Central Corp. v. Research Products Corp.

Decision Date15 June 2004
Docket NumberNo. 02-1974.,02-1974.
Citation272 Wis.2d 561,681 N.W.2d 178,2004 WI 76
PartiesCentral Corporation, Plaintiff-Appellant-Petitioner, v. Research Products Corporation, Defendant-Respondent.
CourtWisconsin Supreme Court

For the plaintiff-appellant-petitioner there were briefs by Daniel W. Hildebrand and DeWitt Ross & Stevens, S.C., Madison, and John M. Kelly and Dempsey, Williamson, Young, Kelly & Hertel, L.L.P, Oshkosh, and oral argument by Daniel W. Hildebrand.

For the defendant-respondent there was a brief by Michael J. Lawton, Kenneth B. Axe and Lathrop & Clark, LLP, Madison, and oral argument by Kenneth B. Axe.

¶ 1. N. PATRICK CROOKS, J

Petitioner Central Corporation (Central) seeks review of the court of appeals' decision, Central Corp. v. Research Products Corp., No. 02-1974, unpublished slip op. (Wis. Ct. App. July 28, 2003), affirming the circuit court's decision to grant summary judgment in favor of Research Products Corporation (Research) and dismiss Central's complaint alleging a violation under the Wisconsin Fair Dealership Law (WFDL). The circuit court granted Research's motion for summary judgment, stating that Central was not a dealer of Research's products under the WFDL. Central appealed, and the court of appeals affirmed.

¶ 2. We conclude that summary judgment was improperly granted to Research. Genuine issues of material fact exist here, as well as reasonable alternative inferences drawn from undisputed material facts, so that a trial is warranted in this case to determine whether there is a community of interest, and, therefore, a dealership relationship. Several facets of Central's relationship with Research lead to the conclusion that, under the WFDL, summary judgment should not have been granted. Those factors, and the alternative inferences that may be drawn from them, include: the parties' 20-year business relationship; Central's owners' significant financial investment in the construction of a warehouse based, in part, on the amount of Research's products it housed; Central's practice of keeping a substantial amount of Research's product in inventory; Research's desire to limit Central's sales to a specific territory; and Central's practice of keeping spare parts for Research's products on hand for sale, at cost, to its customers. Where there are genuine issues of material fact or reasonable alternative inferences drawn from undisputed material facts, the determination of whether there is a community of interest is one which will be made by the trier of fact based on an examination of all of the facets of the business relationship.

I

¶ 3. On June 27, 2001, Research wrote a letter to Central stating that it would stop selling its products to Central effective in 60 days. Central filed the complaint in this case at the end of that 60-day period. In its complaint, Central stated that there was a community of interest, as contemplated in Wis. Stat. § 135.02(3)(a) (2001-02),1 between itself and Research "because there is a continuing financial interest between the parties in the sale and distribution of these goods and the parties are dependent upon each other for the sales and distribution of the goods." Central alleged that Research's decision to terminate the parties' relationship violated Wis. Stat. § 135.032 since there was no good cause to terminate the dealership arrangement. Moreover, Central alleged that Research failed to provide Central with notice and the opportunity to cure in violation of Wis. Stat. § 135.04.3 Central also petitioned for a temporary restraining order to prevent termination of the business relationship. The circuit court entered the temporary restraining order on August 27, 2001. The circuit court then granted a temporary injunction that prevented Research from terminating the relationship until March 15, 2002. The parties later stipulated that the injunction would remain in effect until the court decided Research's anticipated motion for summary judgment. Research filed a motion for summary judgment, claiming that Central was not a dealer under the WFDL because there was no community of interest between the parties.

¶ 4. The Winnebago County Circuit Court, Judge William H. Carver presiding, granted Research's motion for summary judgment. The circuit court found that Central was not a dealer under the WFDL. The court cited the following factors as relevant to its decision: (1) The parties had no written agreement; (2) Central would not be substantially harmed by the termination because it could sell comparable products; (3) Central's sale of Research's products at eight percent of its gross revenue was not enough, given relevant case law, to suggest the existence of a dealership; (4) Research did not require any specific activity of Central; and (5) Research did not require Central to make any specific investments or provide specific promotions or services. Central appealed the circuit court's judgment, and the parties stipulated that the injunction would remain in effect pending appeal.

¶ 5. In an unpublished per curiam opinion, Court of Appeals Judges Neal P. Nettesheim, Richard S. Brown, and Daniel P. Anderson affirmed the circuit court's judgment, stating that no reasonable person could conclude that Central had demonstrated that it and Research had a community of interest. The court concluded that the parties had a typical vendor-vendee relationship and that there were "no disputed material facts demonstrating a continuing financial interest and interdependence as required by the WFDL." Central Corp., No. 02-1974, unpublished slip op., ¶ 7. The court noted the following factors as persuasive: (1) Research did not impose any requirements on Central; (2) Research does its own marketing and does not expect Central to advertise on its behalf; (3) Central did not make any investments that were unique to Research's products; (4) Central derives a low percentage, only eight percent, of its gross revenues from the sale of Research's products; (5) Termination of the parties' relationship will not have a significantly adverse effect on Central's financial well-being; and (6) The inventory in this case is not an unrecoverable investment. The court concluded that the parties were not interdependent, as required by the WFDL, and Central did not have a continuing financial interest with Research. Central appealed.

¶ 6. Central alleges the following: Central is an Oshkosh, Wisconsin based business that sells humidifiers, air cleaners, and zoning systems to installer contractors. Research is based in Madison, Wisconsin and manufactures heating, ventilating, and air conditioning (HVAC) equipment, including Aprilaire brand products such as humidifiers, air cleaners, zone controls, and thermostats. Research does not have its own sales force or related sales equipment. As a result, it sells its products to wholesalers and depends on them to sell and distribute its products. Wholesalers then sell Research's products to installer contractors, who ultimately sell the products to homeowners and commercial builders. Research ships its products to approximately eight wholesalers in Wisconsin, including Central.

¶ 7. Although Central and Research do not have a written contract regarding the terms of their agreement, the parties have a 20-year business relationship based on their oral agreement to allow Central to distribute Research's Aprilaire products. Central sells Research's Aprilaire brand humidifiers, air cleaners, water panels, and zoning systems. Central was one of Research's leading Wisconsin wholesalers based on dollar volume of products sold. Central distributed Research's products throughout northeastern Wisconsin, primarily in the Fox River Valley area, and, approximately ten years ago, expanded its territory to include Milwaukee and Madison. Central visits approximately 100 installer contractors weekly to sell all of Central's HVAC lines, including Aprilaire.

¶ 8. Central provides Aprilaire literature and information to its contractor customers, who then pass along the information to consumers. On occasion, Research's employees will make sales calls with Central's employees in order to promote the Aprilaire product line. Central promoted the Aprilaire product line during its visits with installer contractors. The contractors contacted Central, not Research, with various product related questions, and Central provided service to these contractors.

¶ 9. With the exception of a thermometer recently introduced by Research, Central carries no brands that directly compete with Research's products. Central maintains that the Aprilaire line is an important part of its business because the sale of such products significantly contributes to Central's profits. In 2001, Central's total sales were $5,737,000. Central's gross sales of Research's products were $427,000, with gross profits of $53,807. Sale of Aprilaire products has comprised approximately eight to nine percent of Central's sales and profits over the years.

¶ 10. Central states that, if it did not carry the Aprilaire line, it would lose business because its customers would buy from a wholesaler that stocked all of the brands they required instead of buying only a few items from multiple wholesalers.4 It would take years for Central to replace the business and sales that the Aprilaire products bring to it.

¶ 11. Central claims that it has educated its contractor customers regarding Aprilaire products and helped to develop goodwill and brand loyalty for the product line. Central has marketed the Aprilaire line to its customers with the following slogans: "`. . . There's Only One Name For Indoor Air Comfort;'" "`One Powerful Brand Name For Five Great Comfort Products;'" "`The Strength Of The Aprilaire Brand Is A Fresh Source of Profits;'" and "`Now The Strength Of The Aprilaire Brand Turns Pollen And Dust Into Gold.'"

¶ 12. Although Research does not require that...

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