Eiencorp, Inc. v. Rocky Mountain Radar, Inc., 04-2331.

Decision Date01 March 2005
Docket NumberNo. 04-2331.,04-2331.
Citation398 F.3d 962
CourtU.S. Court of Appeals — Seventh Circuit
PartiesEISENCORP, INC., Plaintiff-Appellant, v. ROCKY MOUNTAIN RADAR, INC. and Michael Churchman, Defendants-Appellees.

Briane F. Pagel, Jr. (argued), Madison, WI, for Plaintiff-Appellant.

Ted Waskowski (argued), Stafford Rosenbaum, Madison, WI, for Defendants-Appellees.

Before FLAUM, Chief Judge, and EASTERBROOK and WILLIAMS, Circuit Judges.

FLAUM, Chief Judge.

Plaintiff-appellant Eisencorp, Inc. filed suit in diversity against defendants-appellees Rocky Mountain Radar, Inc. ("RMR") and its president Michael Churchman, alleging, among other things, that they terminated the parties' dealership agreement in violation of the Wisconsin Fair Dealership Law, Wis. Stat. § 135.03 ("WFDL"). The district court granted summary judgment to defendants, and plaintiff appeals. Because we agree with the district court's well-reasoned decision finding no genuine issues of material fact for trial, we affirm.

I. Background

In September 1999, Ryan Eisenhut founded Eisencorp, Inc. as a sole proprietorship in the business of selling various consumer goods. Eisencorp was incorporated in Wisconsin in 2001, and Eisenhut remained the sole employee and sole shareholder of the company.

RMR is a Colorado corporation which manufactures and sells radar detectors, laser detectors, and scramblers designed for use by automobile and commercial truck drivers. Churchman has been president of RMR since 1990.

Eisencorp sold RMR's products pursuant to a written "dealer agreement" between Eisencorp and RMR dated September 23, 1999. Under this agreement, Eisencorp purchased goods from RMR and then resold them to others. Eisencorp did not maintain an inventory of RMR products. Rather, it solicited orders from third-party customers and then placed orders for those products with RMR. RMR then shipped the products to Eisencorp with payment due on delivery. The dealer agreement allowed Eisencorp to advertise RMR products but specifically stated that Eisencorp was an "independent dealer and may not represent itself as Rocky Mountain Radar in any capacity." (Ex. 5.) Eisencorp made an initial investment in marketing, spending $5,450 to advertise various products, including RMR's. Some of these print advertisements included the names and pictures of RMR goods. In early 2003, Eisencorp spent an additional $1,000 to place an advertisement for one of RMR's radio scramblers in a trucking magazine.

In May 2001, Eisenhut approached Churchman to discuss a potential customer named Barjan Products, LLC, a distributor of products for commercial truck drivers. Eisencorp lacked sufficient financing to purchase and then resell products to Barjan, as it had with other customers under the dealer agreement. RMR and Eisenhut1 agreed orally on the following arrangement. Eisencorp would solicit orders from Barjan for RMR products and negotiate prices with Barjan directly. If RMR accepted the order at the agreed-upon price, it would ship the product directly to Barjan with an RMR invoice. Upon receiving the product, Barjan would pay RMR. Eisencorp would then receive a commission, which was originally calculated as the difference between the price Eisencorp had negotiated with Barjan and the distributor price, less returns and shipping costs.

RMR sold products to Barjan in accordance with this arrangement, and RMR issued checks payable to Eisencorp (at Eisenhut's specific request), identifying these payments as "commission." This arrangement for selling products to Barjan was never reduced to writing.

Defendants contend that this separate arrangement for sales to Barjan did not affect Eisencorp's existing relation-ship with RMR as provided in the earlier dealer agreement. It is undisputed that after May 2001, Eisencorp continued to buy and then resell RMR products directly to other customers pursuant to this written dealer agreement.

In early January 2002, the parties modified the agreement concerning sales to Barjan. Although they described different events leading up to this modification, it is undisputed that the parties ultimately agreed that Eisencorp would continue to solicit sales from Barjan; that RMR would sell to Barjan at a fixed distributor price of $153 per unit; and that RMR would pay Eisencorp its standard 6% commission on Barjan sales.

RMR allowed plaintiff to send it returns of some of the newer products Barjan had purchased. In January 2003, however, Douglas Jones, RMR's vice president of marketing, complained to Eisenhut about his attempts to return obsolete product from Barjan by mislabeling it in the shipping documents as current product. After this complaint, Eisenhut continued to misrepresent the contents of Barjan return shipments.

On February 5, 2003, shortly after Eisenhut again sent a shipment of mislabeled returns, Jones wrote a letter addressed to Eisenhut stating: "Pursuant to the Rocky Mountain Radar Sales Representative Agreement, this letter will serve as your official 30-day notification for termination. As stated this can be without cause and is official 30 days from the date of this letter." (Def.App. at 149.) Jones called Eisenhut the same day to explain that he was terminating the sales agreement. Eisenhut testified in his deposition that Jones told him: "I'm just going to get rid of you now." (R. 25, ¶ 10.) Eisenhut apparently understood this to mean that RMR had terminated any relationships that he or Eisencorp had with RMR. After receiving this letter, neither Eisencorp nor Eisenhut did any further business with RMR.

On February 5, 2003, the same day he spoke with Jones, and again the following day, Eisenhut called RMR, attempting to reach Churchman. His phone calls were not returned. Two months later, on April 7, 2003, Churchman sent a letter to Eisencorp's attorney — apparently in response to a threatened lawsuit — attempting to clarify the parties' relationship. Churchman wrote: "At all times, the distinction was always very clear that Mr. Eisenhut had two relationships with Rocky Mountain Radar: one as sales representative and a second as a dealer." (Ex. 10.) The letter further explained: "Mr. Eisenhut is guilty of attempted fraud and insubordination and his sales representative relationship was terminated. At all times Eisencorp, Inc. was able to order and receive product." (Id.)

Examining the evidence in the record, the district court concluded that two separate agreements existed between the parties: the original dealer agreement and the sales representative agreement. The court determined as a matter of law that defendants had terminated the sales representative agreement but left the dealer agreement intact. Because plaintiff did not argue that the sales representative agreement qualified as a "dealership" under the WFDL, the district court reasoned, it failed to show its entitlement to protection under the Act.

II. Discussion

Summary judgment is appropriate if the evidence presented by the parties "show[s] that there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law ." Fed.R.Civ.P. 56(c). In evaluating the district court's decision, we must construe all facts in the light most favorable to the non-moving party and draw all reasonable and justifiable inferences in favor of that party. Russell v. Harms, 397 F.3d 458, 464 (7th Cir.2005). We review the district court's grant of summary judgment de novo. Id.

A. Wisconsin Fair Dealership Law

The WFDL was enacted "[t]o protect dealers against unfair treatment by grantors, who inherently have superior economic power and superior bargaining power in the negotiation of dealerships[.]" Wis. Stat. § 135.025(b); see also Moodie v. School Book Fairs, Inc. ., 889 F.2d 739, 742 (7th Cir.1989). The statute provides:

No grantor, directly or through any officer, agent or employee, may terminate, cancel, fail to renew or substantially change the competitive circumstances of a dealership agreement without good cause. The burden of proving good cause is on the grantor.

§ 135.03. Examining the legislative history of the statute, the Wisconsin Supreme Court has found that the law:

was meant to protect only those small businessmen who make a substantial financial investment in inventory, physical facilities or "good will" as part of their association with the grantor of...

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