d 654 (1991); Arnold v. Shawano County Agric. Soc'y, 111 
Wis. 2d 203, 330 N.W.2d 773 (1983); and Merten, 108 Wis. 2d 205. 
No.  2004AP239.awb 
 
2 
 
¶50 Just last term this court reaffirmed its restrictive 
approach to exculpatory agreements in Atkins v. Swimwest Family 
Fitness Center, 2005 WI 4, 277 Wis. 2d 303, 691 N.W.2d 334: 
Wisconsin case law does not favor such agreements.  
While this court has not held that an exculpatory 
clause is invalid per se, we have held that such a 
provision must be construed strictly against the party 
seeking to rely on it. 
Atkins, 277 Wis. 2d 303, ¶12 (citations omitted). 
¶51 Time and time again, this court has held exculpatory 
agreements unenforceable and has stated the rule that such 
agreements are disfavored.  On this, the majority and I agree. 
¶52 I also agree with the majority that Discount Fabric 
remains good law.  See majority op., ¶¶3, 45.  One of the key 
principles 
of 
Discount 
Fabric 
is 
that 
a 
contract 
is 
unconscionable if there is an absence of meaningful choice for 
one party together with contract terms that are unreasonably 
favorable to the other party.  This principle is well-settled9 
and infuses the majority's analysis, even as it characterizes 
the agreement here as a stipulated damages clause.  See majority 
op., ¶¶39-43; see also majority op., ¶¶27, 33. 
¶53 Where 
I 
disagree 
with 
the 
majority 
is 
in 
its 
application of Discount Fabric in light of the record in this 
case, decided on summary judgment.  Although the majority 
                                                 
9 See Deminsky v. Arlington Plastics Mach., 2003 WI 15, ¶27, 
259 Wis. 2d 587, 657 N.W.2d 411; Discount Fabric House of 
Racine, Inc. v. Wisconsin Tel. Co., 117 Wis. 2d 587, 601, 345 
N.W.2d 417 (1984); First Fed. Fin. Serv., Inc. v. Derrington's 
Chevron, Inc., 230 Wis. 2d 553, 558, 602 N.W.2d 144 (Ct. App. 
1999); 
Leasefirst 
v. 
Hartford 
Rexall 
Drugs, 
Inc., 
168 
Wis. 2d 83, 89, 483 N.W.2d 585 (Ct. App. 1992) 
No.  2004AP239.awb 
 
3 
 
recites summary judgment standards, it does not properly apply 
them.  If it did, it could not reach the result that it does 
under Discount Fabric.  Allow me to demonstrate. 
¶54 In Discount Fabric, the court recognized that the 
yellow pages aspect of the phone company's dealings was "not 
legally monopolistic."  Discount Fabric, 117 Wis. 2d at 594.  
The court invalidated the exculpatory clause in Discount Fabric 
(1) because of the phone company's "decisive advantage of 
bargaining strength" and (2) because there was no significant 
competition.  Id. at 594, 596, 604.  Acknowledging the existence 
of other yellow pages publishers in the relevant area, the court 
concluded 
that 
there 
was 
no 
"other 
mode 
of 
advertising . . . which reaches as many customers, is of a 
similar nature as the yellow pages, and is inexorably tied to 
the telephone service."  Id. at 591, 594. 
¶55 The question is not, as the majority would have it, 
simply whether the telecommunications industry has generally 
opened to competition since the time of Discount Fabric in 1984.  
Of course it has. 
¶56 Rather, the question the majority should be asking is 
whether the yellow pages advertising market was any different in 
1999 in Oconomowoc and Waukesha and in 2000 in Watertown than 
the market addressed in Discount Fabric.  The answer is unclear.  
It is precisely this uncertainty that renders this case 
unsuitable for summary judgment disposition. 
¶57 The majority shifts the focus of the summary judgment 
inquiry.  The relevant time is 1999-2000.  The relevant 
No.  2004AP239.awb 
 
4 
 
locations are Oconomowoc, Waukesha, and Watertown.  The majority 
obfuscates this by engaging in generalizations, apparently 
relying on data for 2002 and data for Milwaukee.  See majority 
op., ¶¶9, 23.  
¶58 Rainbow's 
summary 
judgment 
materials 
include 
an 
affidavit by Frank Paoletti, the API employee who negotiated 
with Rainbow.  He averred that during the time period of 
September 1997 to September 2000, he was aware of "no other book 
that had the depth of distribution and penetration comparable to 
that of Ameritech's Yellow pages" and that API had "no real 
competitors in the advertisement/yellow page market."  An 
attachment to his affidavit showed that in Oconomowoc in 1999-
2000, 99.3 percent of households had a telephone.   
¶59 In API's sparse summary judgment materials, one of its 
regional marketing managers averred that consumers in the 
Waukesha area consulted Ameritech's competitors 9 percent of the 
time in 1998 and 41 percent of the time in 2002.  The regional 
manager's affidavit gives no such statistics for Oconomowoc or 
Watertown for any year.  Rather, it makes general factual 
assertions.  For example, the regional manager avers that there 
has been increasing competition "since the late 1990's" and that 
there has been one "serious competitor" for "several years" in 
"Milwaukee and the rest of southeastern Wisconsin."    
¶60 Unlike the majority, I view these materials in a light 
most favorable to Rainbow, as summary judgment methodology 
requires. 
 In doing so, 
I 
conclude 
that 
the 
materials 
demonstrate a genuine issue of material fact as to whether, at 
No.  2004AP239.awb 
 
5 
 
the relevant time in the relevant markets, API had any more than 
negligible competition as contemplated in Discount Fabric.  
Here, on this record, it remains disputed whether there was any 
"other 
mode 
of 
advertising . . . which 
reaches 
as 
many 
customers, is of a similar nature as the yellow pages, and is 
inexorably tied to the telephone service."  Discount Fabric, 117 
Wis. 2d at 594. 
¶61 An opportunity to bargain is another, related material 
fact under Discount Fabric.  The parties in Discount Fabric 
stipulated as follows: 
that all yellow pages advertising in Wisconsin for the 
year in question utilized the same form contract.  
Furthermore, none of the telephone company's employees 
or agents had the authority to alter any of the terms 
or provisions of the standard contract, nor had they 
ever done so.  The parties also stipulated that there 
was never any bargaining on either price or terms with 
any 
advertiser; 
each 
subscriber 
in 
the 
Racine 
directory paid exactly the same for the same size 
listing or advertisement. 
Id. at 589-90. 
¶62 The majority says these are "important stipulations."  
Majority op., ¶17.  I agree that they are important, and they 
underscore the existence of genuine issues of material fact 
here. 
¶63  Turning 
again to 
API's 
sparse summary judgment 
materials, API offers no affirmative evidence of Rainbow's 
opportunity to bargain, other than the language of the contract 
itself.  In contrast, Rainbow's responsive materials include an 
averment by Paoletti that as a representative of API he was not 
authorized to change the terms of the form contract. 
No.  2004AP239.awb 
 
6 
 
¶64 Moreover, 
the 
contract 
itself 
is 
internally 
inconsistent as to the opportunity to bargain.  It states that 
the customer may negotiate different terms including higher 
liability limits, as the majority emphasizes.  However, it also 
contains the following provisions: 
IN ORDER TO MAINTAIN OUR PRICING SCHEDULES, WE CANNOT 
AND DO NOT ACCEPT LIABILITY FOR LOST PROFITS OR FOR 
ANY INCIDENTAL OR CONSEQUENTIAL DAMAGES ARISING OUT OF 
ERRORS OR OMISSIONS. . . .  
. . . . 
UNDER NO CIRCUMSTANCES (1) WILL OUR LIABILITY FOR ANY 
ADVERTISING UNIT EXCEED THE AMOUNT YOU HAVE ACTUALLY 
PAID FOR IT TOGETHER WITH FUTURE PAGESPLUS ADVERTISING 
CREDIT OF LIKE AMOUNT . . . . 
¶65 Again, and unlike the majority, I follow summary 
judgment methodology and construe the parties' summary judgment 
materials in the light most favorable to Rainbow, not in a light 
most favorable to API.  In doing so, I conclude that the 
internal inconsistency of the contract and Paoletti's affidavit 
raise an issue of material fact as to whether Rainbow had any 
real opportunity to bargain.  At a minimum, they raise a 
reasonable inference that the opportunity to bargain stated in 
the contract is illusory.   
¶66 In short, the parties' summary judgment materials 
raise genuine issues of material fact under Discount Fabric.  It 
remains disputed whether, in the relevant markets at the 
relevant time, API's yellow pages business, even if "not legally 
monopolistic," 
left 
Rainbow 
with 
no 
"other 
mode 
of 
advertising . . . which reaches as many customers, is of a 
similar nature as the yellow pages, and is inexorably tied to 
No.  2004AP239.awb 
 
7 
 
the telephone service."  Discount Fabric, 117 Wis. 2d at 594.  
It remains disputed whether, in the relevant markets at the 
relevant time, API had a "decisive advantage of bargaining 
strength."  Id. at 596.  It remains disputed whether Rainbow had 
any real opportunity to bargain.  Thus, I would reverse the 
circuit court's grant of summary judgment. 
¶67 In sum, although I agree with the majority that our 
jurisprudence regarding exculpatory clauses remains as vibrant 
as ever and that Discount Fabric remains good law, I disagree 
with the majority's application of the law here.  Accordingly, I 
respectfully dissent. 
 
 
 
 
 
No.  2004AP239.awb 
 
1