Kealey Pharmacy & Home Care Serv. v. Walgreen Co.

• Decision Date: 03 June 1982
• Docket Number: 80-C-523.,No. 80-C-522,80-C-522
• Citation: 539 F. Supp. 1357
• Parties: KEALEY PHARMACY & HOME CARE SERVICE, INC.; Milton Avenue Pharmacy; Rademacher Drugs, Inc. d/b/a East Troy Drugs; Lake Mills Pharmacy, Inc.; Joseph Jameson d/b/a Monticello Pharmacy, a partnership; James S. Krisik d/b/a Genoa City Pharmacy; Phil Lutgen d/b/a Delafield Pharmacy Walgreen Agency; Kunkel Pharmacy, Inc.; Gollash Pharmacies, Inc. d/b/a Bernie's Walgreen Agency Langmack's, Inc. d/b/a Langmack's Drugs; D & W Pharmacies, Inc. d/b/a Monona Drive Walgreen Agency; and Busse Pharmacy, Inc., Plaintiffs, v. WALGREEN COMPANY, Defendant. COLLINS DRUGS, INC., a Wisconsin corporation, Plaintiff, v. WALGREEN CO., an Illinois corporation, Defendant.
• Court: U.S. District Court — Western District of Wisconsin

539 F. Supp. 1357

KEALEY PHARMACY & HOME CARE SERVICE, INC.; Milton Avenue Pharmacy; Rademacher Drugs, Inc. d/b/a East Troy Drugs; Lake Mills Pharmacy, Inc.; Joseph Jameson d/b/a Monticello Pharmacy, a partnership; James S. Krisik d/b/a Genoa City Pharmacy; Phil Lutgen d/b/a Delafield Pharmacy Walgreen Agency; Kunkel Pharmacy, Inc.; Gollash Pharmacies, Inc. d/b/a Bernie's Walgreen Agency Langmack's, Inc. d/b/a Langmack's Drugs; D & W Pharmacies, Inc. d/b/a Monona Drive Walgreen Agency; and Busse Pharmacy, Inc., Plaintiffs, v. WALGREEN COMPANY, Defendant.

COLLINS DRUGS, INC., a Wisconsin corporation, Plaintiff, v. WALGREEN CO., an Illinois corporation, Defendant.

Nos. 80-C-522, 80-C-523.

United States District Court, W. D. Wisconsin.

June 3, 1982.

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Dennis L. Hansch, Janesville, Wis., for plaintiffs in No. 80-C-522.

Douglas L. Flygt, Madison, Wis., for plaintiff in No. 80-C-523.

H. Dale Peterson, Madison, Wis., for defendant in both cases.

OPINION AND ORDER

CRABB, Chief Judge.

These civil actions for injunctive and monetary relief under the Wisconsin Fair Dealership Law, Wis.Stats. § 135.01 et seq., are before the court on defendant's motions for summary judgment. Both actions were begun in state court and removed here by defendant. Diversity jurisdiction is present. 28 U.S.C. § 1332. The issue in both cases is whether the Wisconsin Fair Dealership Law permits a grantor to cancel all of its dealership arrangements within the state for bona fide economic reasons such as a change in its manner of doing business. For the reasons that follow, I conclude that the Wisconsin Fair Dealership Law does not permit grantors to terminate dealerships for any reason other than "good cause," as that term is defined in the Act; that defendant Walgreen's termination of its dealership agreements was without good cause; and that those plaintiff-dealers whose agreements are covered under the Act are entitled to damages and to partial summary judgment in their favor, but that none of the plaintiffs is entitled to injunctive relief.¹

From the record, I find that there is no genuine issue with respect to the following material facts.

FACTS

Plaintiffs are pharmacies doing business in the State of Wisconsin. Defendant is a corporation organized under the laws of the State of Illinois, with its principal place of business at 200 Wilmot Road, Deerfield, Illinois.

Defendant manufactures and sells under its own private labels a wide variety of drugs, beauty aids, and household commodities. It also sells similar products manufactured by other companies. Prior to October 1, 1980, defendant sold these products to the consuming public through a nation-wide system of both company-owned and independently-owned stores.

Every independently-owned drug store which sold Walgreen brand products operated under a standard written agreement (the "Retailer's Agreement"). At the beginning of 1980, approximately 1,400 independently-owned drug stores operated throughout the United States under such agreements.

The Retailer's Agreement governed all aspects of the contractual relationship between defendant and its dealers including such matters as the right of the independently-owned store to use the Walgreen trade name and trademark, defendant's right to locate a company-owned store near the independently-owned store, and the minimum amount of Walgreen products that the retailer must purchase each year. Paragraph "Fourth. (c)" of the Retailer's Agreement expressly provided that "in the event Walgreen determines at any time to discontinue all similar Agreements, it may, at its option, terminate this agreement upon thirty days' written notice" to the dealer. Under the terms of the Retailer's Agreement, the plaintiff dealers were permitted to, and did, purchase additional goods for resale from suppliers other than defendant.

On April 14, 1980, defendant's board of directors met and decided to discontinue the operations of its Agency Division, which administered the defendant's relationship with its dealers, and to terminate all of the Retailer's Agreements as of October 1, 1980, on the ground that these independently-owned drug stores were producing an inadequate rate of return.

By letter dated April 17, 1980, defendant informed plaintiffs and each of its other approximately 1,400 independent dealers that, pursuant to paragraph "Fourth. (c)" of its Retailer's Agreement, defendant had elected to terminate the agreements, effective October 1, 1980.

By letter dated April 28, 1980, defendant informed every dealer that defendant would furnish the dealer's name and address to manufacturers, wholesalers, suppliers, and vendors for the purpose of assisting the dealers in finding alternative sources of supply. Subsequently, defendant gave to other drug store companies the names and addresses of most of its dealers.

As a result of defendant's April, 1980 decision to terminate the Agency Division and all of its Retailer's Agreements, the division was disbanded. Division staff was reduced from 110 persons to 3; over half of the staff left defendant's employment and the remainder were transferred to other positions within the Walgreen organization. The division field personnel responsible for the dealers in the State of Wisconsin are no longer employed by defendant.

As of October 1, 1980, defendant had Retailer's Agreements with the various plaintiffs executed on these dates: 1) Bernie's Walgreen Agency, March 21, 1972; 2) Genoa City Pharmacy, April 4, 1973; 3) Delafield Pharmacy, June 4, 1974; 4) Kealey Pharmacy, August 21, 1974; 5) Milton Avenue Pharmacy, August 21, 1974; 6) Collins Drugs, October 9, 1975; 7) Langmack's Drugs, June 7, 1976; 8) East Troy Drugs, June 23, 1976; 9) Lake Mills Pharmacy, November 11, 1976; 10) Monticello Pharmacy, June 7, 1977; 11) Busse Pharmacy, August 15, 1978; 12) Kunkel Pharmacy, September 26, 1978; 13) Monona Drive Walgreen Agency, approximately January 1, 1979; and 14) Willis Drugs, February 5, 1979.

Plaintiffs Kealey Pharmacy, Langmack's Drugs, Busse Pharmacy, and Kunkel Pharmacy had had previous agreements with defendant predating the enactment of the Wisconsin Fair Dealership Law in April, 1974. The earlier agreements contained no provisions for renewal, but were for fixed periods of time, subject to earlier termination upon the occurrence of certain specified conditions. The more recent agreements were entitled "Retailer's Agreements," as were the earlier ones; they contain no reference to any earlier agreement between the parties; and, in fact, they bear no indication of being renewals of previous agreements. The Kealey and Langmack agreements with defendant differ from their earlier agreements with defendant in several respects: some trade names are added while others are deleted; for example, paragraph 2(c) and the last sentence of paragraph 2(a) of the old agreements are deleted from the new agreements. For plaintiff Kealey Pharmacy, the minimum yearly purchase requirement was increased from $7,500 to $20,000. For plaintiff Langmack's Drugs, Inc., the minimum purchase requirement was increased from $12,000 to $25,000.

Defendant continues to operate company-owned stores in Wisconsin.

OPINION

A. Dealership Agreements Covered by the Wisconsin Fair Dealership Law

Defendant does not contend that plaintiffs are not dealers within the meaning of that term in Wis.Stats. § 135.02. It contends, however, that not all of the plaintiffs are parties to agreements subject to the provision of the Wisconsin Fair Dealership Law, either because they were operating under agreements executed prior to the effective date of the law or because they were operating under "renewal agreements" executed prior to the effective date of the amendment to the Fair Dealership Law which specified that the provisions of the law extended to renewal agreements. Therefore, the threshold inquiry is to determine which of the plaintiffs are parties to agreements subject to the provisions of the Wisconsin Fair Dealership Law.

The fourteen plaintiffs of this consolidated lawsuit may be considered in four categories: (1) those that at the time of termination were operating under a Retailer's Agreement executed prior to April 5, 1974 (the effective date of the Wisconsin Fair Dealership Law); (2) those that were operating under Retailer's Agreements executed after April 5, 1974, but before November 24, 1977 (the effective date of the amendments to the Wisconsin Fair Dealership Law), having been parties to previous Retailer's Agreements executed prior to April 5, 1974; (3) those that were operating under Retailer's Agreements executed after November 24, 1977, having been parties to previous Retailer's Agreements executed before April 5, 1974; and (4) those that were operating under Retailer's Agreements executed after April 4, 1974, having not been parties to previous agreements with defendant.

1. Pre-April 5, 1974 agreements

As the Wisconsin Fair Dealership Law was originally enacted in 1974, it provided that

No grantor, directly or through any officer, agent or employe may terminate, cancel, fail to renew or substantially change the competitive circumstances of a Retailer's agreement entered into after the effective date of this act (1973) sic without good cause.² The burden of proving good cause shall be on the grantor.

Wis.Stats. § 135.03. (Emphasis supplied.) It is clear from the language of the statute as it was originally enacted, that pre-April 5, 1974 agreements were not entitled to coverage under the Wisconsin Fair Dealership Law. However, by an amendment enacted in November 24, 1977, the underscored language was deleted, and Wis.Stats. § 135.025 was created to provide that one of the purposes of the Wisconsin Fair Dealership Law was "to govern all dealerships, including any renewals or amendments, to the full extent consistent with the constitutions of this state and the United...