H. Phillips Co. v. Brown-Forman Distillers, No. 79-C-543.

• Court: United States District Courts. 7th Circuit. Western District of Wisconsin
• Writing for the Court: Donald L. Heaney, of Isaksen, Lathrop, Esch, Hart & Clark, Madison, Wis., for defendant
• Citation: 483 F. Supp. 1289
• Parties: H. PHILLIPS CO., INC., a Wisconsin Corporation, Plaintiff, v. BROWN-FORMAN DISTILLERS CORPORATION, a Delaware Corporation, Defendant.
• Docket Number: No. 79-C-543.
• Decision Date: 06 February 1980

483 F. Supp. 1289

H. PHILLIPS CO., INC., a Wisconsin Corporation, Plaintiff,
v.
BROWN-FORMAN DISTILLERS CORPORATION, a Delaware Corporation, Defendant.

No. 79-C-543.

United States District Court, W. D. Wisconsin.

February 6, 1980.

483 F. Supp. 1290

Jack R. DeWitt, of DeWitt, McAndrews & Sundby, S. C., Madison, Wis., for plaintiff.

Donald L. Heaney, of Isaksen, Lathrop, Esch, Hart & Clark, Madison, Wis., for defendant.

JAMES E. DOYLE, Chief Judge.

Plaintiff has served and filed a renewed motion for a preliminary injunction, to which this opinion and order are directed. For the purpose of deciding the said motion, and for no other purpose, I find as fact those matters set forth hereinafter under the heading "Facts."

Facts

As of no later than about 1947, Wisconsin Liquor Company of Green Bay and Oshkosh, a Wisconsin corporation engaged in the wholesale distribution of liquor, distributed an alcoholic beverage called "Southern Comfort" in the Oshkosh, Wisconsin, area, and it continued to do so until about 1972, when its name was changed to Ed. Phillips & Sons Co. of Oshkosh (Ed. Phillips). Southern Comfort is classified in the trade as a cordial or specialty. Thereafter, Ed. Phillips continued to distribute Southern Comfort in the Oshkosh area until October 1, 1979, when Ed. Phillips merged with H. Phillips Co., also a Wisconsin corporation, with H. Phillips Co. as the surviving corporation. Thereafter, H. Phillips Co. continued to distribute Southern Comfort until about mid-October, 1979, when the events occurred which are the subject of this lawsuit. Over the years Wisconsin Liquor Company and then Ed. Phillips had purchased Southern Comfort from its manufacturer, the Southern Comfort Corporation, for distribution in the Oshkosh area. In about mid-1979, defendant Brown-Forman Distillers Corp. (Brown-Forman) acquired the Southern Comfort Corporation. Thereafter, until mid-October, Ed. Phillips and then H. Phillips Co. purchased Southern Comfort from Brown-Forman and continued such distribution. Prior to the merger, H. Phillips Co. had not sold Southern Comfort. Neither the Southern Comfort Corporation nor Brown-Forman has sold any product other than Southern Comfort to Wisconsin Liquor Company, Ed. Phillips, or H. Phillips Co. Excluding H. Phillips, Brown-Forman had three wholesale dealers in Southern Comfort in the Oshkosh area as of mid-October 1979.

(Wisconsin Liquor Company, Ed. Phillips, and H. Phillips Co. will be referred to hereinafter, collectively, as H. Phillips Co., unless there is reason to refer to them more precisely. Southern Comfort Corporation and Brown-Forman will be referred to, collectively, as Brown-Forman, unless there is reason to refer to them more precisely.)

There has never been any written agreement between Brown-Forman and its predecessor, on the one hand, and H. Phillips Co. and its predecessors, on the other. At all times since about 1947, H. Phillips Co. has been permitted by Brown-Forman: to sell Southern Comfort at wholesale in the Oshkosh area in containers bearing the Southern Comfort tradename, trademark, logotype and commercial symbol; and to use the Southern Comfort tradename, trademark, logotype, commercial symbol, and advertising in connection with such wholesale sales. Brown-Forman has forwarded to H. Phillips Co. promotional material bearing the Southern Comfort and Brown-Forman tradenames, and H. Phillips Co. has used these materials in promoting sales of Southern Comfort in the Oshkosh area.

In recent years, the gross receipts by H. Phillips Co. and Ed. Phillips from the wholesale sales of Southern Comfort have been about $250,000 to $300,000, and their net profit approximately $25,000. H. Phillips Co. and Ed. Phillips, in aggregate, sold at wholesale many varieties of liquors and several brands within particular varieties. For the year ending in May, 1979, the volume of Southern Comfort sold by Ed. Phillips represented between 2% and 3% of the aggregate volume of all liquor sold by the two companies.

A Wisconsin state manager for the B-F Spirits, Ltd., Division of Brown-Forman advised

483 F. Supp. 1291

a representative of Ed. Phillips in September, 1979 that there was an allotment of Southern Comfort, gift wrapped for the holidays, available to it. At the time of this communication, the Brown-Forman representative was not aware of the impending merger of Ed. Phillips and H. Phillips Co. On about September 26, 1979, a letter describing the impending merger was mailed on behalf of Ed. Phillips and H. Phillips Co. to Brown-Forman. Shortly after October 1, 1979, H. Phillips Co. placed an order with Brown-Forman for the full allotment of gift-wrapped Southern Comfort plus sufficient non-gift-wrapped Southern Comfort to make a full truck load. Delivery has not been made

On about October 14, 1979, a representative of Brown-Forman advised a representative of H. Phillips Co. that Brown-Forman was terminating the distributorship, effective immediately. In a letter dated October 16, 1979, and addressed to "Ed Phillips & Sons," a representative of Brown-Forman confirmed "that Ed Phillips & Sons is being terminated, effective immediately, as a distributor of Southern Comfort in the state of Wisconsin." Brown-Forman was requested to reconsider its decision, did so, and then, by letter dated October 31, 1979, reaffirmed "that your company was being terminated as a distributor of Southern Comfort." In the latter letter, the reason stated was that "Ed Phillips & Sons Company" had unilaterally closed its office and warehouse in Oshkosh and had begun to service the Oshkosh market from Wausau, Wisconsin, 97 miles distant.

Apparently because it is a specialty, as contrasted, for example, with scotch whiskey or bourbon whiskey or gin, purchasers frequently ask for Southern Comfort by name and they decline purported substitutes. This apparently explains why, from the viewpoint of a wholesaler, it is a business-starter. That is, the proprietor of a tavern or retail liquor outlet will sometimes order Southern Comfort and only Southern Comfort from a wholesaler who sells it, and will later expand his or her purchases from that wholesaler to include other beverages.

As a result of the action by Brown-Forman, H. Phillips Co. has been unable to fill a number of orders for Southern Comfort by its customers, and this inability to continue to supply Southern Comfort has been a business embarrassment to H. Phillips Co. and its salesmen.

Unless enjoined, Brown-Forman will continue to refuse to sell and deliver Southern Comfort to Ed. Phillips.

OPINION

Assuming that the Wisconsin Fair Dealership Law (§§ 135.01 through 135.07, Wis. Stat.) applies to dealerships granted prior to April 5, 1974, its effective date, I consider it a rather close question, on the record thus far, whether H. Phillips Co. and its predecessors have been a "dealer" in Southern Comfort, within the meaning of the Wisconsin Fair Dealership Law.

I appreciate that the statute expressly directs that it be "liberally construed and applied to promote its underlying remedial purposes and policies" and that one such purpose and policy is "To promote the compelling interest of the public in fair business relations between dealers and grantors, and in the continuation of dealerships on a fair basis . . .." § 135.025. However, this direction by the legislature to the courts to construe and apply the statute liberally does not mean that the boundaries of its coverage should be construed expansively. That is to say, the legislature has acted to protect "dealers" from "grantors" rather zealously, particularly with respect to the continuation of "dealerships." If a relationship is a dealership, the protections afforded the dealer are to be construed and applied liberally to the dealer. But the statute itself undertakes to draw a line to encompass the kinds of enterprises and relationships which are to enjoy such protection. There is no basis upon which the courts can provide that protection to enterprises and relationships which fall without the legislative line.

Brown-Forman made frequent sales of Southern Comfort to H. Phillips Co. over the years, for resale by H. Phillips Co. to

483 F. Supp. 1292

retailers. In this sense, Brown-Forman "granted" H. Phillips Co. "the right to sell . . . goods. . . ." § 135.02(2). Also, Brown-Forman "granted" H. Phillips Co. "the right to . . . use a trade name, trademark, service mark, logotype or advertising . . .." § 135.02(2). The question is whether the agreement implied by the two parties was an agreement in which there was "a community of interest in the business of offering, selling or distributing goods . . . at wholesale . . .." § 135.02(2). Because "community of interest" is expressly defined by the statute, § 135.02(4), the more precise question is whether there was "a continuing financial interest between the grantor and grantee in either the operation of the dealership business or the marketing of such goods . . .." H. Phillips Co.'s continuing financial interest both in the operation of its own wholesale Southern Comfort business and in the marketing of Southern Comfort is clear. Did...