Bush v. National School Studios, Inc.

• Decision Date: 25 June 1987
• Docket Number: No. 84-2056,84-2056
• Citation: 139 Wis.2d 635,407 N.W.2d 883
• Parties: Thomas G. BUSH, Plaintiff-Respondent, v. NATIONAL SCHOOL STUDIOS, INC., Defendant-Appellant-Petitioner.
• Court: Wisconsin Supreme Court

Page 883

407 N.W.2d 883

139 Wis.2d 635

Thomas G. BUSH, Plaintiff-Respondent, v. NATIONAL SCHOOL STUDIOS, INC., Defendant-Appellant-Petitioner.

No. 84-2056.

Supreme Court of Wisconsin.

Argued April 28, 1987.

Decided June 25, 1987.

Leo G. Stern, Minneapolis, Minn., argued, for defendant-appellant-petitioner; Michael A. Trittipo, Fredrikson & Byron, P.A., Minneapolis, Minn., Phillip M. Steans, and Solberg, Steans, Schofield & Higley, Menomonie, on brief.

James P. Lonsdorf, Wausau, argued for plaintiff-respondent; Lonsdorf & Andraski, Wausau, on brief.

BABLITCH, Justice.

National School Studios, Inc. (National) seeks review of a published decision of the court of appeals, Bush v. National School Studios, 131 Wis.2d 435, 389 N.W.2d 49 (Ct.App.1986), which held that Thomas G. Bush (Bush), is a "dealer" under the Wisconsin Fair Dealership Law (WFDL), and is therefore entitled to its protections, notwithstanding a clause in the agreement between the parties specifying that Minnesota law governed the contract. We conclude that because Bush was contractually granted a right to sell National's services and shared a community of interest with National, he is a dealer as defined by the WEDL. We further conclude that because the WFDL embodies a strong state public policy, parties cannot avoid it by including a contrary choice of law provision in their contract. Accordingly, we affirm the decision of the court of appeals.

The underlying issue on review is whether Bush is a dealer as defined by the WFDL. If Bush is a dealer the court must determine whether the "door to door" sales exclusion of the WFDL denies Bush coverage. In addition, the court must resolve whether the parties' contract provision stating that Minnesota law governs the relationship, should be given effect.

In 1982, after a 21 year association, National terminated Bush's employment. Bush then commenced this action against National claiming that he was wrongfully terminated in violation of the cancellation and policy termination provisions of ch. 135, Stats., the WFDL. Bush specifically alleged he was terminated without good cause and was not given the required written notice. The trial court determined that Bush was a dealer under the WFDL and was therefore entitled to the Law's protections. The jury found that National had terminated Bush without cause and awarded damages. The court of appeals affirmed the trial court's determination that Bush was a dealer under the WFDL but reversed the damage portion of the judgement. The court held the award was duplicative and remanded for a new trial on damages. This latter ruling on damages has not been challenged by the parties.

The underlying facts in this case are undisputed. In 1961, Bush began his career as a photographer for National, a Minnesota corporation engaged in the school photography business. Bush took student portraits at schools in northern Wisconsin. Bush was initially hired by his father, George Bush, who was manager of National's northern Wisconsin territory. In 1969, Bush became co-manager with his father and the two thereafter worked the territory together.

In 1979, after a 30 year association with National, George Bush decided to reduce his employment activity and Bush became sole manager of the northern Wisconsin territory. This transfer of territorial rights required the consent and approval of National. The terms and conditions of the transfer were set forth in a Territory Succession Agreement executed by Bush, George Bush and National on December 28, 1979. The agreement provided that Bush would pay his father $150,000 for rights to the territory. It also specified that the $150,000 was payable in 10 equal installments of $15,000 each derived only out of commissions in excess of Bush's annual draw and expenses. An addendum to the Territorial Succession Agreement provided that any failure to make payments as required under the agreement constituted a "material breach" of Bush's employment contract with National.

National was the conduit for the payments. If at the end of the year Bush's commissions exceeded his total draw of $1800 biweekly and expenses, National would automatically pay the required installment to George Bush. In exchange for the payments George Bush transferred his "bookings," which represented National's good will and existing agreements with schools in the territory and agreed to provide "continuing consulting services" to National or Bush. At the time Bush was terminated, he had paid $17,000 through National to George Bush.

On December 17, 1979, just before the Territory Succession Agreement was executed Bush signed an employment contract with National. Pursuant to the contract he was to work exclusively for National as "primary or sole representative" in its ten county northern Wisconsin territory. The contract required Bush to actively solicit new and repeat business for National, purchase all film and merchandise necessary to carry on the business from National, and promote the business by assuming one-half of advertising costs. The contract provided that Bush would receive a commission equal to forty percent of National's net sales receipts in his assigned territory. The employment contract further provided that either party could terminate the agreement upon thirty days written notice to the other party. It also allowed National to terminate the agreement for cause upon 10 days written notice to Bush. The contract also contained a choice of law clause which provided as follows:

"The provisions of this contract shall be governed by the laws of the State of Minnesota unless otherwise required by the law of conflict of laws. Any provision of this contract which may be unenforceable or invalid in the applicable jurisdiction shall be severable from the contract and shall not affect or nullify the other provisions thereof."

As territory manager, Bush traveled to schools within his territory and convinced school administrators to use National's student portrait services. In these solicitation efforts Bush prominently used and displayed the National name and logo. For example, business cards, stationery, advertising, identification badges, and calendars and pens distributed to school administrators carried both National and Bush's name.

Once a school booked National's service through Bush he scheduled the picture taking sessions, sent notices and order forms to parents and set the price on the portrait packages. Bush had substantial latitude to set the prices on these packages. On the scheduled picture date, Bush accepted student orders, photographed the students and collected payment. Although not required to do so by National, when students were unable to make payment on the scheduled date, Bush extended them credit. After photographing the students, Bush mailed the exposed film to National which processed, packaged and distributed the finished portraits to the schools. Bush also remitted all funds collected from portrait package sales to National by depositing them in its bank account.

National did all the necessary accounting to calculate Bush's commissions. National also withheld federal and state income tax from Bush's weekly draw, and deducted amounts for health and life insurance. Bush received a W-2 form each year from National and described himself as its employee on his tax returns. In addition, each summer when schools were in recess Bush applied for and received unemployment compensation.

In November 1982, National terminated Bush's employment and Bush commenced this action claiming among other things that he was terminated without cause in violation of the WFDL. Bush stipulated that if the WFDL did not apply and the jury found National terminated him without cause, his damages would be limited to $2500. If the jury concluded he was terminated with cause, Bush stipulated to a damage award of $1000. The jury agreed with Bush that he had been terminated without cause and awarded him $50,000 for lost income and $50,000 for lost "territory rights."

After verdict the trial court determined as a matter of law that Bush was a dealer under the WFDL and therefore the statute's good cause requirement for all dealership terminations applied. The court therefore entered judgment on the jury's verdict.

Before setting forth the analysis which leads us to conclude that Bush was operating a dealership as defined by the WFDL we will consider the preliminary issue of whether the parties' choice of law provision, selecting Minnesota law to govern the contract, should be given effect.

I. The parties choice of law clause

National contends that the clause in the employment contract specifying that Minnesota law governs the contract should be honored by this court because it does not violate fundamental Wisconsin public policy. National argues that Wisconsin ordinarily follows the same termination-at-will rule as Minnesota and that if indeed a franchise/dealership is involved, Minnesota law also protects franchises against unfair termination. Minnesota Stat. sec. 80C.14 subd. 2(a) (1986).

In contrast, Bush argues that whether he would receive protection under Minnesota's franchise law is highly debatable. National in fact concedes that Minnesota and Wisconsin law are not co-extensive. Bush points out that the Wisconsin legislature has declared the WFDL fundamental policy and has specifically provided that its effect cannot be varied by contract. This public policy, Bush contends, renders the choice of law clause in the employment contract unenforceable. We agree.

While Wisconsin courts have acknowledged that parties to a contract may expressly agree that the law of a particular jurisdiction shall control their contractual relations; Jefferis v. Austin, 182 Wis. 203, 205, 196 N.W. 238 (1923); Brown v. Gates, 120 Wis. 349, 97 N.W. 221 (1904); First Wis. Nat. Bank of Madison v. Nicolaou, 85 Wis.2d 393, 397 n. 1, 270 N.W.2d 582 (Ct.App.1978), this...