Baldewein Co. v. Tri-Clover, Inc.

• Decision Date: 29 February 2000
• Docket Number: No. 99-0541-CQ.,99-0541-CQ.
• Citation: 233 Wis.2d 57,2000 WI 20,606 N.W.2d 145
• Parties: The BALDEWEIN COMPANY, Plaintiff-Appellant, v. TRI-CLOVER, INC., Defendant-Appellee.
• Court: Wisconsin Supreme Court

233 Wis.2d 57

2000 WI 20

606 N.W.2d 145

The BALDEWEIN COMPANY, Plaintiff-Appellant, v. TRI-CLOVER, INC., Defendant-Appellee.

No. 99-0541-CQ.

Supreme Court of Wisconsin.

Oral argument September 9, 1999.

Decided February 29, 2000.

For the plaintiff-appellant there were briefs by Michael Spurlock, Eric W. Beery and Beery & Spurlock Co., L.P.A., Columbus, OH and W. Stuart Parsons, Daniel Janssen and Quarles & Brady, Milwaukee and oral argument by Richard A. Westley & Eric Beery.

For the defendant-appellee there was a brief by Charles P. Graupner, Joshua L. Gimbel and Michael Best & Friedrich, LLP, and oral argument by Charles P. Graupner.

¶ 1. DIANE S. SYKES, J.

This case is before the court on certification from the United States Court of Appeals for the Seventh Circuit pursuant to Wis. Stat. § 821.01 (1997-98) and Circuit Rule 52. The essential question is: when is a dealership "situated in this state" under Wis. Stat. § 135.02(2),¹ thereby entitling the dealer to protection under the Wisconsin Fair Dealership Law (WFDL)?² Based upon the language of the statute, as well as its history and purposes, we adopt a test similar to the multiple factor test advanced in Ziegler Co. v. Rexnord, Inc., 139 Wis. 2d 593, 606, 407 N.W.2d 873 (1987), which considers the dealership's total involvement and investment in promoting and selling the grantor's products or services in the State of Wisconsin.

¶ 2. This case arises out of the termination of a 56-year relationship between the Baldewein Company (Baldewein) and Tri-Clover, Inc. (Tri-Clover). Baldewein is an Illinois corporation with its principal place of business in Franklin Park, Illinois. Baldewein sells sanitary pumps, valves, fittings, and tubing for use in the food, dairy, and pharmaceutical industries. From 1940 until 1996, Baldewein was a distributor for Tri-Clover, a manufacturer of fittings, valves, pumps, and tubing. Tri-Clover is a Delaware corporation with its headquarters, distribution center, and principal place of business in Kenosha, Wisconsin.

¶ 3. Baldewein and Tri-Clover operated under oral agreements for most of their relationship. On May 24, 1985, the two entered into a written distributor agreement that amended the terms of the previous oral agreements and provided that Wisconsin law would govern the relationship. The agreement granted Baldewein a nonexclusive right to promote and sell Tri-Clover products in a territory consisting of Baldewein's "normal marketing area," which included the entire United States and several foreign countries. Although Tri-Clover was later purchased by the Alfa-Laval Group, the agreement appears to have been unaffected by the change in Tri-Clover's ownership, and the parties continued to operate under it until Tri-Clover terminated the relationshp in June 1996.

¶ 4. Prior to the termination, Baldewein derived some 80 to 90 percent of its total revenue from the sale of Tri-Clover's products. The vast majority of that business, however, was conducted outside the State of Wisconsin, primarily in Illinois, where Baldewein was headquartered. In fact, based upon sales figures from both Baldewein and Tri-Clover, the district court concluded that although Baldewein always had some Tri-Clover sales in Wisconsin, for at least the first 51 years of the parties' relationship, over 99 percent of Baldewein's Tri-Clover sales took place outside this state.

¶ 5. Between 1992 and 1996, when the relationship was terminated, Baldewein's Wisconsin sales of Tri-Clover products were showing slight increases, averaging between 3.9 and 4 percent of its total annual Tri-Clover sales during those years. This development appears to have coincided with the hiring of two Wisconsin residents who solicited sales for Baldewein in this state. It is not clear, however, whether these salespeople devoted all of their time to developing the Wisconsin market for Baldewein's Tri-Clover product line, or whether Wisconsin was only part of their assigned territory. At no time did Baldewein ever have an office, warehouse or other facility in Wisconsin, or invest in any physical plant or inventory in this state.

¶ 6. During the fiscal years 1993-1995, Baldewein spent approximately $40,000 per year on advertising. It is not clear from the record, however, how much of this advertising budget was devoted exclusively to Wisconsin or could be apportioned in some pro rata way to the development of the Wisconsin market. Nor is there any indication of how much Baldewein spent on advertising in the years prior to 1993, either generally or in Wisconsin in particular. There is a reference in the record to "advertising and mailings" being sent to some 111 customers and prospective customers in Wisconsin, but it is not specific as to time.

¶ 7. On June 29, 1996, Tri-Clover changed its nationwide distribution system and terminated its relationship with Baldewein. In March 1997, Baldewein brought a diversity suit in the United States District Court for the Eastern District of Wisconsin, claiming damages under the Wisconsin Fair Dealership Law. Tri-Clover counterclaimed, seeking damages based upon Baldewein's failure to pay for products it had purchased on account.

¶ 8. Both parties filed cross-motions for summary judgment. The district court, the Honorable Rudolph T. Randa, granted Tri-Clover's motion, relying on Swan Sales Corp. v. Joseph Schlitz Brewing Co., 126 Wis. 2d 16, 374 N.W.2d 640 (Ct. App. 1985) and an unpublished federal district court opinion, Lewis Communications v. Athletic Business Publications, No. 97-C-132-S (W.D. Wis. Oct. 7, 1997). Judge Randa determined that in order to be "situated in this state" within the meaning of the WFDL, a dealership must have some meaningful connection with this state, as represented by a "not-insignificant amount of sales in Wisconsin compared to its overall sales" of the grantor's products. Baldewein Co. v. Tri-Clover, Inc., No. 97-C-213, slip op. at 19 (E.D. Wis. Mar. 9, 1998).

¶ 9. Judge Randa concluded that to hold otherwise would mean "any nationwide or worldwide dealership could obtain for itself the protections of the WFDL by the simple trick of a Wisconsin choice-of-law provision and a single sale to the State." Baldewein, slip op. at 15. He found that Baldewein's sales of Tri-Clover products in Wisconsin, which at no time were greater than 7.3 percent and which averaged 3.5 percent to 4 percent of its total Tri-Clover sales in the last five years of the parties' relationship, were not sufficient to qualify Baldewein as a dealership "situated in this state" under the WFDL.

[1, 2]

¶ 10. Baldewein appealed the district court's decision to the United States Court of Appeals for the Seventh Circuit. The Seventh Circuit certified the case to us to interpret the "situated in this state" language in the statute. We are therefore presented with a question of law, which we review independently. Although we are not bound by the federal court's interpretation of Wisconsin law, Daanen & Janssen, Inc. v. Cedarapids, Inc., 216 Wis. 2d 395, 400, 573 N.W.2d 842 (1998), it is nonetheless helpful to our analysis.

[3-5]

¶ 11. In any case of statutory interpretation we must give effect to the intent of the legislature. Matter of Sullivan, 218 Wis. 2d 458, 464, 578 N.W.2d 596 (1998). We first look for that intent in the language of the statute itself. If we find that the language of the statute is ambiguous, we will look beyond it to the scope, history, context, subject matter, and object of the statute. State ex rel. Jacobus v. State, 208 Wis. 2d 39, 47, 559 N.W.2d 900 (1997). A statute is ambiguous if it is capable of being understood by reasonably well-informed persons in more than one way. Id.

¶ 12. The statutory definition of a "dealer" appears, on its face, to be quite simple: a "dealer" is "a person who is a grantee of a dealership situated in this state." Wis. Stat. § 135.02(2). The definition of a "dealership," on the other hand, is more complicated and is both extremely broad and highly nuanced:

`Dealership' means a contract or agreement, either express or implied, whether oral or written, between 2 or more persons, by which a person is granted the right to sell or distribute goods or services, or use a trade name, trademark, service mark, logotype, advertising or other commercial symbol, in which there is a community of interest in the business of offering, selling or distributing goods or services at wholesale, retail, by lease, agreement or otherwise.

Wis. Stat. § 135.02(3)(emphasis added).

¶ 13. "Community of interest" has been the most vexing phrase in the dealership definition for courts faced with applying this law. Our decision in Ziegler, 139 Wis. 2d at 606, established a multiple factor test that provides some contours for the concept. The "situated in this state" language has also been an interpretive challenge.

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¶ 14. The only state court authority about the meaning of the "situated in this state" requirement is Swan, 126 Wis. 2d at 20-22. Swan held that the language was ambiguous because "a reasonably well-informed person might interpret it to mean either that the grantee (dealer) must be located in Wisconsin or that the dealership must be situated in Wisconsin." Id. at 21.

¶ 15. Having found an ambiguity, the Swan court consulted the legislative history of the statute, tracing the "situated in this state" language to a 1977 effort to amend the WFDL to limit its application to Wisconsin dealers. Id. 21-22. This was a legislative response to two federal cases, C.A. May Marine Supply Co. v. Brunswick Corp., 557 F.2d 1163 (5th Cir. 1977) and Boatland, Inc. v. Brunswick Corp., 558 F.2d 818 (6th Cir. 1977), which had applied the WFDL to non-Wisconsin dealers operating under agreements containing Wisconsin choice-of-law provisions. See Diesel Serv. Co. v. AMBAC Int'l Corp., 961 F.2d 635, 638 (7th Cir. 1992)

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[7]

¶ 16. The Swan court concluded that the 1977 amendment adding the "situated in...