Fleet Wholesale Supply Co., Inc. v. Remington Arms Co., Inc.

• Decision Date: 06 May 1988
• Docket Number: No. 87-2862,87-2862
• Citation: 846 F.2d 1095
• Parties: FLEET WHOLESALE SUPPLY COMPANY, INC., Plaintiff-Appellant, v. REMINGTON ARMS COMPANY, INC., Defendant-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 1095

846 F.2d 1095

FLEET WHOLESALE SUPPLY COMPANY, INC., Plaintiff-Appellant, v. REMINGTON ARMS COMPANY, INC., Defendant-Appellee.

No. 87-2862.

United States Court of Appeals, Seventh Circuit.

Argued April 18, 1988.

Decided May 6, 1988.

Michael A. Bowen, Foley & Lardner, Milwaukee, Wis., for plaintiff-appellant.

Diane Sykes, Whyte & Hirschboeck, S.C., Milwaukee, Wis., for defendant-appellee.

Before CUMMINGS, CUDAHY and EASTERBROOK, Circuit Judges.

EASTERBROOK, Circuit Judge.

The Wisconsin Fair Dealership Law, Wis.Stat. ch. 135, governs the relations between a supplier and its "dealers" but does not define "dealer" except by saying that a dealer is a distributor in a "community of interest" with the supplier, Sec. 135.02(2), (3), which just pushes the lack of a definition to a new level of abstraction. Ziegler Co. v. Rexnord, Inc., 139 Wis.2d 593, 407 N.W.2d 873 (1987), adopts a multi-factor definition under which the trier of fact must ponder all aspects of the buyer-seller relation.

This case, removed to federal court under the diversity jurisdiction, pits Fleet Wholesale Supply Co., which operates 25 retail outlets in Wisconsin, against Remington Arms Co., which supplied Fleet with about $1.6 million of firearms in 1986. Sales of Remington's guns accounted for about 0.5% of Fleet's revenues in 1986. Fleet did not have an exclusive territory but operated under an agreement designating it as a distributor with annual sales targets, and it built a special facility to store weapons it purchased from Remington; in exchange Remington gave Fleet a "functional distributor discount" of 5% relative to the prices charged to many other customers. The legality of such a discount to a large "dual distributor" (a firm with both wholesale and retail operations) was called into question by Boise Cascade Corp., 107 F.T.C. 76 (1986), which interpreted the Robinson-Patman Act, 15 U.S.C. Sec. 13, to prohibit such "functional discounts" in almost every case, even when the industry was vigorously competitive. Whether out of concern for liability or out of a belief that a different method of pricing would increase profits, Remington told its distributors in late 1986 that they were terminated, and then promptly told them that they were welcome to continue to purchase on different terms. In Fleet's case, that meant the elimination of the 5% "functional distributor discount". (It may also have meant the elimination of deferred payment terms, a disputed but unimportant issue.)

Fleet, claiming to be a "dealer" protected by Wisconsin's statute against terminations without adequate reason, filed this suit seeking an injunction against its "termination". Remington replied that it had not terminated Fleet but had simply increased its price, something both state law and the contract between the parties permit; Remington added that Fleet's sales were such a small portion of its business that it was not a "dealer" and, if it were, damages would be an adequate remedy for any injury. Fleet rejoined that the price increase was selective, that other wholesalers (and at least one dual distributor) continue to receive the 5% discount, making the change an imposition of onerous terms forbidden as the practical equivalent of termination. See Wis.Stat. Sec. 135.03 (prohibiting substantial changes without good cause); Remus v. Amoco Oil Co., 794 F.2d 1238, 1240 (7th Cir.1986). It also relied on Wis.Stat. Sec. 135.065, which says that any violation of the Act "is deemed an irreparable injury to the dealer for determining if a temporary injunction should be issued."

The district court thought this "deemer" clause counter-intuitive and declined to issue an interlocutory injunction on two grounds: that Fleet has an "adequate remedy at law" (damages) even if it will suffer irreparable injury; and that Fleet is likely to lose the case on the merits because purchases amounting to 0.5% of its retail sales did not make Fleet a "dealer". Fleet took this immediate appeal under 28 U.S.C. Sec. 1292(a)(1). It has meanwhile pursued discovery in the district court and amended its complaint to assert that selective elimination of the 5% discount violates the Robinson-Patman Act; in another forum, the FTC has been told that its views of the application of that statute to dual distributors are erroneous. Boise Cascade Corp. v. FTC, 837 F.2d 1127 (D.C.Cir.1988). Whether Remington will revamp its pricing structure yet again we cannot say. We are concerned on this appeal only with the application of the Fair Dealership Law to the denial of the preliminary injunction.

Someone protesting the denial of a preliminary injunction has an uphill task, for the district court has substantial discretion both in estimating the probability of success on the merits and in balancing the equitable aspects of the claim. When the district court has such discretion, review is deferential. See Lawson Products, Inc. v. Avnet, Inc., 782 F.2d 1429 (7th Cir.1986); American Hospital Supply Corp. v. Hospital Products Ltd., 780 F.2d 589 (7th Cir.1986); Roland Machinery Co. v. Dresser Industries, 749 F.2d 380 (7th Cir.1984). The court should try to minimize the error costs, the sum of the costs of erroneously granting an injunction (should it turn out that none is warranted) and of denying an injunction (should the plaintiff prevail in the end). To minimize the costs of the two possible errors, the court must know (and compare) the costs of granting and denying relief. That inquiry requires the court to consider many factors that cannot be measured precisely, hence the deferential review. The district court did not abuse its discretion in this case. It thought the probability of Fleet's prevailing on the merits small; we agree. Only a "dealer" is protected by the Act--and then only against unjustified termination. Purchases from Remington made up only 0.5% of Fleet's business. No court has held that a firm doing such a small portion of its business with one supplier is a "dealer". And the weakness on the merits, combined with the fact that the case entails only a 5% price increase on 0.5% of Fleet's business, suggests that the potential costs of an erroneous denial of interim relief are small.

The...