Court Opinion

ID: 9740847
Source: CourtListenerOpinion
Date Created: 2023-08-26 20:42:45.717365+00
Date Added: 2024-06-11T07:24:20.649450
License: Public Domain

SUNDBY, J.
(dissenting). This appeal presents a first-impression issue of great public concern: Does the constructive termination of a dealership by a grantor without good cause violate sec. 135.03, Stats.?
D-Mart Food Stores, Inc., had a nonexclusive Super Valu retailer’s agreement with Super Valu *582Stores, Inc. William Cahak and his wife are the sole shareholders of D-Mart. There is no dispute that ch. 135, Stats., applies to the agreement.
Section 135.03, Stats., provides:
No grantor ... may terminate, cancel, fail to renew or substantially change the competitive circumstances of a dealership agreement without good cause. The burden of proving good cause is on the grantor.
"Good cause” is defined in sec. 135.02(4) and deals only with failures and bad faith by a dealer. Thus, a grantor may not terminate a dealership agreement for business reasons which appear to the grantor to be justified. See Kealey Pharmacy v. Walgreen Co., 761 F.2d 345 (7th Cir. 1985) (evenhanded nationwide termination of all dealerships violates WFDL). "[T]he Wisconsin Fair Dealership Law forces on the parties the equivalent of... a [long-term dealership] contract, in the form of a nonwaivable prohibition against the franchisor’s terminating the dealership without cause.” Moore v. Tandy Corp., 819 F.2d 820, 822 (7th Cir. 1987).
This case presents the question of whether a grantor by a constructive termination may avoid the consequences of an explicit termination of a dealership under sec. 135.03, Stats. Super Valu intends to open a 50,000 square foot County Market four blocks from D-Mart’s store. It will lease County Market to a retailer.1 Super Valu’s market survey predicted that *583the presence of a County Market in Wisconsin Rapids would render the D-Mart store unprofitable. Super Valu contends that its agreement with D-Mart is nonexclusive and permits it to enter into retailer agreements with other parties at its sole choice and discretion. Therefore, the fact that the County Market will put D-Mart out of business is simply irrelevant because there is no statute, decision or policy which insulates D-Mart, as Super Valu puts it, "from the tide of progress in a highly competitive industry.” I conclude, however, that the WFDL is a dike which protects a dealer from being drowned in a flood of economic competition generated by its grantor.
The WFDL is to be liberally construed and applied to promote its underlying remedial purposes and policies. Sec. 135.025(1), Stats. One of those purposes is "[t]o protect dealers against unfair treatment by grantors, who inherently have superior economic power and superior bargaining power in the negotiation of dealerships.” Sec. 135.025(2)(b).
Super Valu seems to argue that because its agreement with D-Mart is nonexclusive it has no responsibility for the economic vitality or survival of D-Mart. Super Valu wholly ignores the benefits it received from the obligations D-Mart undertook to advance Super Valu’s name and its products.2 Under *584the retailer’s agreement D-Mart agreed to identify and advertise itself as a Super Valu retailer by the use of the Super Valu trade name, insignia, emblem and colors. It purchased merchandise and services from Super Valu and agreed to observe all standards and conditions and requirements for the protection of all Super Valu trademarks and trade names. Super Valu claims, however, that it did not "substantially change the competitive circumstances” of the dealership agreement because D-Mart is free to continue in business as before and enjoys the same privileges as any other Super Valu retailer. It claims that sec. 135.03, Stats., does not prevent it from adversely affecting D-Mart’s ability to compete by its actions which do not directly affect the dealership agreement. The majority adopts that construction of sec. 135.03, relying on Brauman Paper Co. v. Congoleum Corp., 563 F. Supp. 1 (E.D. Wis. 1981). Brauman, however, did not deal with a change in competitive circumstances which resulted in a constructive termination of the dealership. Remus v. Amoco Oil Co., 794 F.2d 1238 (7th Cir.), cert. dismissed, — U.S. —, 93 L.Ed.2d 345 (1986), suggests the correct result when a grantor’s competitive actions accomplish a constructive termination of a dealership.
Remus was a franchised Amoco gasoline dealer in Wisconsin who, in a class action, charged Amoco with violating the WFDL by adopting a "discount for cash” program. The court assumed that Remus and his class consisted of dealers who lost money under the program. While the court found that Amoco did not violate the WFDL by its discount program, it considered in dicta what the effect might be if a substantial change in competitive circumstances of the dealership effected a constructive termination.
*585First, the court pointed out that, "The statute’s [135.03, Stats.] main purpose is to give dealers a kind of tenure — like federal judges, or teachers, or workers in establishments covered by collective bargaining contracts.” Remus, 794 F.2d at 1240. It further stated:
The provision about not "substantially changing] the competitive circumstances of the dealership” may be intended simply to protect the dealer against "constructive termination,” that is, against the franchisor’s making the dealer’s competitive circumstances so desperate that the dealer "voluntarily” gives up the franchise. Constructive termination is a problem in some employee tenure cases, where it is treated, as it should be, as termination. The Wisconsin Fair Dealership Law makes the equation explicit. Not only may the franchisor not terminate or fail to renew the franchise outright; the franchisor may not drive the dealer out of business — say by doubling the wholesale price to him only, so that he cannot [compete] against other dealers in the same product. ...
The statute may go somewhat further than we have suggested and protect dealers against new competition that has substantially adverse although not lethal effects. The statute is primarily designed to benefit existing dealers ... and what most dealers fear more than anything else is that the franchisor will increase the amount of intra-brand competition by placing new outlets, whether franchised or franchisor-owned, too close to the existing outlet for comfort. But even if the Wisconsin Fair Dealership Law is designed to give franchised dealers in Wisconsin some protection against such moves by franchisors (an issue we need not decide), this cannot help Remus. Amoco *586did not increase the number of dealers or open up new company-owned stations. [Citation omitted.]
Id. at 1240-41.
The court considered Kealey, where the court held that the WFDL prohibited Walgreen from terminating all its Wisconsin dealerships. Remus, 794 F.2d at 1241. In Kealey the court found that Walgreen was trying to eliminate dealers who had built its reputation in Wisconsin, so that it could open its own stores and appropriate the goodwill that the dealers had created. As to this the Remus court said:
This was just the sort of conduct that the Wisconsin legislature had wanted to prevent. There is nothing like that in this case. Amoco isn’t trying to drive its dealers out of business or even make life more difficult for them; although some dealers may lose from the change in policy that Remus attacks, others will gain.
Id., 794 F.2d at 1241.
It is not suggested in this case that Super Valu has adopted a deliberate policy to eliminate dealers in Wisconsin Rapids so that its new County Market will be a more attractive and financially successful dealership. If, however, we adopt the narrow construction of "dealership agreement” of sec. 135.03, Stats., which the majority proposes, we expose dealers to exactly that possibility. A grantor such as Super Valu could appropriate the goodwill of its dealers by opening grantor-owned stores with which the dealers could not compete. As Judge Posner observed in Remus, this is exactly the kind of economic misconduct the WFDL is designed to protect dealers against. Remus, 794 F.2d at 1241.
*587Even if in this case Super Valu is motivated simply by rugged American entrepreneurism, it may not use its superior economic power to make its dealers’ competitive circumstances so desperate that the consequences are fatal to the dealer. Because I believe that the WFDL protects D-Mart against this result, I respectfully dissent.

Super Valu presented its market analysis to Cahak. It indicated that "unencumbered” cash of $400,000 - $500,000 would be necessary to make the project a reality. The estimated necessary total investment was approximately two million dollars. Apparently Super Valu was willing to consider Cahak as the *583retailer for County Market but he lacked the financial resources. Super Valu does not contend that an offer to Cahak would have excused compliance with ch. 135, Stats.

It is undoubtedly bitterly ironic to D-Mart, and William Cahak as guarantor, that they are now compelled to pay Super Valu the value of the merchandise, inventory, furniture, trade fixtures and equipment purchased from Super Valu which Super Valu by its destruction of D-Mart’s dealership has reduced to bankruptcy value.