Frieburg Farm Equipment, Inc. v. Van Dale, Inc., 91-1510

• Citation: 978 F.2d 395
• Decision Date: 29 October 1992
• Docket Number: No. 91-1510,91-1510
• Parties: FRIEBURG FARM EQUIPMENT, INCORPORATED, a Wisconsin corporation, Frieburg Farm Equipment, a Wisconsin partnership, Harold R. Frieburg, et al., Plaintiffs-Appellees, v. VAN DALE, INCORPORATED, a Minnesota corporation, Defendant-Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals (7th Circuit)

Page 395

978 F.2d 395

FRIEBURG FARM EQUIPMENT, INCORPORATED, a Wisconsin

corporation, Frieburg Farm Equipment, a Wisconsin partnership, Harold R. Frieburg, et al., Plaintiffs-Appellees, v. VAN DALE, INCORPORATED, a Minnesota corporation, Defendant-Appellant.

No. 91-1510.

United States Court of Appeals, Seventh Circuit.

Argued May 19, 1992.

Decided Oct. 29, 1992.

James F. Gebhart, H. Dale Peterson (argued), Stroud, Stroud, Willink, Thompson & Howard, Madison, Wis., for plaintiffs-appellees.

Edwin J. Hughes (argued), Ted Waskowski, Stafford, Rosenbaum, Rieser & Hansen, Madison, Wis., for defendant-appellant.

Before FLAUM and RIPPLE, Circuit Judges, and ESCHBACH, Senior Circuit Judge.

FLAUM, Circuit Judge.

Frieburg Farm Equipment, Inc., and related parties (collectively "Frieburg") brought this diversity suit against Van Dale, Inc., under the Wisconsin Fair Dealership Law (WFDL) and state common law. The district court, on cross motions for summary judgment, held that Frieburg met the statutory definition of "dealer," and hence could proceed with its WFDL count. At the same time, the court granted Van Dale summary judgment on all other counts, save one for breach of contract. Frieburg Farm Equip., Inc. v. Van Dale, Inc., No. 89-C-0666-C (W.D.Wis. Sept. 6, 1990) ("Frieburg I "). The case went to trial, and the jury found for Frieburg on both the WFDL and contract counts, awarding it $133,915 and $31,357 in damages, respectively. The district court then granted Frieburg approximately $150,000 in fees and costs to which it was entitled under the WFDL, and denied all of Van Dale's post-trial motions. Frieburg Farm Equip., Inc. v. Van Dale, Inc., 756 F.Supp. 1191 (W.D.Wis.1991) ("Frieburg II "). Van Dale raises a number of issues on appeal, and we affirm.

I.

Frieburg is a retail business engaged in the sale, service and installation of farm equipment. Van Dale manufactures and sells farm equipment to retail dealers. For some time, Hedlund Farm Systems, located in Boyceville, Wisconsin, served as Van Dale's dealer in St. Croix and Dunn counties, but it went out of business in late 1985. Shortly thereafter, Van Dale offered Frieburg, which was already established as a farm equipment outlet in nearby Glenwood City, the opportunity to take over Hedlund's territory, and Frieburg accepted. It signed a Van Dale dealership agreement in March 1986, and, as part of the bargain, purchased Hedlund's assets, paying approximately $25,000 for inventory and $20,000 for various fixed assets, including five trucks. Frieburg claims, and the jury found, that Van Dale promised Frieburg that it would serve as Van Dale's exclusive dealer in St. Croix and Dunn counties.

Initially, Frieburg operated its Van Dale dealership out of two locations: its original premises in Glenwood City, and the former Hedlund store in Boyceville, which Frieburg leased from the Hedlund family. In late 1986, Frieburg informed Van Dale that it wished to close the Boyceville location and consolidate its operations in Glenwood City. Van Dale objected, and threatened to appoint another dealer in Dunn county if Frieburg carried out its plan. Frieburg acceded, and in November 1986 it sold the Glenwood City property and purchased the Boyceville property from the Hedlunds for $30,000. Just three months later, despite Frieburg's compliance with its demands, Van Dale appointed another dealer in Dunn county. It had also appointed two other dealers in St. Croix county the previous May.

In response, Frieburg brought this suit against Van Dale in July 1989. On January 2, 1990, Van Dale notified Frieburg that it planned to terminate the dealership owing to Frieburg's past due account, history of late payments, and poor sales volume. Van Dale told Frieburg that it could retain the dealership only if it paid off its account balance, maintained a current account for sixty days, and purchased $40,000 worth of Van Dale equipment during January and February. Frieburg put its account in order, but did not make the requisite purchases, and Van Dale terminated the dealership in April 1990. Frieburg amended its complaint, and the suit proceeded as described above.

II.

A.

The WFDL protects dealers by prohibiting grantors from terminating dealerships without good cause. Wis.Stat. § 135.03. The statute reaches only to those business relationships properly classified as "dealerships," a term of art defined under the WFDL as (1) a contract, either express or implied, (2) by which the dealer is granted the right to sell or distribute goods or services, or use a trade name, trademark or the like, and (3) in which there is a "community of interest." Id. § 135.02(3); Pollack v. Calimag, 157 Wis.2d 222, 458 N.W.2d 591, 596 (Wis.App.1990).

On summary judgment, the district court held that Frieburg was a dealer under the WFDL. Frieburg I, slip op. at 10-19. Van Dale challenges that ruling; it acknowledges that its relationship with Frieburg satisfied the first and second dealership criteria, but contends that the two businesses did not share a community of interest. Van Dale does not argue that the court should have left the community of interest issue to the jury; the parties agree--although the commentators have their doubts, see Michael A. Bowen & Brian E. Butler, The Wisconsin Fair Dealership Law § 3.3, at 3-[1-2] (Supp.1991)--that the issue presents a question of law for the court. Given this, we draw from the undisputed facts, the trial record and the jury's verdict in deciding for ourselves whether Frieburg and Van Dale shared a community of interest. Bush v. National School Studios, Inc., 139 Wis.2d 635, 407 N.W.2d 883, 888 (1987) (question of whether a business is a "dealer" subject to de novo review).

The WFDL defines "community of interest" as "a continuing financial interest between the grantor and grantee in either the operation of the dealership business or the marketing of such goods or services." Wis.Stat. § 135.02(1). We have in the past disparaged this definition as vague and unhelpful, see, e.g., Moodie v. School Book Fairs, Inc., 889 F.2d 739, 744 (7th Cir.1989); Fleet Wholesale Supply Co., Inc. v. Remington Arms Co., Inc., 846 F.2d 1095, 1096 (7th Cir.1988), for it permits no ready way in which to differentiate a dealership from any ordinary vendor/vendee relationship. Bush, 407 N.W.2d at 888. The Wisconsin Supreme Court recently illuminated matters somewhat by establishing two "guideposts" that serve to distinguish communities of interest. See Ziegler Company, Inc. v. Rexnord, Inc., 139 Wis.2d 593, 407 N.W.2d 873 (1987) ("Ziegler I "), on reconsideration, 147 Wis.2d 308, 433 N.W.2d 8 (1988) ("Ziegler II "). The first guidepost is the dealer's and grantor's "continuing financial interest" in their business relationship; a dealer can manifest such an interest by, among other things, investing in grantor-specific inventory and facilities. Id. 407 N.W.2d at 880. The second guidepost is "interdependence," which the Court described as "shared goals and a cooperative effort more significant than in the typical vendor-vendee relationship." Id. 407 N.W.2d at 879; see also Pollack, 458 N.W.2d at 596. To shed further light upon the two guideposts, Ziegler I sets out a non-exclusive list of ten factors, all of which deal with various aspects of the alleged grantor-dealer relationship. Ziegler I, 407 N.W.2d at 879-80. ¹ Significantly the Court explicitly rejected an approach that would have required a business, to qualify as a "dealer," to have garnered a certain minimum percentage of its revenues from servicing or selling the grantor's products. Id. at 878; see also Bush, 407 N.W.2d at 890 (courts should not "focus solely on the telltale trappings of the traditional franchise"). At the same time, the Court observed that a "low percentage," such as 8%, is strong evidence that there was no community of interest, at least absent other indicia, such as a dealer's investment in the dealership. Ziegler I, 407 N.W.2d at 880.

It is plain that the Wisconsin courts have created a totality of the circumstances test. Id. at 879; Moodie, 889 F.2d at 744. Our cases have distilled the principles underlying the Wisconsin cases, and provide that a community of interest may exist under one of two circumstances: first, when a large proportion of an alleged dealer's revenues are derived from the dealership, and, second, when the alleged dealer has made sizable investments (in, for example, fixed assets, inventory, advertising, training) specialized in some way to the grantor's goods or services, and hence not fully recoverable upon termination. Lakefield Tel. Co. v. Northern Telecom, Inc., 970 F.2d 386, 389 (7th Cir.1992); Kenosha Liquor Co. v. Heublein, Inc., 895 F.2d 418, 419 (7th Cir.1990); Moodie, 889 F.2d at 744; Fleet Wholesale, 846 F.2d at 1097; Moore v. Tandy Corp., 819 F.2d 820, 822 (7th Cir.1987). We also suppose that some combination of revenues and investments could manifest a community of interest, even if neither could standing alone. See Ziegler I, 407 N.W.2d at 879-82; Kealy Pharmacy & Home Care Servs., Inc. v. Walgreen Co., 761 F.2d 345, 349-50 (7th Cir.1985).

Some have opined that federal diversity courts impose stricter requirements upon alleged dealers than do Wisconsin state courts, see Bowen & Butler, supra, § 3.34, at 3- (Supp.1991), but we do not believe this to be the case. Both federal and state courts rest their decisions upon identical principles. Wisconsin courts have recognized that a dealership exists only if the alleged dealer's stake in the relationship is so significant that termination would have severe economic consequences. Ziegler I, 407 N.W.2d at 879. We have recognized the same tenet, albeit in a slightly different manner: a retailer is a dealer only if it has made the kind of investments that would tempt an unscrupulous grantor to engage in opportunistic behavior--in other words, to exploit the fear of termination that naturally attends a...