Source: https://law.justia.com/cases/federal/appellate-courts/F2/978/395/183810/
Timestamp: 2019-03-26 00:34:16
Document Index: 753539146

Matched Legal Cases: ['§ 3', '§ 135', '§ 135', '§ 135', '§ 135', '§ 135']

Frieburg Farm Equipment, Incorporated, a Wisconsincorporation, Frieburg Farm Equipment, a Wisconsinpartnership, Harold R. Frieburg, et al.,plaintiffs-appellees, v. Van Dale, Incorporated, a Minnesota Corporation, Defendant-appellant, 978 F.2d 395 (7th Cir. 1992) :: Justia
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Frieburg Farm Equipment, Incorporated, a Wisconsincorporation, Frieburg Farm Equipment, a Wisconsinpartnership, Harold R. Frieburg, et al.,plaintiffs-appellees, v. Van Dale, Incorporated, a Minnesota Corporation, Defendant-appellant, 978 F.2d 395 (7th Cir. 1992)
US Court of Appeals for the Seventh Circuit - 978 F.2d 395 (7th Cir. 1992)
Argued May 19, 1992. Decided Oct. 29, 1992
Frieburg Farm Equipment, Inc., and related parties (collectively "Frieburg") brought this diversity suit against Van Dale, Inc., under the Wisconsin Fair Dealership Law (WFDL) and state common law. The district court, on cross motions for summary judgment, held that Frieburg met the statutory definition of "dealer," and hence could proceed with its WFDL count. At the same time, the court granted Van Dale summary judgment on all other counts, save one for breach of contract. Frieburg Farm Equip., Inc. v. Van Dale, Inc., No. 89-C-0666-C (W.D. Wis. Sept. 6, 1990) ("Frieburg I "). The case went to trial, and the jury found for Frieburg on both the WFDL and contract counts, awarding it $133,915 and $31,357 in damages, respectively. The district court then granted Frieburg approximately $150,000 in fees and costs to which it was entitled under the WFDL, and denied all of Van Dale's post-trial motions. Frieburg Farm Equip., Inc. v. Van Dale, Inc., 756 F. Supp. 1191 (W.D. Wis. 1991) ("Frieburg II "). Van Dale raises a number of issues on appeal, and we affirm.
On summary judgment, the district court held that Frieburg was a dealer under the WFDL. Frieburg I, slip op. at 10-19. Van Dale challenges that ruling; it acknowledges that its relationship with Frieburg satisfied the first and second dealership criteria, but contends that the two businesses did not share a community of interest. Van Dale does not argue that the court should have left the community of interest issue to the jury; the parties agree--although the commentators have their doubts, see Michael A. Bowen & Brian E. Butler, The Wisconsin Fair Dealership Law § 3.3, at 3- [1-2] (Supp.1991)--that the issue presents a question of law for the court. Given this, we draw from the undisputed facts, the trial record and the jury's verdict in deciding for ourselves whether Frieburg and Van Dale shared a community of interest. Bush v. National School Studios, Inc., 139 Wis.2d 635, 407 N.W.2d 883, 888 (1987) (question of whether a business is a "dealer" subject to de novo review).
The WFDL defines "community of interest" as "a continuing financial interest between the grantor and grantee in either the operation of the dealership business or the marketing of such goods or services." Wis.Stat. § 135.02(1). We have in the past disparaged this definition as vague and unhelpful, see, e.g., Moodie v. School Book Fairs, Inc., 889 F.2d 739, 744 (7th Cir. 1989); Fleet Wholesale Supply Co., Inc. v. Remington Arms Co., Inc., 846 F.2d 1095, 1096 (7th Cir. 1988), for it permits no ready way in which to differentiate a dealership from any ordinary vendor/vendee relationship. Bush, 407 N.W.2d at 888. The Wisconsin Supreme Court recently illuminated matters somewhat by establishing two "guideposts" that serve to distinguish communities of interest. See Ziegler Company, Inc. v. Rexnord, Inc., 139 Wis.2d 593, 407 N.W.2d 873 (1987) ("Ziegler I "), on reconsideration, 147 Wis.2d 308, 433 N.W.2d 8 (1988) ("Ziegler II "). The first guidepost is the dealer's and grantor's "continuing financial interest" in their business relationship; a dealer can manifest such an interest by, among other things, investing in grantor-specific inventory and facilities. Id. 407 N.W.2d at 880. The second guidepost is "interdependence," which the Court described as "shared goals and a cooperative effort more significant than in the typical vendor-vendee relationship." Id. 407 N.W.2d at 879; see also Pollack, 458 N.W.2d at 596. To shed further light upon the two guideposts, Ziegler I sets out a non-exclusive list of ten factors, all of which deal with various aspects of the alleged grantor-dealer relationship. Ziegler I, 407 N.W.2d at 879-80.1 Significantly, the Court explicitly rejected an approach that would have required a business, to qualify as a "dealer," to have garnered a certain minimum percentage of its revenues from servicing or selling the grantor's products. Id. at 878; see also Bush, 407 N.W.2d at 890 (courts should not "focus solely on the telltale trappings of the traditional franchise"). At the same time, the Court observed that a "low percentage," such as 8%, is strong evidence that there was no community of interest, at least absent other indicia, such as a dealer's investment in the dealership. Ziegler I, 407 N.W.2d at 880.
It is plain that the Wisconsin courts have created a totality of the circumstances test. Id. at 879; Moodie, 889 F.2d at 744. Our cases have distilled the principles underlying the Wisconsin cases, and provide that a community of interest may exist under one of two circumstances: first, when a large proportion of an alleged dealer's revenues are derived from the dealership, and, second, when the alleged dealer has made sizable investments (in, for example, fixed assets, inventory, advertising, training) specialized in some way to the grantor's goods or services, and hence not fully recoverable upon termination. Lakefield Tel. Co. v. Northern Telecom, Inc., 970 F.2d 386, 389 (7th Cir. 1992); Kenosha Liquor Co. v. Heublein, Inc., 895 F.2d 418, 419 (7th Cir. 1990); Moodie, 889 F.2d at 744; Fleet Wholesale, 846 F.2d at 1097; Moore v. Tandy Corp., 819 F.2d 820, 822 (7th Cir. 1987). We also suppose that some combination of revenues and investments could manifest a community of interest, even if neither could standing alone. See Ziegler I, 407 N.W.2d at 879-82; Kealy Pharmacy & Home Care Servs., Inc. v. Walgreen Co., 761 F.2d 345, 349-50 (7th Cir. 1985).
Also significant are the particular circumstances underlying the decline in Frieburg's Van Dale-related business. As noted, Van Dale breached its promise to Frieburg by appointing three other dealers in Dunn and St. Croix counties in 1986 and 1987. Evidence at trial attributed part of the sales decline to Van Dale's introduction of these competitors in what was to have been Frieburg's exclusive territory. Permitting a grantor to breach a promise of exclusivity, and then to claim that the grantee, because of the resulting decline in sales, no longer satisfies the statutory definition of "dealer," would subvert the goals underlying the WFDL. See Wis.Stat. § 135.025(2); Bush, 407 N.W.2d at 888-90. A decline in the proportion of revenues related to the grantor's products may expunge a once-existing community of interest, see Midwest Perishables, Inc. v. Jack Frost, Inc., [New Developments] Bus. Franchise Guide (CCH) p 9467 (W.D. Wis. Aug. 25, 1989) (decrease from 26% to 9.8%), but not if the grantor was largely responsible for the decline.
We turn to the issue of liability. Frieburg's status as a "dealer" does not necessarily insulate it from termination, because the WFDL permits grantors to terminate dealers for good cause. Wis.Stat. § 135.03. One can establish good cause by demonstrating that a dealer failed to comply with "essential and reasonable" and "non-discriminatory" requirements imposed by the grantor. Id. § 135.02(4) (a); Deutchland Enter. Ltd. v. Burger King Corp., 957 F.2d 449, 452 (7th Cir. 1992); Remus v. Amoco Oil Co., 794 F.2d 1238, 1240 (7th Cir.), cert. dismissed, 479 U.S. 925, 107 S. Ct. 333, 93 L. Ed. 2d 345 (1986). Whether a grantor had good cause is a question of fact for the jury. Ziegler Co., Inc. v. Rexnord, Inc., 147 Wis.2d 308, 433 N.W.2d 8, 13 (1988) ("Ziegler II "); White Hen Pantry v. Johnson, 599 F. Supp. 718, 719 (E.D. Wis. 1984). While Van Dale correctly observes a court may take this issue away from the jury if a reasonable person could arrive at only one conclusion, see, e.g., Deutchland Enter., supra; Remus, supra, as a general matter "only the trier of fact can determine what was essential, reasonable and nondiscriminatory" under the circumstances. Ziegler II, 433 N.W.2d at 13.
Van Dale's arguments have some merit, but do not carry the day. Admittedly, a dealer's deficient sales and purchasing performance can constitute good cause for termination, see, e.g., Al Bishop Agency, Inc. v. Lithonia, 474 F. Supp. 828, 833-34 (E.D. Wis. 1979), and a jury verdict holding that Van Dale properly terminated Frieburg would not have been unreasonable. See Frieburg I, slip op. at 25 (denying Frieburg summary judgment on good cause issue). But in this case, the evidence on the good cause issue was far from conclusive, and consequently sufficient to support a verdict for Frieburg. To take one example, Van Dale introduced evidence at trial that Frieburg had purchased all of its barn cleaner chain from a J & D, a competitor of Van Dale. Frieburg rebutted this charge with evidence that Van Dale knew Frieburg was a J & D dealer when it granted Frieburg a dealership back in 1986, that J & D chain was superior to Van Dale chain in terms of quality and price, and further that Van Dale had been unable to fill Frieburg's orders for chain. Faced with this evidence, a reasonable jury could have found that, given the circumstances, Frieburg's actions did not justify termination. The same holds for Van Dale's allegations at trial regarding Frieburg's declining sales performance. Frieburg conceded that its Van Dale-related sales had dropped, but explained, with an expert's assistance, that the decline was due in large part to Van Dale's appointment of three other dealers in Dunn and St. Croix counties. In this light, the jury's verdict that Van Dale lacked good cause to terminate Frieburg was reasonable, and the district court did not err in declining to decide the issue as a matter of law.
Van Dale, in effect, asks us to recognize a presumption in favor of injunctive relief and against damages for lost future profits. But as a general matter injunctive relief is the exception, and damages the rule. Walgreen Co. v. Sara Creek Property Co., B.V., 966 F.2d 273, 275 (7th Cir. 1992); United States v. Rural Elec. Convenience Coop. Co., 922 F.2d 429, 432-33 (7th Cir. 1991). There are of course instances when a statute (or the common law) will reverse the traditional presumption, but the WFDL is not one of those statutes. The section on remedies provides that dealers may seek damages, injunctive relief or both. Wis.Stat. § 135.06.2 The plain meaning of the statute places the choice in the hands of the dealer. Although one federal case appears to have established the presumption Van Dale champions, see Wilburn v. Jack Cartwright, Inc., 514 F. Supp. 493, 499 (E.D. Wis. 1981) (" [a] wronged dealer should recover an award of future lost profits only in the most egregious case"), rev'd on other grounds, 676 F.2d 698 (7th Cir.) (unpublished order), on remand, 543 F. Supp. 174 (E.D. Wis. 1982), rev'd, 719 F.2d 262 (7th Cir. 1983), we do not see how such a presumption follows from the statute. Nor does it follow from the Wisconsin cases considering remedies under the WFDL, which have held, without any fanfare, that damages are normally available to wronged dealers. See Bush v. National School Studios, Inc., 131 Wis.2d 435, 389 N.W.2d 49, 53 (Wis.App.1986), aff'd on other grounds, 139 Wis.2d 635, 407 N.W.2d 883 (1987); Lindevig v. Dairy Equip. Co., 150 Wis.2d 731, 442 N.W.2d 504, 507-08 (Wis.App.1989) (recognizing availability of damages, but denying recovery on evidentiary grounds); see also Lakefield Tel. Co. v. Northern Telecom Inc., 679 F. Supp. 881, 883 (E.D. Wis.) (directing alleged dealer to elect either injunction or damages prior to trial), dismissed on other grounds, 696 F. Supp. 413 (E.D. Wis. 1988), aff'd, 970 F.2d 386 (7th Cir. 1992).