819 F.2d 820 (7th Cir. 1987), 86-2313, Moore v. Tandy Corp.

Docket Nº:86-2313.
Citation:819 F.2d 820
Party Name:Richard E. MOORE, Plaintiff-Appellant, v. TANDY CORPORATION, Defendant-Appellee.
Case Date:May 18, 1987
Court:United States Courts of Appeals, Court of Appeals for the Seventh Circuit

Page 820

819 F.2d 820 (7th Cir. 1987)

Richard E. MOORE, Plaintiff-Appellant,


TANDY CORPORATION, Defendant-Appellee.

No. 86-2313.

United States Court of Appeals, Seventh Circuit

May 18, 1987

Argued Jan. 27, 1987.

Page 821

Stephen P. Hurley, Aagaard, Hurley, Burish & Milliken, Madison, Wis., for plaintiff-appellant.

Thomas Pyper, Stafford, Rosenbaum, Rieser & Hansen, Madison, Wis., for defendant-appellee.

Before POSNER, FLAUM, and MANION, Circuit Judges.

POSNER, Circuit Judge.

The appeal in this diversity case requires us to decide whether the plaintiff, although nominally an employee of the defendant, was a "dealer" within the meaning of the Wisconsin Fair Dealership Law, Wis.Stat. Secs. 135.01 et seq., in which event he could be terminated only for "good cause." Wis.Stat. Sec. 135.03; see Remus v. Amoco Oil Co., 794 F.2d 1238, 1240 (7th Cir.1986).

Shortly before the law was passed in 1973, Radio Shack (Tandy Corporation), a nationwide retail distributor of consumer electronic goods, abandoned its system of franchised outlets and replaced them with stores it owned itself, managed by employees. It offered the store managers a "special manager incentive agreement." Radio Shack would pick the site for a store, lease the store premises from the owner, equip the store, select and supply the inventory, establish pricing directives, pay all the store's expenses (though the variable expenses would be subtracted from the manager's compensation, as we shall see), maintain all financial records, employ all store personnel, and determine store hours, while the special manager would train and supervise the sales staff, maintain daily sales and inventory records, set prices (in accordance, however, with Radio Shack's directives), and authorize returns, exchanges, and repairs of goods. The special manager would not receive a fixed wage, but instead one half of the store's revenues (after adjustments unnecessary to dwell on here), minus the store's variable expenses. (This is the same arrangement as in a standard sharecropping contract, with the manager corresponding to the sharecropper and Radio Shack to the owner of the sharecropped land.) If the variable expenses exceeded the manager's share of the store's monthly revenues, the difference would be subtracted from the manager's compensation in subsequent months, but he would never have to dig into his own pocket to make good any loss resulting from the operation of the store. For tax purposes the parties designated the compensation received by the manager as employee income, and the agreement is emphatic that the manager is an "employee" --though of course these labels are not decisive. The term of the agreement is two years, and the agreement expires automatically when the term is up, unless renewed.

We do not understand Moore to be arguing that if this were all there was to the special manager incentive program he would be a dealer under the Wisconsin Fair Dealership Law. The critical wrinkle is the requirement that the special manager put up a security deposit equal to half the value of the store's inventory. The deposit is retained by Radio Shack and earns no interest for the special manager; but if and when the agreement is terminated, Radio Shack must return the deposit to him. Consistent with the concept of a security deposit, Radio Shack may debit the special manager's deposit to cover losses caused by his dishonesty, breach of contract, gross mismanagement, or failure to manage the store with "a reasonable degree of care, skill, and judgment."

Moore signed his first special manager...

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